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Passport Revocation Legislation Update

Passport Revocation Legislation 

Included in the 2015 highway bill, signed into law on 4 December 2015, was a revenue-raising provision that requires the IRS to revoke or deny the passport of any taxpayer with a seriously deliquent tax debt.  

The IRS defines a seriously delinquent tax debt as a tax liability 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 currently $52,000. 

Taxes can be collected without imposition of undue and unwarranted hardship for traveling Americans and for those living overseas. For reasons grounded in principle, law, and equity, ACA strongly opposes the notion of revoking passports for the purpose of collecting tax debts.

Americans Abroad Caucus Co-Chairs Maloney (D-NY) and Mulvaney (R-SC) along with their colleagues wrote to the Secretary of State Kerry in April of 2016 advising him of the serious issues with regard to the passport revocation provision as it applies to Americans living and working overseas. See Caucus letter here.

ACA has been on the forefront of this issue bringing it to the attention of the legislature and the Americans Abroad Caucus. ACA has continued to highlight to the Congress the serious negative impact such legislation could have on Americans living overseas:  ACA letter to Congress and Final ACA position paper on passport revocation.

ACA is concerned over this provision given the increase in individuals coming into compliance from overseas, the lengthy mail delivery and communication time between the IRS and overseas tax filers, the risk of error in filing from overseas and the lack of clear regulatory guidance on how the process for the final determination of those whose passports will be revoked.

 

ACA Updates on US Passport Revocation Legislation and Regulations.

December 2019

IRS Reverses Temporary Relief from Passport Certification for Taxpayers. with Open National Taxpayer Advocate Services Cases 

On October 16, 2019, the IRS reversed its temporary suspension of passport certification for revocation/denial for taxpayers with open National Taxpayer Advocate Services (TAS) cases. The reversal is based on the IRS belief that excluding cases for certification solely on the basis that the taxpayer is seeking TAS intervention and assistance could permit “won’t pay” taxpayers to circumvent the intent of the law—allowing them to continue to hold or renew a passport even with a debt in excess of $52,000.[1] 

Prior to this reversal, Acting TAS Advocate, Bridget Roberts, had blogged the good news that the IRS had agreed to temporarily: (1) exclude from passport certification those cases with TAS involvement, and (2) reverse certifications for TAS taxpayers who were certified prior to engaging TAS. She emphasized that “TAS has long advocated for the IRS to exclude from certification taxpayers who came to TAS and were actively working with us prior to being certified.”[2] Significantly, Roberts highlighted that certain groups of taxpayers may have been so desperate to avoid passport certification that they were unduly pressured into agreeing to unrealistic payment plans, perhaps based on incorrect liability determinations. Specifically, Roberts identified the following taxpayers working with TAS as particularly susceptible to this: 

(1) taxpayers who did not believe that they owed a liability and were working with TAS to challenge a substitute for return,

(2) those seeking penalty abatement based on reasonable cause, and

(3) those pursing an audit reconsideration.

ACA maintains that loss or denial of a US passport for Americans overseas holds serious and unparalleled consequences compared to those faced by US citizens living in the United States.  An ACA Freedom of Information Act request has revealed that of the over 260,000 cases reported for potential passport revocation, approximately 1,850 represent individuals who are overseas residents.[3] A US passport for these Americans and any American living overseas is the only official US document conclusively proving US citizenship. It is vitally important in a way that is not so for Americans living in the United States. 

For those Americans working in high-risk countries and danger zones, a US passport may be their only proof to the US Embassy or Consulate in circumstances necessitating urgent assistance. Also, a US passport is the underpinning document for many Americans to hold “work permits” and “right of residency” in many foreign countries.  Without such a document, many would be unable to work or maintain their livelihoods if their US passports were revoked or denied.  

ACA supports the US government efforts to track down and prosecute real tax evaders; however, US citizens who are attempting to come into compliance given the new bank account reporting forms, or those who may have been assessed erroneously calculated tax debts should not find themselves coerced into paying onerous and potentially bankrupting amounts just to keep their passports when they are not engaged in active tax evasion. 

The reversal appears to extend to those future cases of individuals considering addressing an appeal to an IRS tax decision. This goes against one of the major principals enshrined in the Taxpayer Bill of Right, the right to a fair and just tax system as it forces them to pay first (even if the payment is in error) in order to maintain their right of free movement.  

 

See ACA position on passport revocation: https://www.americansabroad.org/media/files/files/c8188518/final-aca-position-paper-on-passport-revocation.pdf 

For full information on the IRS reversal see article by Frost & Co: https://www.districtofcolumbiataxattorney.com/Articles/IRS-Reverses-Temporary-TAS-Passport-Program-Relief.shtml?utm_medium=email&utm_source=November+2019&utm_campaign=Newsletter&utm_content=43789DutyMorning&utm_term=ema15New

 

[1] I.R.C. §7345(b)(1)(B). The amount is indexed for inflation. I.R.C. §7345(f). For 2019, the amount is $52,000. Rev. Proc. 2018-57.

[2] TAS-13-0819-0014 (Aug. 14, 2019); NTA Blog: IRS Agrees to Temporary Exclusion from the Passport Certification Program for TAS Cases, available at: https://taxpayeradvocate.irs.gov/news/NTA_Blog_Temporary_Exclusion_from_Passport_Certification_Program_for_TAS_Cases.

[3] Letter from Department of Treasury to ACA dated August 20, 2019.

 

February 2019 

The IRS has issued an advisory for US citizens to settle tax debts in light of the passport revocation provision (https://www.irs.gov/newsroom/individuals-who-need-passports-for-imminent-travel-should-contact-irs-promptly-to-resolve-tax-debt). ACA continues to highlight to the Congress the serious negative impact that the Passport Revocation legislation could have on Americans living overseas.  Little consideration has been given to the fact that a US passport for an American overseas is a fundamental identification document of his or her US citizenship.  Without it, travel would be seriously curtailed in a significantly more impactful way than a US domiciled citizen.  Travel within the US does not require a passport, travel internationally does require a US passport. US domiciled citizens have state identification cards or drivers license that gives them a secondary identification document for travel and general identification (opening bank accounts, etc).  Americans overseas cannot use these documents to prove citizenship in a foreign jurisdiction. Individuals may have their very livelihoods severely impacted due to the inability to travel and identify themselves as US citizens.  Most concerning is that errors in the calculation of a tax debt, along with delays in notification of such debts, and a process involving long-distance resolution of such problems, could be much longer and costly for the Americans living and working overseas.

 

January 17, 2018

IRS ISSUES PASSPORT DENIAL/REVOCATION RULES; IMPLEMENTATION BEGINS NOW

The statutory denial or revocation of an individual’s passport where the individual has a seriously delinquent tax debt was enacted in December 2015. Today, the IRS published a Notice explaining the workings of the new rules. Additional important details have been added to the IRS Internal Manual. An IRS News Release warns “IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered”  

See ACA's complete information on this here: https://www.americansabroad.org/news/irs-issues-passport-denial-revocation-rules/