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On December 24, 2015, President Obama signed into law Fixing America’s Surface Transportation Act of 2015 (The FAST Act). Embedded in The FAST Act is IRC Section 7345, which provides the IRS the ability to request the Secretary of State to deny or revoke a taxpayer’s U.S. passport.
IRC Section 7345 is effective starting on January 1, 2016 and applies to taxpayers who are “seriously delinquent” which means they have an assessed tax liability in excess of $50,000, including penalties and interest, and either a federal tax lien or a notice of levy that has been issued. A taxpayer will not be considered seriously delinquent if the taxpayer meets one of the three tests below:
- The tax is being paid in a timely manner under an installment agreement or offer in compromise.
- Collection actions have been suspended during the pendency of a collection due process hearing.
- Collection actions have been suspended during the pendency of a request for innocent spouse relief.
Seriously delinquent taxpayers include tax liabilities that were incurred before January 1, 2016, and the $50,000 threshold is indexed for inflation. The IRS must send a written notification to the taxpayer’s last known address if a revocation request is sent to the Secretary of State.
U.S. Expatriates who move and do not notify the IRS or fail to file a return believing the IRS has no ability to collect, may find a small tax debt becoming a big headache when the IRS uses their authority under IRC Section 7345.
Taxpayers who are not contemplating traveling abroad may think this law will not affect them. However, Starting October 1, 2020, anyone traveling on a domestic flight will need a form of identification that is compliant with the requirements set forth in the REAL ID Act. Generally, taxpayers use their state issued driver’s license for identification when checking in on a domestic flight. Currently many states, including California, have not complied with the REAL ID Act. The TSA will accept a U.S. passport or U.S. passport card as an acceptable alternative. Consequently, not having a U.S. passport could restrict a taxpayer’s ability to travel domestically.
If you have questions regarding this new law or believe you may be subject to passport revocation, please contact your RINA representative.