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Tax Debtors Could Lose U.S. Passports Under New Law

February 1, 2018

On December 3, 2015, the "Fixing America's Surface Transportation Act" (FAST ACT) was passed by Congress and signed into law on December 4, 2015. An important, but widely overlooked provision of the law, which went into effect on January 1, 2018, is the provision by which the U.S. government may revoke or deny the U.S. passport of an individual with a "seriously delinquent tax debt."

Under the new law, the Secretary of State is mandated to deny the issuance or renewal of a passport to such individuals. Further, the passport may be revoked or the passport may be limited solely to permit return travel of the U.S. citizen to the United States.

The definition of a seriously delinquent tax debt is an "unpaid, legally enforceable Federal tax liability" of more than $50,000 that has been assessed and with respect to which the IRS has filed a notice of lien or levy. This is a good reason why taxpayers who have received a tax assessment should maintain contact with the IRS and try to make arrangements for a payment plan; failure to do so will likely lead to the filing of a notice of lien or levy.

The $50,000 threshold is a cumulative total of taxpayer's outstanding tax debt inclusive of penalties and interest and will be adjusted annually for inflation. If a taxpayer believes that the certification of a serious tax delinquency is incorrect, they have the right to judicial review in either U.S. District Court or U.S. Tax Court.

Permanent residents of the United States have traditionally been barred from eligibility for U.S. citizenship on grounds related to non-payment of U.S. taxes. It will likely come as a rude surprise to U.S. citizens living abroad who do not stay current with their tax filings obligations that they will have their passports restricted and the ability to sponsor relatives suspended should they not comply with U.S. tax obligations.

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Ben-Ami, Andrew R. Partner Partner 212.216.8025 VCard
Levine, Roxanne H. Partner Partner 212.216.1122 VCard