What Do Infrastructure Spending, the IRS and Passports have in Common?

While America was busy planning for the holidays, on December 4, 2015, President Obama signed the five year Fixing America’s Surface Transportation Act, otherwise known as The Fast Act bill.  Surprisingly, inside this infrastructure bill, a new code section arose: Section 7345 of the Internal Revenue Code (IRC), titled “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”  Passed with bipartisan support of the House and Senate, this passport section was added to the highway funding bill and is now part of our law.

What this means, is that the State Department can revoke, deny, or limit passports to individuals that the Internal Revenue Service (IRS) certifies to have serious delinquent tax debt in excess of $50,000.  The threshold of $50,000 includes penalties and interest. This can present multiple issues for individuals who not only have to travel internationally in 2016, but who also need passports for domestic travel..  This amount may seem very high, but when interest and penalties are added to the tax liability, the $50,000 threshold may not be hard to reach.

Exceptions to the revocation exist, including an exception for taxpayers currently contesting a tax liability with the IRS or in tax court. The State Department can also issue a passport in an emergency or for humanitarian reasons, however those exceptions are limited.  Taxpayers may still be able to travel with their passport if they are paying the debt in a timely manner, such as under a signed installment agreement.  Conversely, taxpayers can have their passports revoked for merely receiving a notice from the IRS that states they owe $50,000 or more.

Please contact us with questions regarding new code section 7345 and visit the Our Thoughts On blog for more tax related articles.