This article was published by The McAlvany Intelligence Advisor on Wednesday, February 8, 2017:
The federal government published the final rules on Monday on just how the Department of Transportation, the Department of State and the Internal Revenue Service, working together, can disrupt one’s plans to travel abroad:
If the Secretary [of the U.S. Department of Transportation] 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.
“Seriously delinquent” means an “unpaid, legally enforceable Federal tax liability of an individual … which has been assessed … which is greater than $50,000, and … with respect to which … a notice of lien has been filed … or … a levy is made.”
The unpaid debt will include penalties and interest along with an inflation adjustment. As long as the debt remains unpaid the State Department will not issue or renew an individual’s passport.
The idea of keeping Americans from fleeing so they can be fleeced was a brainchild of former California Democrat Senator Barbara Boxer (shown) back in 2012. The transportation bill, then called “MAP 21” (Moving Ahead for Progress in the 21st Century Act), had nothing to do with collecting back taxes until she stuck in a little provision called the “Highway Use Tax Evasion” program. It would allow $10 million of highway funds to be directed to the IRS “for efforts including the development, operation, and maintenance of databases to support tax compliance.”
Fast forward to December 2015. With those databases fully operational, the final step was announced as part of FAST – the “Fixing America’s Surface Transportation” act – which outgoing president Obama signed into law.
There are exceptions built into the law (see Sources), including “innocent spouse relief” and any existing installment payment plant already in place. Other than that the State Department will put a 90-day hold on any new passport requests until the “issue” is “resolved.” And it’s likely, although unclear, that State will also demand existing passports be returned for safekeeping, or they will be confiscated by the TSA at airports.
The program has serious Due Process issues, but according to Timothy Meyer, a constitutional law professor at the University of Georgia, it’s likely to survive any court challenges: “Courts have upheld statutes calling for the revocation and denial of passports to those in arrears on child support payments,” and so legal precedent would likely override those concerns in the present instance.
The idea behind the new rule is to close the so-called “tax gap” – the amount owed by tax scofflaws, estimated to approach $500 billion. But, according to Congress’s Joint Committee on Taxation, the amount likely to be raised will be less than $400 million, or about one-tenth of a percent of that gap.
What’s really afoot was explained by Professor Daniel Shaviro, a professor at New York University’s School of Law, who called it more of a “policy” issue than a tax collection tool: someone owing large amounts to the IRS might present a “flight risk” and this new rule will keep them inside the US where the IRS has ready access to them, their bank accounts, real estate holdings, investments, and business interests.
Nestmann.com: The IRS could stop you from flying. Here’s how…