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the 2015 highway bill, signed into law by the President on 4 December 2015, is
a revenue-raising provision that requires the IRS to work with the State
Department to revoke or deny the passport of any taxpayer with “seriously delinquent tax debt.”
delinquent tax debt is defined as a tax liability that has been assessed (as
opposed to merely asserted) of an amount greater than $50,000, and for which
the taxpayer has exhausted all administrative appeal rights. That amount
includes penalties and interest in addition to the taxes. The statutory $50,000
amount is adjusted annually for inflation, and is $51,000 in 2018.
IRS and the
State Department began implementing the law 1 January 2018. Notice
2018-1, provides detailed information
about the provision and its implementation. Generally, when notified of a
qualifying delinquent debt, the State Department will give the taxpayer 90 days
to resolve the issue, typically by arranging for payment of the debt.
amount might seem high enough that few taxpayers would be affected, but
according to statistics published in the Wall Street Journal and
confirmed 5 July 2018, by IRS, there are more than 362,000 citizens with
assessed debt of that amount or greater and who have exhausted administrative
remedies. Many of those taxpayers reside abroad, and will be seriously affected
by the potential loss of a passport.
is exacerbated by the limited remedies afforded by the statute and IRS
interpretation of it. If a passport is denied, the taxpayer’s sole remedy is to
litigate the issue.
Related: U.S. IRS Launches New Audit Campaigns Targeting Nonresidents
with employees who are assigned overseas, or who work temporarily in other
countries, will need to make sure that such employees do not have tax debt
sufficient to run afoul of the passport revocation provision. If such an
employee has a passport revoked, movement between countries will become impossible
and business disruption will occur.