You wouldn’t think that a bill about funding transportation infrastructure projects would have anything to do with passports, would you?
On December 4, 2015, the “Fixing America’s Surface Transportation” bill was signed into law. Slipped into this bill were a few updates to tax law, including a new provision that allows the State Department to deny or revoke passports for US citizens who are seriously delinquent on their tax bills.
This is not the first time that debt has been used as a reason for the State Department to refuse to issue or renew passports. For many years, passports have been denied to noncustodial parents who owe more than $2,500 in unpaid child support. Each state will send the State Department lists of people who owe back child support, and the State Department will not issue a passport until the debt has been paid. Although the State Department will not renew the passport of a parent who owed child support, they do not cancel valid passports due to child support debt.
Under the new law, the Internal Revenue Service will inform the U.S. State Department of “seriously delinquent tax debt,” and the State Department is required to deny the issuance or renewal of a passport to any U.S. citizen who owes $50,000 or more in cumulative back taxes, interest, and penalties. The State Department is also authorized to revoke the valid passport of anyone on the IRS list. This provision applies to federal taxes only, and not to state or local taxes.
Exceptions will be made for debtors who are attempting to reconcile their tax debt with an installment agreement or Offer-in-Compromise, as well as those who have requested a collection due process hearing or innocent spouse relief.
The U.S. Government hopes that this new law will help them collect billions in unpaid taxes. This is based on a 2011 study by the General Accounting Office, which revealed that of the 16 million U.S. passports issued in 2008, almost a quarter of a million were issued to individuals with significant federal tax debt. Those passport applicants owed a cumulative total of more than $5.8 billion! It’s worth noting that this study only addressed the tax debt owed by people who applied for passports in 2008, and not those who already held valid passports. The General Accounting Office states that the amount of tax debt owed by travelers who currently hold passports is likely many times higher than the $5.8 billion they identified. After all, $5.8 billion only sounds like a lot of money until you consider that the federal government is owed more than $330 billion in unpaid taxes!