The Internal Revenue Service has once again delayed the start date for implementation of a new law authorizing the State Department to revoke the passports of taxpayers with sizeable tax debts. According to an IRS web site page entitled “Revocation or Denial of Passport in Case of Certain Unpaid Taxes” (updated as of September 6, 2017), the IRS has not yet started certifying tax debt to the State Department, and such certifications will not begin until January 2018. As we noted in prior posts (here, here, and here), the IRS had initially announced that certifications to the State Department would begin in “early 2017,” and then later revised that announcement to sometime “in 2017.” No reason was provided for the further delay to 2018, although we presume that Treasury and the IRS are in the process of drafting regulations implementing the new law.
The passport revocation measure was enacted into law in December 2015 as part of the Fixing America’s Surface Transportation Act (FAST Act), which contained two controversial measures designed to assist the IRS in collecting delinquent taxes: (1) re-authorizing the use of private collection agencies for certain delinquent tax accounts; and (2) authorizing the State Department to revoke, or deny, passports to taxpayers with “seriously delinquent tax debt.”
“Seriously delinquent tax debt” is defined as a federal tax liability that been assessed and is greater than $50,000 (including interest and penalties), and for which the IRS has either filed a lien or levy. The dollar threshold will be adjusted for inflation every year. Taxpayers who have entered into installment agreements or offers-in-compromise, or have requested collection due process hearings or innocent spouse relief, are not considered to have “seriously delinquent tax debt” even if they owe the IRS more than $50,000.
The threat of passport revocation provides the IRS with a powerful tool to force tax compliance, particularly for non-residents or dual citizens who regularly travel to or from the United States. Until Congress enacted this new law in December 2015, the State Department had no authority to restrict the issuance of passports to individuals because they owed back taxes. In contrast, other federal laws authorize the State Department to deny or revoke the issuance of passports in certain circumstances, such as in the case of individuals with delinquent child support obligations. The new law is not without its critics, however, as we noted in a prior post addressing sharp criticism leveled by the Taxpayer Advocate.