Six years ago, the Government Accountability Office, the independent congressional watchdog tasked with helping “improve the performance and ensure the accountability of the federal government,” released a rather eye-opening report examining the feasibility of leveraging passports as a tax collection tool.
Specifically, this GAO report determined that in 2008 alone, passports were issued to 224,000 people who collectively owed over $5.8 billion in outstanding federal taxes. Based on these findings, it urged the Internal Revenue Service and the State Department to begin collaboration on the matter as soon as possible.
Fast forward to 2015 and Congress passed what is known as the Fixing America’s Surface Transportation Act — or the FAST ACT. Buried within the text of this law was a provision calling for the creation of a new section in the Internal Revenue Code mandating that the IRS work with the State Department to revoke, deny or limit the ability of individuals with “seriously delinquent tax debt” to use their passports.
Interestingly enough, despite the fact that this provision took immediate effect, it has taken close to two years for the two agencies to work out the logistics of the program. However, recent reports from the IRS indicate that the program will be officially rolled out next month.
The first questions that naturally arise for most people now are what exactly constitutes “seriously delinquent tax debt” and who exactly is covered by the newly minted IRC Section 7345.
According to reports, both those possessing passports and those looking to secure passports are covered by the new section. As to what constitutes seriously delinquent tax debt, it includes anyone with a legally enforceable tax debt of more than $50,000 (unpaid taxes, interest and penalties combined) who satisfies one of the following circumstances:
- A levy has been issued, or
- A lien has been filed and all administrative remedies denied or lapsed
We’ll continue discussing this important development in future posts, including examining those scenarios in which individuals who technically have seriously delinquent tax debt are nevertheless considered exempt from passport restrictions.
In the meantime, consider speaking with an experienced legal professional if you have questions or concerns relating to tax debt or other tax-related matters as soon as possible.