Tax

Campaign Group Condemns Proposal To Seize US Passports As Tax Enforcement Measure

Tom Burroughes, Group Editor, December 1, 2015

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A proposal - which could become law imminently - to seize passports of expats who allegedly haven't settled their tax affairs has drawn fire from a campaign network representing Americans overseas.

A campaign and networking group speaking for Americans living abroad has urged lawmakers in Washington DC to strike down a proposal to seize passports of expats who haven't settled their tax affairs. Up to six to eight million Americans live outside the US.

American Citizens Abroad (ACA), a non-profit, non-partisan body, has called for legislators to strike down tax collection provisions in the Highway Bill that affect holders of US passports. ACA said in a statement yesterday that the Conference Committee on the Drive Act (HR 22) is due to act on this legislation in the coming days. The legislation is due to take effect from January if processed; the measure is attached to legislation that is mainly focused on transportation and communications, rather than tax.

When another controversial piece of tax legislation - the Foreign Account Taxation Compliance Act (FATCA) - was enacted into law in 2010, it was also contained within a larger piece of legislation dealing with matters such as remuneration of military personnel.

Section 32101 of the latest bill, if fully passed, would permit the Internal Revenue Service to cause an individual’s US passport to be revoked, or an application for issuance or renewal to be denied, if the individual is “seriously delinquent” with his or her tax payments. “Seriously delinquent” is not defined, ACA said.  The threshold is $50,000 or more and, while not clear, is probably comprised of tax, penalties and interest, it said.

“This provision is way too harsh and dangerous a remedy, especially for American taxpayers residing abroad who absolutely must have their US passport at hand,” said Jonathan Lachowitz, chairman, American Citizens Abroad. “In many situations, they cannot do things like open a bank account, arrange for direct debit of utility bills, travel, or do many other everyday things, without their passport," he said.

Such a measure adds to the FATCA legislation designed to crack down, its framers say, on expat US persons and Green Card holders. The act has been blamed for making it difficult for US persons to open a bank account outside the US. Increasingly onerous rules have also, critics say, encouraged more Americans to renounce their citizenship.

On the latest proposal, ACA said the plan "has never been the subject of a hearing, where taxpayers affected and groups advocating for them could give testimony".

"Apparently, neither IRS, including IRS Collections, nor Treasury Department is pushing for this. The State Department, including the Bureau of Consular Services, apparently was not consulted," it said.

"Enactment of this legislation would come at a time when the IRS’s, including Collections’, ability to render services to taxpayers overseas and, in effect, help them 'work out' their collection problems, are severely reduced. IRS offices overseas have been closed. The ability of revenue officers in Collections to meet with taxpayers outside the US, as a practical matter, is non-existent. There are well-known problems with IRS communications sent to taxpayers overseas," it said.

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