On Friday, December 4, 2015, President Obama signed the “Fixing America’s Surface Transportation Act” (FAST Act) into law. Although the FAST Act is primarily a transportation infrastructure bill, it contains tax provisions that could significantly impact US taxpayers living abroad.
Section 32101 authorizes the Department of Treasury to advise the Secretary of State of the names of any taxpayer who has “seriously delinquent tax debt” by way of a certificate. Upon receipt of a tax debt certificate, the Secretary of State may deny or revoke that taxpayer’s US passport. The taxpayer can contest only the accuracy of the certification in federal court or in the US Tax Court, not the underlying tax debt upon which the certification was made.
A “seriously delinquent tax debt” includes tax debts greater than $50,000 for which the IRS has issued a notice of lien or levy. It does not include a debt which is covered by an installment agreement or an Offer-in-Compromise, which is part of an active collection due process appeal, or for which innocent spouse relief has been requested.
Taxpayers affected by this section must fully satisfy their tax debt, receive innocent spouse relief, or enter into an installment agreement or Offer-in-Compromise with the IRS to get the certification revoked. If applicable, the Department of Treasury must revoke the certification within 30 days.
Separately, the FAST Act authorizes the Secretary of State to revoke or deny passports to US persons who do not provide a social security number on their passport applications or “willfully, intentionally, negligently, or recklessly” provide the wrong social security number. We imagine this section was included to prevent US persons who are certified under Section 32101 from avoiding the consequences by refusing to disclose their true social security number on the application.
However, this may also negatively impact US persons living abroad who do not have an SSN. Thus, someone who has previously been issued a US passport, could be denied a US passport unless they obtain a social security number.
The Secretary of State has the power to make limited exceptions to the revocation of a passport under Section 32101. The Secretary of State may limit the use of a passport only for return to the United States in the event a US person is vacationing outside the US when he or she is certified. However, for US persons who work and live abroad with no intention of returning to the US, the exception offers little assistance.
Finally, Section 32102 of the FAST Act requires the IRS to hire private debt collectors to collect “inactive account receivables.” “Inactive account receivables” are any tax liabilities that the IRS has removed from its active inventory due to lack of resources or inability to locate the taxpayer, tax liabilities for which more than a third of the statute of limitations has lapsed and no employee has been assigned to its collection, or any tax liabilities which has been assigned for collection but more than 365 days have passed since contact with the taxpayer or their representative.