Briefly, should this law be passed, it would authorize the IRS identify someone who owes more than $50,000 in “seriously delinquent tax debt”. In addition, the Treasury Secretary will have the authority to send such a case to the Secretary of State, who in turn can then deny, revoke or limit the tax debtor’s passport.
But what does the law mean by a “seriously delinquent tax debt?” It is any debt where there’s a Notice of Federal Tax Lien or a Notice of Levy filed, but not including:
a debt that is being paid in a timely manner under an installment agreement, and
a debt on which collection is suspended because of a pending or requested collection due process hearing (or certain other relief). Emergency circumstances or travel for humanitarian reasons could also be excepted.
A tax lien is a legal charge imposed on the property(ies) of a debtor that gives the IRS first right of liquidating the property(ies) to pay off the amount of taxes owed. The IRS is never slow in filing a tax lien on the property(ies) of delinquent taxpayers. So if this law comes into effect, many thousands of tax debtors may have their travel rights severely restricted.
A tax lien also includes the future property of a tax debtor bought after the lien filing. The tax lien determines the priority over the property in bankruptcy proceedings and real estate sales. Under normal circumstances, the IRS will only file a lien against your property after they have assessed your tax liability, sent you a Notice of Demand asking you to pay up and you have not responded to the Notice within the time stipulated (usually 10 days).
The proposed law has stirred up a storm of debate with advocates from both sides of the divide vocally airing their views. Some believe the IRS is justified in proposing such a law as it would bring about more effectiveness in tax collection. Others, on the other hand, believe such a move infringes on the basic rights of liberty of individuals. Still others are skeptical over potential mistakes like administrative glitches that can occur. While it is true that in rare cases the IRS may file a lien by mistake but such cases are few and far between.
In any case, it would be interesting to watch how this proposed law will pan out.