The ban on citizens with high unpaid tax debts, a controversial measure attacked for its legality, takes effect this month.

US citizens who are considered to be heavily in debt over unpaid tax could be banned from leaving the country if or when laws legislated for more than two years ago come into force, raising questions over whether such a move is constitutional.

In a briefing note by law firm Caplin & Drysdale, it explains a measure in Fixing America’s Surface Transportation Act (aka FAST Act), which was enacted in December 2015, enables US authorities to deny a person the right to use, obtain or retain a US passport if such a person has a “seriously delinquent tax debt”. 

The firm noted that Internal Revenue Service chief counsel (operations), Drita Tonuzi, has indicated during a meeting of the American Bar Association that the IRS will start sending certifications of such serious tax debts to the State Department this month.

The idea of banning certain US taxpayers from leaving the country is another weapon, it appears, in the US official toolbox to chase after people over tax affairs. In 2010, the Obama administration signed into law the Foreign Account Taxation Compliance Act, which is designed to prevent expats from dodging tax. FATCA and other rules have been blamed for making it tough for Americans to get access to financial services outside the US. 

The latest legislation aims to stop tax debtors leaving the US in the first place, prompting anger that such a move abuses due process of law and the right of persons to travel. An article by National Review, a US publication (Feb 14), stated that lawmakers had turned the US into a “debtor’s prison”. It said: “To be clear: We are not talking about Americans who have been convicted of tax evasion or tax fraud, or who are awaiting a criminal trial on charges related to tax matters. These Americans have not been charged with a crime, must less convicted of one. They simply have unpaid taxes amounting to $50,000 or more.
More precisely: They have an unpaid IRS liability amounting to $50,000 or more. The IRS’s aggressive schedule of interest and penalties for unpaid taxes ensures that a relatively small amount of unpaid taxes can turn into a $50,000-plus liability with remarkable speed.”

In its note, Caplin & Drysdale said that for the purpose of the FAST Act, a "tax debt" includes US individual income taxes, trust fund recovery penalties, business taxes for which the individual is liable and other civil penalties - however, it does not include other non-tax liabilities, such as FBAR assessments under Title 31 and criminal restitution assessments”.

The IRS on January 16 has said when a certified taxpayer applies for a passport or a passport renewal, the State Department will generally hold such application open for 90 days to allow the taxpayer a chance to resolve his or her tax delinquency or any other certification issues before denying a passport.

There are other potential exclusions from the passport ban, such as debt that that cannot be collected due to hardship, identity theft, the cost of a disaster, debt of a taxpayer in bankruptcy, debt of a deceased taxpayer, and debt with a pending adjustment ending in no balance due. The IRS has said exclusion categories could be changed at any time.

“If a taxpayer believes that the IRS has made an erroneous certification or has improperly failed to reverse a certification, the taxpayer's sole remedy is to file suit in either federal district court or the US Tax Court. A taxpayer may not avail him or herself of administrative IRS appeals to challenge a certification of a seriously delinquent tax debt,” the firm said. 

Critics have claimed that there is no appeal or legal remedy or redress in cases where a person is wrongly targeted, as can happen.