U.S. Citizens with Unpaid Tax Liabilities May Soon Kiss Their Passports Goodbye
Section 32101 of the Fixing America’s Surface Transportation Act (“FAST Act”) adds Section 7345 to the United States Internal Revenue Code. This new Code provision allows denial or revocation of U.S. passports for individuals with unpaid United States tax obligations in excess of $50,000. The FAST Act has been passed by both chambers of the United States Congress and is expected to be signed into law by President Obama.
Revocation of an individual’s passport can only occur if the Commissioner of Internal Revenue or his designee has certified an individual’s failure to pay a legally enforceable U.S. tax liability. Customary administrative remedies are available to contest the tax liability, and denial or renunciation will not occur in cases in which the individual has entered into an installment agreement with the Internal Revenue Service to pay the tax liability in a timely manner.
The statute provides specific procedures for reversal of certification. Reversal of certification is available in cases of
- full payment of the tax liability,
- individuals qualifying for innocent spouse relief under IRC Section 6015(b) or (c),
- entering into an installment agreement for payment of the tax, or
- circumstances in which the initial certification was found to be erroneous.
Judicial review of the IRS Commissioner’s certification is also available.
If upon certification by the Commissioner of the Internal Revenue Service the Secretary of State determines to revoke the passport of any individual, the Secretary of State may limit a previously issued passport solely to return travel to the United States or issue a limited passport that only permits return travel to the United States. The passport forfeiture provisions of the FAST Act are effective on the date of enactment.