If you don’t pay your taxes – you may have your passport revoked. That is the premise of a new law Congress seems likely to enact next month. The legislation also seeks to deny the issuance of new passports to those who owe money to Uncle Sam.  

The new law should take effect in January and it authorizes the State Department to prevent American citizens with “seriously delinquent” tax debt from getting new passports as well as to rescind existing passports of individuals with the same issue. The Internal Revenue Service (IRS) will compile the list of affected taxpayers.

Both the House of Representatives and the Senate passed similar versions of the rule which is part of the larger highway-funding bill, H.R. 22. The entire bill is now before a conference committee and Congress should pass the legislation early next month.

The passport provision will apply if a taxpayer is laden with at least a $50,000 IRS lien or levy. A lien is essentially a red flag to a person’s creditors, while a levy authorizes the IRS to seize a person’s assets. The provision will not apply if a taxpayer is in the process of working with the IRS to resolve a tax debt – either by contesting the collection or by paying owed taxes through an installment plan.

There is a provision of the rule authorizing the State Department to issue a passport in an emergency or for “humanitarian reasons.”

If enacted as it is now written, the law will take effect January 1 and it will apply to tax debts already in existence. The Joint Committee on Taxation estimates that the new rule will raise $398 million over 10 years.

David Kautter, a partner at the RSM accounting firm noted that, “If this bill becomes law, it will be imperative for Americans traveling abroad or living abroad to pay attention to IRS notices – assuming they receive them.”

Critics of the rule argue that over seven million American citizens live abroad and need their passports for many essential purposes, including residency permits and work visas. These people may also not be receiving mail from the IRS.

Charles Bruce, an American lawyer who advises the group, American Citizens Abroad, stated that, “Americans abroad need their passports for many routine activities of daily life, such as banking, registering in a hotel, or registering a child for school, and mistakes could be disastrous.”

Mr. Bruce noted that, “IRS data systems aren’t designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.”

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