cross posted from Citizenship Solutions
Circa 2015:
US Passport application links Citizenship (State Dept) to Taxation (Treasury) to enforce "Taxation based Citizenship" https://t.co/UIINgzbpF2 via @ExpatriationLaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 2, 2018
The logical progression continues …
I just got off the phone with someone who has just received a letter from the IRS stating that:
1. He had a “seriously delinquent” tax debt; and
2. That notice of the “seriously delinquent” tax debt was being forwarded to the State Department.
(In 2016 I did a presentation on this topic just a few months after the law came into force. You may view the presentation here.)
It is clear that the letters from the IRS have started to go out. The purpose of this post is to explain in simple terms what this means for Americans abroad.
To put it simply:
1. If you have received the notice and you do NOT have a current U.S. passport then:
The State Department cannot issue you a passport.
2. If you have received the notice and you DO have a current U.S. passport then:
The State Department may revoke your passport but is not required to revoke your passport.
For most Americans abroad (who certainly have a valid U.S. passport unless they are dual citizens) receipt of the letter does NOT mean that they will lose their existing U.S. passport.
Like all aspects of living as a U.S. citizen abroad, this issue will be governed by both the IRS and by the State Department.
It began with Sec. 3201 of the FAST Act (which naturally is a revenue offset provision and one of the final gifts from the Obama administration) …
Like most of life as a U.S. citizen, it all starts with the IRS …
Internal Revenue Code Sec. 7345 provides the mechanism to certify the “seriously delinquent tax debt” and then forward notice of the debt to the State Department. The relevant language is:
If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, 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 32101 of the FAST Act.
You can read how the IRS interprets this provision here:
https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes
Once the State Department receives the “certification” it will respond with “denial, revocation, or limitation” …
According to the State Department:
Passports and Seriously Delinquent Tax Debt If you have been certified to the Department of State by the Secretary of the Treasury as having a seriously delinquent tax debt, you cannot be issued a U.S. passport and your current U.S. passport may be revoked.
If you are overseas you may be eligible for a limited passport good for direct return to the United States.
We would suggest that if you have seriously delinquent tax debt, you contact the IRS to resolve your debt before applying for a passport. If you do not resolve your tax issues before applying for a passport, your application will be delayed or denied.
If you have seriously delinquent tax debt and have already applied for a new U.S. passport, we cannot issue a new passport to you until you have resolved your tax issues with the Internal Revenue Service (IRS).
For more information on seriously delinquent tax debt, see Revocation or Denial of Passport in Case of Certain Unpaid Taxes on the Internal Revenue Service (IRS) website.
So, where in the legislation and regulations does all this come from?
Denial: Denial is mandatory when one applies for renewal or for a new passport.
https://www.law.cornell.edu/cfr/text/22/51.60
§ 51.60 Denial and restriction of passports.
(a) The Department may not issue a passport, except a passport for direct return to the United States, in any case in which the Department determines or is informed by competent authority that:(3) The applicant is certified by the Secretary of the Treasury as having a seriously delinquent tax debt as described in 26 U.S.C. 7345.
Revocation: Revocation is permitted but is not mandatory
https://www.law.cornell.edu/cfr/text/22/51.62
§ 51.62 Revocation or limitation of passports.
(a) The Department may revoke or limit a passport when(1) The bearer of the passport may be denied a passport under 22 CFR 51.60 or 51.61; or 51.28; or any other provision contained in this part; or,
It is not clear when the State Department would revoke an existing passport. I am not sure what incentive the State Department has to revoke an existing passport (just because of a tax debt).
My thoughts on this …
1. The $50,000 “tax debt” includes interest and penalties. It’s easy for an American abroad to exceed this simply through “form transgressions”.
2. The people most threatened by this are those who do not have a second passport. Get yourself a second passport.
The days of living as a U.S. citizen outside the United States are clearly numbered.
Interested in learning about Substitute Tax Returns for non-filers? If this is not enough excitement, see …
Considering renouncing US citizenship? "Passport Revocation Update: Over 436,000 Taxpayers Meet "Certification" Criteria" https://t.co/LDoHw0iAAV via @VLJeker
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 2, 2018
Doesn’t matter if it’s not documented with a CLN.
“Do you know under what circumstances a PR visa holder can remain in Canada with a passport?”
Do you mean WITHOUT a passport? Since I read that a holder of PR status in Canada doesn’t have to maintain a passport, I’d guess PR means PR, but that’s an intuitive guess.
“Does Canada provide some kind of travel document to allow such persons to travel abroad and return to Canada?”
I don’t know.
I saw a stateless person’s document at immigration in Japan but haven’t seen them in other countries. I didn’t see if the document was issued by a different country, or if the document was issued by Japan and Japan would require the person to visit immigration periodically for extensions. In other words, I don’t know if it was a travel document or not. If it was issued by a different country then it would seem to be a travel document.
However, if your question simply means that Canada allows the person to exit temporarily and return without knowing whether any other country would accept it or not, yes a Canadian PR document allows it, and it sounds like the person might (at present) not need a passport to accompany it when returning to Canada.
@Zla’od
“Question: If you try to enter the USA on a foreign passport, which gives a US birthplace, and have no CLN on file (perhaps you consider yourself to have lost US citizenship anyway), how are you treated by US border officials?”
Such individuals should probably be in possession of an authenticated copy of their CLN to carry with them globally (yes, globally). They are setting themselves up for problems at US Border Control without a copy. Just my opinion…
Well, I’m going to the USA in about 10 days time with my British passport and a copy of my CLN. I have an ESTA (completed after I’d renounced so I put in that I had previously held US citizenship). We’ll see what happens!
There shouldn’t be any problem for a former citizen with an ESTA and a CLN.
If I understand correctly, Zla’od is enquiring about whether an individual with a US place of birth, a non-US passport, and no CLN, is likely to be challenged.
“If I understand correctly, Zla’od is enquiring about whether an individual with a US place of birth, a non-US passport, and no CLN, is likely to be challenged.”
If coming from Canada with a Canadian passport, it’s possible but very unlikely, and consequences are generally just a semi-polite lecture.
If coming from an ESTA waiver country, possibly more likely, plus you would have had to lie on the application, which might be problematic if challenged.
If coming from a visa country, possible you won’t actually get the visa if the consular staff notice the place of birth. (This seems to be an issue in Israel, based on what one hears in the FB group.)
Per the ESTA waiver comment: I’m not sure what would happen if you applied for the waiver using a foreign passport but then listed US citizenship as well, to avoid the lying. Is that an automatic rejection or just a text field that the CBP officer may or may not notice?
“If coming from an ESTA waiver country, possibly more likely, plus you would have had to lie on the application, which might be problematic if challenged.”
Is it even possible? I have an idea that the US birthplace would lead to a request for details of CLN (date approved). Or possibly the application would just immediately be dumped for manual processing.
IMO, it would be counter-productive to give a false answer on an ESTA form.
I have no idea how the ESTA waiver thing works, having no need of it. I defer to others who have attempted to enter the US with a US birthplace on a non-US non-Canadian passport.
Manual processing could mean missing the flight.
Nonymous: “If coming from an ESTA waiver country, possibly more likely [to be challenged while attempting to enter the US on foreign passport with US birthplace], plus you would have had to lie on the application, which might be problematic if challenged.”
It is possible that I believe myself to have committed an expatriating act (such as acquisition of a foreign nationality with intent to relinquish), but have not paid to obtain a CLN. Thus I have solid legal grounds for believing myself to have ceased being a US citizen, but would not have any direct documentation of this (unless perhaps I make a YouTube video before and after my foreign naturalization describing my intent / state of mind), and could just as easily have chosen to continue to identify as a US citizen.
@Zla’od
Good luck with that. I’m sure the nice folks at US customs will enjoy debating the finer points of what constitutes a relinquishing act.
But of course the old Catch-22 still applies. If they believe you to be a US citizen, ultimately they must let you in, after a lecture. If they don’t believe you to be a US citizen, they have no reason to give you grief for not using a US passport.
Before taking Canadian citizenship I made a declaration of what my intent was and had it notarized. Unfortunately I didn’t know what was coming so my intent was different from what it should have been.
“ I have solid legal grounds for believing myself to have ceased being a US citizen, ”
But what you need to get on a flight to the US is a CLN plus visa/visa-waiver.
Or a US passport.
I said:
“what you need to get on a flight to the US is a CLN plus visa/visa-waiver.”
Or rather, you need the visa/visa-waiver to board the flight, and you need the CLN to get the visa/visa-waiver.
Or you could try flying to Canada and see if you can get in by land with a US birthplace, no CLN, a non-Canadian passport, and no visa.
Is a US passport not an option?
“I expect most non-US-resident USCs without PR/citizenship status in their country of residence take the necessary steps to keep their US passport constantly valid, since it’s their only document for traveling outside the residence country. It would be daft to do otherwise.”
Yep, and that is why passport renewal refusal or revocation is such a problem. There is little to nothing one can do about it, especially when the rules are changed, more so when they are applied retroactively and with nothing like an extradition hearing to see if they got the right person.
@plaxy
““Back to your perfect court case,”
Eh? What court case?”
The one with your ideal plaintif.
@Portland
“Passport revocation is meant to keep US resident tax delinquents from leaving”
Which is of even greater concern. They let in on your foreign passport but not leave until you have a US passport or can meet their requirements to not be a USC.
@ND,
Yes, meant “wothout” a passport.
@plaxy,
On the Law360 article.
The law defines seriously delinquent as anyone who owes $50,000 or more. As the OP points out, with penalties and fees included, it is very easy to reach the threshold.
Someplace someone showed how a very minor underpayment in tax can in a very few years bring penalties that are greater than $50,000.
As far as fleeing the country, what criteria are used to determine if one is fleeing? If “fleeing” is the only other thing that triggers passport revocation, denial or renewal denial, then all abroad are in the clear. Even if they determine we left to skip out in taxes, those residing abroad are not fleeing, they have already fled.
@Zla’od I just caught up and saw your question. My friend was born in the USA to UK parents while they were there temporarily for work. i believe the city was Chicago so not easy to challenge as being a US place of birth. He has never had a social security number and the parents returned to the UK while he was in diapers and siblings all born in the UK. He was born in the late 70s I believe. He is clueless to CBT. fast forward to around 2008 and gets questioned at border control. He argued with them that he is not a US citizen but they enlightened him to his place of birth and automatic citizenship. I don’t think my friend was clued into nationality law or anything else at that time and just wanted to get through and in any case he hasn’t committed a relinquishing act. I believe because we was born a dual citizen he needs to renounce. They let him through with a warning that next time he needs a US passport. He has decided to just stay under the radar and stay clear from the USA. Banking hasn’t been an issue yet here. and if it ever becomes one, he will renounce and not file. Since this episode he has become aware of more through me and the Fatca.
“Someplace someone showed how a very minor underpayment in tax can in a very few years bring penalties that are greater than $50,000.”
Someone pointed out this this blog that without any underpayment at all, illegally honest declarations can bring penalties that are greater than $50,000. Even if the IRS will concede 100% of the penalties a few hours after calendar call in Tax Court, the person still has to appear at calendar call in Tax Court.
Though actually I think Tax Court violates Cook v. Tait when Tax Court refuses to hold hearings in states where US citizens live.
Thank you, UK Rose!
Also plaxy, Nonymous, and Duality
@ND
“Someone pointed out this this blog that without any underpayment at all, illegally honest declarations can bring penalties that are greater than $50,000. Even if the IRS will concede 100% of the penalties a few hours after calendar call in Tax Court, the person still has to appear at calendar call in Tax Court.”
Not to worry. If you were depenent upon your US passport to live abroad and the passport revocation law was in effect, you not being one with seriously delinquent debt to the US would have no worries regarding loss of your US passport. According to others, not me.