Does the Tax Man have the right to prevent us from traveling, even without a formal charge of evasion or another crime? Maybe we're about to find out.
You're standing at the airport. The ticket agent clacks away on the keyboard. She looks up. "I'm sorry," she says. "We can't let you board the plane today." Why? "It's the IRS. They say you haven't paid all of your taxes."
It sounds like the opening scene of a straight-to-DVD Washington thriller. It's actually a few votes from becoming a reality. A new bill, quietly making its way through Congress, allows the federal government to stop people with unpaid taxes from leaving the country-- even if they haven't been charged with tax evasion or any other formal crime.
It all started last fall, when Senator Barbara Boxer introduced the "Moving Ahead for Progress in the 21st Century Act" (or "MAP-21" as it's now called), to reauthorize funds for federal highway and transportation programs. While that doesn't sound like anything having to do with your taxes, the bill includes a little-noticed section that allows the State Department to "deny, revoke or limit" passport rights for any taxpayers with "serious delinquencies."
Here's how it would work. If someone owed more than $50,000 in back taxes, the IRS would be able to send their name over to the passport office for suspension, provided that the IRS already either filed a public lien or a assessed a levy for the outstanding balance. The bill does provide a few exceptions though. For example, if a person has set up a payment plan (that they're paying in a timely manner), is legitimately disputing the debt, or has an emergency situation or humanitarian reason and must travel internationally, they may be able to leave for a limited time despite their unpaid taxes.
IS THAT LEGAL?
Timothy Meyer, a constitutional law professor at the University of Georgia, who's also served as a State Department lawyer, believes that, for all its creepiness, the rule is probably legal. He concludes that if the passport provisions of MAP 21 became law and were challenged, chances are, the courts would find that they satisfy Due Process concerns. Even though there's no judicial hearing before your travel rights are restricted, the bill does protect a passport holder who's challenging the alleged tax debt. And according to Professor Meyer, that's probably enough here.
"Courts have upheld statutes calling for the revocation and denial of passports to those in arrears of child support payments," he explains. "In part, because the child support payments can be contested."
As Meyer points out, MAP 21 certainly isn't the first law to limit a person's right to travel because they owe somebody money. The State Department screens passport applications every day for people who owe child support of more than $2500--a lot less than the $50,000 proposed here. And the tax system is routinely used to get Americans to make good on their outstanding liabilities. In fact, over the next few weeks, some folks won't be getting the refund check they're expecting if, for instance, they've defaulted on their student loans, owe state or local taxes, or haven't ponied up for the child support they owe. Most people don't realize it, but the IRS is in contact with federal and state agencies throughout the year, making sure you've paid your debts before they send you a chunk of change back in the mail.
Kramer Levin partner and member of the IRS Taxpayer Advocacy Panel, Russell Pinilis, is sympathetic to both sides of the issue, but thinks that overall, MAP 21 reflects the frustrating position the government faces when someone just won't pay their taxes.
"The problem," he says, "is that the government isn't a normal creditor. They're not lending you money. They can't put you in jail, and they have to be able to do something."
There's no question that the IRS has trouble collecting the revenue they're supposed to, and that those of us who pay our taxes are hurt by the people who don't. The IRS has even developed the concept of the "tax gap" as a way to gauge people's compliance (or lack there of) with their federal tax obligation. According to the most recently released data, Americans owe $450 billion more in federal taxes than they actually paid, an increase in $105 billion from the last time the IRS looked at the issue.
Professor Daniel Shaviro, a tax policy expert at New York University School of Law, recognizes that there is a legitimate policy goal at play in the proposed travel restrictions: making sure someone stays in the country and really pays the taxes they owe. After all, he says, someone who owes a huge amount in taxes might present a flight risk. He does, however, worry about the possibility that the passport rules could be misused, say, to harass specific individuals whom government officials dislike.
IRS + TSA = UH OH
But is all of this a little extreme? The IRS places tax liens on assets all the time, putting other creditors on notice that you have an outstanding debt with the US government. And would someone really flee the country--leaving their home and their family behind--over a $55,000 tax bill? At this point, there's no real data either way, but Senator Boxer continues to push House Republicans to pass MAP 21 with the travel ban in place.
"Thousands of businesses are at stake," she said in a statement. "There are many people on both sides of the aisle in the Senate who want to get our bill passed into law, and I'm going to do everything I can to keep the pressure on the Republican House to do just that."
For now, at least, MAP 21 remains pending legislation. But, in the future, when traveling abroad, you may need to worry about more than just your shots and those baggage fees -- you may need permission from the IRS.