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Davis Brown Tax Law Blog

Tax Law Blog: Delinquent Taxes May Mean No Passport - December 8, 2015

Individuals who are “seriously delinquent” on their taxes may not be able to obtain or renew a passport under a new law signed December 4, 2015. The provision is part of the Fixing America’s Surface Transportation Act, aimed at funding transportation projects. The provision isn’t exactly related to the purpose of the Act, but was hidden in the details. (The Transportation Department’s summary of the Act doesn’t even mention the passport provision.)

A new Section 7345 to be added to the Internal Revenue Code requires the Secretary of State to deny or revoke the passport of an individual with a “seriously delinquent” tax debt. “Seriously delinquent” is defined to include tax debt which has been assessed in excess of $50,000, and for which a notice of lien or a levy has been filed. It does not include tax debts if the taxpayer is on a payment plan with the IRS, or if collection is suspended because a due process hearing has been requested or certain other relief has been requested.

In theory, the denial or revocation of passport will not come without warning; the taxpayer should be aware the tax debt is out there. However, many taxpayers may be unaware their passport can be affected by a tax debt. Imagine the problems for a taxpayer who is unaware of this new rule and not finding out until being stranded in the midst of traveling.

The $50,000 threshold includes interest and penalties, and will be adjusted annually for inflation and cost of enforcement. If the debt is later satisfied, the Act does have procedures, including time frames, for removing the individual from the list. There is also a mechanism for an individual to challenge being placed on the list.

The section is effective as of the date of enactment, which was December 4, 2015. The full text of the Act is available on the Library of Congress website. The provision relating to passports is at Section 32101 of the Act.