Thursday, May 31, 2012

Tax Delinquents May Have Passports Canceled & Be Questioned at Air & Sea Ports

Almost unnoticed, Congress is close to approving a law under which the Internal Revenue Service (IRS) will be able to revoke the passports of Americans who owe substantial unpaid taxes.

It would allow federal officials to revoke or deny passports to delinquent taxpayers who owe the Internal Revenue Service $50,000 or more.

The provision passed the Senate in February and is before the House now. Revenues it generates would be used to help fund a highway-transportation bill that extends provisions set to expire on June 30.
The measure comes on the heels of a 2011 Government Accountability Office study requested by Senate Finance Committee Chairman Max Baucus (D., Mont.) and then-ranking Republican member Charles Grassley (R., Iowa).

The GAO report found that for the year it studied—2008—the State Department issued passports to more than 224,000 citizens who owed about $6 billion in tax. Most of it was for individual income taxes, and nearly two-thirds was more than three years old. 

The report also gave details of 15 cases in which passport recipients owe lots of unpaid tax.

The biggest Tax Debtor owed $46.6 million and was part-owner of a professional sports team. Another owed nearly $40 million and had traveled to 10 foreign countries in the recent past. The report said that the IRS had filed tax liens against both individuals but large amounts of tax still were uncollected.

If a taxpayer has an outstanding tax debt but can't be found, the IRS can alert Homeland Security officials to question the person on his way into the U.S. Typically, they will ask where the person is going and for how long, so the IRS can get in touch, but they can't arrest a taxpayer.

Because of the potential for abuse, people should know what's allowed and what isn't.

If you have US Tax Problems, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

For more on this story go to the WallStreet Journal.


  1. Ronald, this is indeed very interesting particular for many of many clients that live outside of the US. Could you send me the proposed Senate and HR bill numbers? I would be interested to read the actual bills.

    I have also heard rumors, although have not been able to confirm, that the US Embassies are considering not to renew US passports for citizens living outside of United States unless they were tax compliant. Have you heard anything along these lines? I do know that when you renew your US passport overseas at the Embassy you are required to provide a SSN.

    Posted by Milan Patel

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  4. Interesting how Worthy v. United States, 328 F.2d 386 (5th Cir. 1964) (journalist refused passport facilities for travel to Cuba and China; fundamental right of free ingress held infringed) and the Supreme Court cases it cites have diminished in force.

    The GAO report "Potential for Using Passport Issuance to Increase Collection of Unpaid Taxes" and older GAO reports on overseas nonflilers (1993) & (1998) have emboldened Congress. The State Department notice on child support debtors' passport blocks is here:

    And countries talk to each other about such things. Here's a 2009 Daily Mail article about UK proposals to block passports and driving licenses of child support debtors: And on European Union law:

    The academically and philosophically interesting cases involve those against whom there are final judgments for tax or child support, the debtor is insolvent and can't pay, but the money ought not to have been owed in the first place (the debtor isn't the father but failed to prove his case with DNA in time, perhaps because he was in prison; or there is double taxation because of a wrong characterisation of a transaction that cannot be corrected because of a time bar: United States v. Dalm, 494 U.S. 596 (1990)

    State tries to keep track of second passports (it's a question on passport applications). But for the dual- or multi-national person who has decamped from the US with all his wealth there's not much either State or the IRS can do about it, except in Canada with respect to non-Canadians. Think of Marc Rich. There are plenty of shady outfits offering escape artistry, second passports, and tax absconder help.

    Given Congressional targeting of overseas assets (FATCA) and expatriates ("Expatriation to Avoid Tax", Pub. L. 104-191, 110 Stat. 2093, § 511, 26 U.S.C. § 877 and later amendments) I fully expect the passport block to be enacted despite the reservations of some senators.
    Posted by Andrew Grossman