New Law Permits Denial or Revocation of US Passports Due to Significant Federal Tax Delinquencies

Under the Fixing America’s Surface Transportation Act, which President Obama signed on December 4, 2015, an individual’s US passport can, for the first time, be denied or revoked because the individual has a significant US tax liability.  This provision became effective on January 1, 2016. The liability does not have to be for US income tax; it includes, for example, an excise tax imposed on an individual who engages in certain “prohibited transactions” with a qualified retirement plan or IRA.The liability amount which triggers this exposure is $50,000 (including interest and penalties). This amount will be adjusted annually for inflation.A taxpayer need not fear that his or her passport might be denied or revoked merely because an IRS agent determines on audit that the taxpayer owes federal tax.  Rather, the new law jeopardizes a passport only where: the liability has been assessed; and the IRS has either issued a notice of lien to the taxpayer or levied on the taxpayer’s property to satisfy the tax debt.In addition, a passport cannot be denied or revoked where the taxpayer is paying off his or her debt under an installment agreement or offer in compromise entered into with the Internal Revenue Service.  Similarly, while a taxpayer is in the process of appealing the IRS’s tax determination to a court such as the US Tax Court, the taxpayer’s passport is safe.Under the new law, the IRS first must issue a certification to the Treasury Department that a particular individual has a “seriously delinquent tax debt.” The taxpayer must be notified that such certification has been issued.  The Treasury Department is then authorized to transmit this certification to the Department of State. Once the State Department has received the delinquency certification it must deny any application by the taxpayer for a passport; and it may (not required) revoke a passport previously issued to that taxpayer.Procedures are authorized for a taxpayer’s seriously delinquent tax status to be decertified under circumstances which include the taxpayer’s payment of the tax liability after he or she has been certified as seriously delinquent.This summary is intended to provide general information only on the matters presented. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice. If you have any questions about the matters covered in this publication, please contact:

Maureen R. Monaghan:       maureen.monaghan@wg-law.com I (212) 509 6312
Charles E. Chromow:            charles.chromow@wg-law.com I (212) 509 4712