The so-called “Surface Transportation Bill” is proving to be a remarkably “fruitful” platform for senators to use the amendment process to push through their pet legislation. Tim just posted about Carl Levin’s SA 1818, which gives Timmy Geithner the power to outlaw credit cards from countries that Carl Levin doesn’t like. Now, American Citizens Abroad, via an update on their Facebook page, tells us that Harry Reid snuck in something much more sinister: a provision allowing the Secretary of State to deny U.S. passport renewal to — or revoke the existing passport of — anyone with outstanding tax debts over a certain threshold.
This provision was stuck into the middle of Reid’s giant amendment SA 1761. You can see the full text at page 153 of the Congressional Record of 1 March 2012. The Senate accepted the amendment unanimously.
SEC. 7345. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN TAX DELINQUENCIES.
(a) IN GENERAL.
If the Secretary 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 pursuant to section 4 of the Act entitled ‘An Act to regulate the issue and validity of passports, and for other purposes’, approved July 3, 1926 (22 U.S.C. 211a et seq.), commonly known as the ‘Passport Act of 1926’.
(b) SERIOUSLY DELINQUENT TAX DEBT.
For purposes of this section, the term ‘seriously delinquent tax debt’ means an outstanding debt under this title for which a notice of lien has been filed in public records pursuant to section 6323 or a notice of levy has been filed pursuant to section 6331, except that such term does not include—
- a debt that is being paid in a timely manner pursuant to an agreement under section 6159 or 7122, and
- a debt with respect to which collection is suspended because a collection due process hearing under section 6330, or relief under subsection (b), (c), or (f) of section 6015, is requested or pending.
(c) ADJUSTMENT FOR INFLATION.
In the case of a calendar year beginning after 2012, the dollar amount in subsection (a) shall be increased by an amount equal to—
- such dollar amount, multiplied by
- the cost-of-living adjustment determined under section 1(f)(3) for the calendar
year, determined by substituting ‘calendar year 2011’ for ‘calendar year 1992’ in subparagraph (B) thereof.If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next highest multiple of $1,000.
This is yet another strong argument to pursue naturalisation where you live. Otherwise, you may find yourself deprived of your freedom of movement by a unilateral IRS determination that you owe taxes and fines — for failing to fill out all their ridiculous, obscure forms (with their giant, life-altering “failure-to-file” fines) about the ordinary, tax-compliant financial life you lead in the country where you actually live. (Perhaps the doomed One Subject at a Time Act could have prevented our esteemed Senators from using amendments to create laws about matters entirely unrelated to Surface Transportation. Which of course is precisely why that Act will die in subcommittee.)
Well, the Tax code just went north of 72,536 pages if the Republicans don’t strip these provisions out in the House.
Wonder how many other beauties are yet to be discovered with unintended negative consequences?.
As someone else said….It is almost as if the Senate has passed a foreign tourist trade embargo bill against its self.
Surreal.
Is it possible that what we are witnessing is public backlash to something going on in private between the US and the world’s banks? Maybe all the financial institutions are telling the US to go to hell with regard to FATCA.
This would explain the more recent hostility coming from people like Levin. If nobody plays their game, they can’t win.
I think we should be certain to record the legislative intent, not just the text of the proposed law. What are these folks actually debating about in open parliament (if they even show up, see C-SPAN).
Would Congress intend now that this applies to people who have no tax debt resulting from income earned in the US, but who might have potential “tax debt” (albeit unconstitutional and to my mind noncollectible) potiential tax debt on income already taxed abroad? What about those who are bone fide foreign residents abroad and might have assessed or potential assessment of FBAR penalties or the like?
I think this just brings to light the ‘high and mighty’ attitude Congress….which is denial.
eliminating the buying power through credit card restrictions only hurts the US economy….they obviously have a self destructive attitude, or are really really stupid.
Maybe a bit from column A and a bit from column B?
Also….take my passport PLEASE! I don’t want the F*&(ing thing anyway!
Aha! The passport! Already described as one of the two plier handles on the torture instrument of choice for extraterritorial US citizens!
@all- now wouldn’t denial of a passport amount to the same thing as a unilateral revocation of citizenship? Then it seems to me that the bill’s enactment would bring the U.S. around full circle? It would basically make a U.S. person stateless.
@recalcitrantexpat well if you’re overseas, they’ll graciously give you a one-way travel document to go “home” and submit yourself to the IRS’ tender mercies while you sort out your tax problem. Technically speaking you wouldn’t be stateless.
Fortunately, some countries will issue an alien’s passport to any resident — not just a stateless individual — if the person can prove his state of nationality refuses to issue a passport to him. Hong Kong and some Eastern European and Latin American countries do this. So even if you’re not a citizen elsewhere, you could avoid completely losing your freedom of movement (though you’d need a visa for pretty much every country you wanted to visit).
Just finished reading the actual text of this amendment, which is written in the usual legalese.
Anyway, I view this is a rather empty threat really, seeing as a very large number of “US persons” abroad probably couldn’t care less if their US passport were revoked. Correct me if I am wrong, but it seems as if the majority of contributors here have a second citizenship already or only a few months away from naturalising.
How do they propose to “revoke” a passport exactly that has already been issued? Send in a special forces team to break down somebody’s door and take it by force?
It is possible to naturalise in most countries in under 10 years’ time (Switzerland being the main exception requiring 12), so most people could simply ignore the US government threats so long as they remain home and naturalise the moment that they are eligible to where they live. The only other threat would be the same old threat to not be able to visit the US, which I know is a divisive issue on this blog with that being extremely important to many and completely toothless for others.
In any case, I am hard pressed to think of another democratic country that would withhold the issuance of a passport for “tax crimes” (it seems to be done almost entirely just to spite US expats?). I associate withholding passports for those accused of murder or about to stand trial, not for your average Joe who didn’t know about FBAR fines 🙁
@Jefferson, re “assessed or potential assessment of FBAR penalties or the like?” Thanks for raising the issue of FBAR ‘reporting’ debts specifically rather than just ‘tax’ debt since the FBARs (and soon FATCA) are magnified exponentially by the way the penalty structure is crafted, and (mis?)applied.
Does the use of the word ‘tax’ = FBAR and FATCA ‘reporting’ penalties?
– I (and probably many others) want to know specifically about whether this includes the FBAR (and soon FATCA) penalties – since they (for now) are considered ‘reporting’ penalties, not ‘tax’ arrears (even if they seem to be filling in as taxes where the US can’t find any actual ‘tax’ liability to pursue. The IRS is very canny and careful not to distinguish between the two in all those press releases – and has not made public any analysis of the proportion of the OVDI revenues came from actual TAX, vs. Penalties). There is a very good reason that the ACA and other critics have been asking for a breakdown of the residence (citizens INSIDE the US/vs. outside US) of the OVDI cases, and details of the makeup (tax vs. penalty) of the revenues Shulman keeps trumpeting.
Is this another egregious example of ‘systemic discrimination’ qualifying for a complaint via SAMs, to the IRS taxpayers advocate?
– I would argue to the TAS that this is a systemic discrimination – it affects the class of those deemed ‘taxpayers’ abroad inequitably – because those that are US citizen residents are already INSIDE the country – so the passport restrictions would be no impediment to their free travel within the US (ex. to help family), whereas US citizen/duals/’persons’ are being forced to use the American passport to enter the US – in order to travel inside the country to do the same. OR,
What if (a big what if I know!) a US deemed taxpayer in arrears wanted to cross just over the border into the US to consult with a US tax specialist for help in dealing with the IRS – or was required to appear in a US court?
Is it even constitutional to restrict entrance and return to the ‘motherland’ by its ‘children’ ‘abroad’? Is there any US equivalent of a ‘right to return’?
– Seeing that US passports are now required to enter the US by those deemed ‘US citizens’ (even duals), is it constitutional to restrict entrance into (and therefore within) the ‘mother country’? Would this provision stand up to scrutiny if it at once made a valid US passport a condition of entrance and return to the US, but simultaneously made it impossible to do unless there was tax compliance? This question is based on information and musings here: http://nomadlaw.com/2011/04/government-investigating-whether-condition-passport-issuance-on-payment-of-taxes/
Seems like a really counter-intuitive move to me….to make those abroad increasingly liable for ever more draconian taxation and reporting penalties – thus bringing them ever closer to a threshold where the lack of a US passport would deny them entrance to (and thus travel within) the US ‘mother country’ – fraying further any ties they maintain – and alienating them even further….. What’s not to like?
This thread: http://isaacbrocksociety.com/2012/02/14/u-s-passport-as-enforcement-tool/ and the link to the author’s blog, (thanks usxcanada!) http://usxcanada.wordpress.com/perspectives/#passport also describe some related recent passport issues and developments re the IRS attempts to tie passport and US taxes.
How would this most recent initiative play out domestically in the US – for residents if it was passed? –
– re passports and Federal Workers;
There has been recent scrutiny of US federal employees in tax arrears (see http://www.washingtonpost.com/blogs/federal-eye/post/federal-employees-owe-103-billion-in-unpaid-taxes/2012/01/20/gIQAv7KKJQ_blog.html ) and apparently being in actual TAX arrears (sometimes for a period of years) is not an impediment to obtain and keep government jobs. The IRS produced this chart http://www.washingtonpost.com/wp-srv/special/politics/irs-federal-workers-2010/ that illustrates the scale for tax arrears owed by federal employees (not elected officials). You can also continue to hold office in the US Senate and Congress (see small sample here: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/17/AR2010091706583.html ). There has been some talk of denying these employees passports as a deterrent.
There have been other past attempts to deny US passports to US ‘taxpayers’ in tax arrears with the IRS, but so far, the only restriction is for those owing child support. See; http://travel.state.gov/passport/ppi/family/family_863.html
– re passports and US resident Elected officials:
Presumably, officials (like Timothy Geithner) and the other Senatorial and Congressional ‘lawmakers’ in arrears, and their federal staffers need a US passport to travel – as part of their official duties – did they set the threshold high enough to suit themselves, or did they just assume that they would ‘deal’ (ex. the *’Geithner deal’) with that when the *time came?
* in the case of Geithner – the arrears were only finally addressed when nominated for his present position by Pres. Obama. He paid $25,970., and the IRS agreed to waive another portion, and a statute of limitations apparently applied to several older years. “Mr. Geithner volunteered to amend the earlier returns and pay the taxes and interest, a total of $25,970, after Mr. Obama indicated that he wanted to nominate him for the Treasury job, according to the account.” ……http://query.nytimes.com/gst/fullpage.html?res=9907E4DB1E3FF937A25752C0A96F9C8B63&pagewanted=all
Geithner had several areas where he failed to report and pay his taxes properly, but his explanations ranged from the “TurboTax defense” (see:http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBusmy.JWs_Q ) to – “As Obama officials pointed out, and I.R.S. documents attest, the failure to pay Social Security and Medicare taxes is common among Americans who work for international organizations, including foreign embassies. A 2007 I.R.S. notice reported that up to half of such employees incorrectly file their tax returns.” from:
http://justoneminute.typepad.com/main/2009/01/geithners-taxes.html
Another egregious example is described here: http://www.washingtontimes.com/news/2009/jan/31/back-taxes-issue-clouds-daschle-nomination/ http://www.slate.com/articles/news_and_politics/politics/2009/02/tomfoolery.html
These examples are not confined to one party – it is just easier to find the more recent examples online for incumbents and nominees of the Democrats because they are the party currently in power – and more in the news.
The Republicans also have some spectacular examples. See: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/17/AR2010091706583.html
@Brock the Badger
Thanks for pulling all those links together into one post. I have seen most of them before, but lose track of them and this is really helpful. Especially those related to Geithner. He certainly got the full benefit of Examiner IRM discretion didn’t he?!
As a former voter in the state of Nevada, I decided to send a sternly worded letter to Senator Reid regarding our predicament. As I wrote in the letter: being a U.S. citizen living abroad these days is like being stuck in a bad marriage. And I, for one, want a divorce.
@DonPomodoro
Everything is computerised these days. They put out an electronic notice and suddenly your passport is useless. A couple of years back there was a case where the Dominican Republic (or it might have been Dominica with their whole “citizenship-by-investment” plan) revoked the passport of a Taiwanese guy while he was in midair on a plane; no one knew until he landed in Singapore (link).
@Brock the Badger and Jefferson:
FBAR fines are assessed under Title 31, so I think not. However, other fines which come under Title 26 do seem to be included. A person living a normal life abroad could easily hit this $50,000 threshold in one year: if you didn’t include Form 8938 for all your bank accounts, Form 8858 for self-employment, Form 8621 for your ETFs, Form 8891 for your RRSP, and Form 3520 for an RDSP or another type of savings plan, that’s five $10,000 failure-to-file fines right there even when no tax is owed.
Specifically, Reid’s amendment refers to a “notice of lien … pursuant to section 6323”. Section 6323 reads:
Section 6321 lists the things that might be a part of that lien:
@Eric
I haven’t been on a plane in 3 years – I only travel with the train. This is my point though: As long as you don’t need to fly anywhere and your passport has enough years left so that you can apply for citizenship where you live, they can’t ruin your life yet. Not realistic for some people, but I also know many who have never left their country of birth/citizenship, even in the EU. I hope that all EU member states will routinely issue non-citizen passports to those affected by this arrogance who require them so that they can travel however. The US should be beyond embarrassed that many of their citizens will be forced to travel with documents normally reserved for those fleeing dictatorial regimes and failed states, just because the majority most likely had no idea about their FBAR obligations and will have easily accumulated the 50,000 dollar cut off in penalties.
No sympathy for the Taiwanese couple in your example since they are the real “tax cheats”. Its people like them though who serve as the examples behind the “need” for overdone laws such as this one.
@Don One important thing to consider about the policies of the country you intend to take up citizenship in. Most countries require permenant residency before citizenship, and often permenant residency requires a background check. The US Embassy does not do this, but they do provide a statement on your honor that must be signed by you in the presence of a consular officer (potentially giving State the possibility to do a heabeus grabbus extraordinary rendition on you).
What I would recommend for everyone is that if their criminal record in the US is now clean, they request a name-only (non-fingerprint) criminal history from their home state, if they have one. This can usually be done by mail.
http://www.interpol.int/Wanted-Persons you might want to check periodically if you are on this list.
@Jefferson D. Thomas
I hadn’t thought about that at all…I had a background check done in the US once – It had to be done through the FBI and my fingerprints were taken at a police station. No idea how you would order one outside of the US.
Maybe Levin’s next amendment will be to withhold criminal background checks from all expats until taxes are paid in order to stop them from naturalising elsewhere. What a nightmare that this whole situation will turn into even without such an amendment. How many countries would naturalise somebody who the US wants to possibly throw in prison for “tax evasion”?
Do most countries really require a background check from your country of citizenship as opposed to regular residence? That doesn’t make much sense if, say, you are an accidental American or have never lived in the US. Also, I would assume that in order to get a visa that a background would need to be submitted beforehand. So, for example, somebody leaving the US for France should have to get a background check in the US and, if he or she applies for French citizenship 5 years later in France it would be more logical to then submit a background check done internally within France, or..?
Oh btw the FBI background check took 6 months when I did it, so if anyone reading this is considering applying for citizenship somewhere and you need this apply NOW, because otherwise your citizenship application will be on hold for quite awhile unfortunately!
You can get an expedited FBI background report from various companies now.
http://www.fbi.gov/about-us/cjis/background-checks/faqs
2. Do you have procedures for expeditious handling?
No. The CJIS Division does not expedite requests; however, an expedited response may be provided by an FBI-approved Channeler. ( http://www.fbi.gov/about-us/cjis/background-checks/list-of-fbi-approved-channelers )
@Rick
WOW! One of those sites says that the normal turnover if you use their service is just 3-5 business days. Wish that this had existed when I needed it done. The only problem I see though is that the 4-5 pages that I quickly looked at all seem to require you to be resident in the US, so it might not help people who need it done fast for a citizenship application unfortunately.
Patience Don.. I certainly learned that living in Brasil. I got my FBI cert at the end of December. I’ve already turned in my citizenship documents here. Now all I have to do is go down and pay the crummy $450 fee.
@Eric, thank you for the interpretation/clarifcation and the section link.
http://www.accountingtoday.com/news/Senate-Bill-Revoke-Deny-Passports-Tax-Delinquents-61996-1.html
Senate Bill Would Revoke Passports of Tax Delinquents
Washington, D.C. (March 12, 2012)
By Michael Cohn, Accounting Today
“The Senate has unanimously approved a provision to a highway transportation bill that would revoke the passports of people with seriously delinquent tax debts.”
“.. part of a larger amendment by Senate Majority Leader Harry Reid, D-Nev., to the Senate version of a surface transportation bill, was approved by unanimous consent last Tuesday. The amendment would allow the State Department to deny, revoke or limit a passport for any individual whom the Internal Revenue Service has certified as having a “seriously delinquent tax debt” in excess of $50,000. The amount would be adjusted for inflation in future years.”
Nobledreamer just alerted me, that Accounting Today has reported on this Passport provision.
Michael Cohn is a friend when it comes to reporting on FBAR, OVDI,FATCA issues. I have emailed him many times, and he follows up with stories. I sent him this information that I took from here, and now the story follows. Would recommend others to follow him and give him positive comments so he knows you are around and approving of his reporting…
Senate Bill Would Revoke Passports of Tax Delinquents
http://www.accountingtoday.com/news/Senate-Bill-Revoke-Deny-Passports-Tax-Delinquents-61996-1.html
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