Are They Demanding More Taxes?

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I’ve long predicted there would come a time when the U.S. government began requiring individuals applying for or renewing their U.S. passports to prove tax compliance.

That time came a step closer earlier this month with a report from the Government Accountability Office (GAO). The report concluded that in 2008, the State Department issued passports to 224,000 citizens who owed nearly $6 billion in unpaid federal taxes.

Under current law, the State Department cannot refuse to issue or renew a passport if the applicant owes back taxes. In addition, federal law forbids the IRS from disclosing taxpayer information to the State Department. To do so, the IRS must first obtain consent from the taxpayer.

However, there are several circumstances under which the State Department can refuse to issue or renew a passport. If there’s a federal warrant for your arrest, a federal or state court order forbidding departure from the United States, or a request for extradition, you won’t get your passport. But there are much more mundane exclusions. For instance, if you owe more than $2,500 in delinquent child support payments, you won’t get a passport.

Given these existing exclusions, it wouldn’t be difficult for Congress to add “tax delinquencies” to them. The GAO suggested as much:

“If Congress is interested in pursuing a policy of linking federal tax debt collection to passport issuance, it may consider taking steps to enable State to screen and prevent individuals who owe federal taxes from receiving passports.”

You can read the text of the full report here.

This proposal is the latest wakeup call for any U.S. citizen applying or renewing their passport. In the future, doing so might be conditional not only on being tax compliant, but also making sure your children are registered for the draft, or whatever other conditions Congress decides to impose. And without a passport, of course, you have no way to travel internationally.

The GAO proposal makes it more important than ever to get a second passport. If you don’t qualify for a second passport by virtue of marriage or ancestry, it’s still possible to acquire one by making a contribution or investment to a handful of countries. In exchange, you’ll receive citizenship for life and a passport. The Commonwealth of Dominica and the Federation of St. Kitts & Nevis are the only countries with an official, legally mandated, citizenship-through-investment program. Several other countries, including at least two EU countries, will award citizenship and passport upon performance of an outstanding service (including an investment).

Reprinted with permission from The Sovereign Society.

Mark Nestmann is a journalist with more than 20 years of investigative experience and is a charter member of The Sovereign Society's Council of Experts. He has authored over a dozen books and many additional reports on wealth preservation, privacy and offshore investing. Mark serves as president of his own international consulting firm, The Nestmann Group, Ltd. The Nestmann Group provides international wealth preservation services for high-net worth individuals. Mark is an Associate Member of the American Bar Association (member of subcommittee on Foreign Activities of U.S. Taxpayers, Committee on Taxation) and member of the Society of Professional Journalists. In 2005, he was awarded a Masters of Laws (LL.M) degree in international tax law at the Vienna (Austria) University of Economics and Business Administration.