Congress has a sneaky habit of attaching tax bills to end-of-the-year highway funding legislation. HR22, the Surface Transportation Reauthorization and Reform Act of 2015,” has tucked into Title 52 a nasty little tax ditty that creates new Internal Revenue Code (IRC) Section 7345, “Revocation or Denial of Passport in Case of Certain Tax Delinquencies,” which begins:
“(a) In general.—If the Secretary (of State) receives certification by the Commissioner of Internal Revenue that any individual has a seriously delinquent tax debt in an amount in excess of $50,000, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport….”
Seriously delinquent tax debt
Under Section 7345, seriously delinquent debt means tax debt over $50,000 on which IRS has filed a notice of federal tax lien or has issued a notice of levy but does not include a tax debt:
Note that a federal tax lien is created automatically when a taxpayers has unpaid tax debts. But, IRS will record its lien, meaning file a notice of federal tax lien, to give notice to the world thereby perfecting its priority over subsequent creditors. This is done rather routinely, although the taxpayer may ask for a collection due process hearing if he or she believes the lien recording was inappropriate.
Notice of levy
The IRS mails a notice of intent to levy to inform a delinquent taxpayer that it is about to seize money from his or her bank accounts, garnish wages, or take other assets upon which it has the right to levy. The taxpayer will also at least once receive a notice informing him or her of the right to obtain a collection due process hearing before IRS executes the levy.
$50,000 threshold of tax debt
Even tax debt over $50,000 incurred before the effective date of this bill would trigger notification to the Secretary of State. Also, the $50,000 amount will be adjusted for inflation each year in increments of $1,000, beginning in 2016.
Secretary of State may not issue passport to seriously delinquent taxpayer
The bill mandates that the Secretary of state, upon receipt of the certification that a taxpayer is seriously delinquent, shall not issue a passport to the taxpayer except in emergency circumstances or for humanitarian reasons.
Additional discretionary action the Secretary of State may take with regard to seriously delinquent taxpayer
The Senate and House have already passed similar versions of the bill, now in conference committee, and it is almost certain to become law, effective January 1, 2016. Since attached to a highway funding bill, presidential veto seems unlikely.
Impact of this bill becoming law