Integrity Legal

In the aftermath of the new year, there have been many announcements which have had significant impacts upon those living outside the USA. It recently came to this blogger’s attention that the Internal Revenue Service (IRS) of the United States is poised to begin certifying delinquent taxes and communicating such certification to the United States Department of State. To quote the official IRS website directly:

The IRS has not yet started certifying tax debt to the State Department. Certifications to the State Department will begin in early 2017…If you have seriously delinquent tax debt, IRC § 7345 authorizes the IRS to certify that to the State Department. The [State] department generally will not issue or renew a passport to you after receiving certification from the IRS…Upon receiving certification, the State Department may revoke your passport. If the department decides to revoke it, prior to revocation, the department may limit your passport to return travel to the U.S.

As of January 1, 2016 US Federal statutes were amended to allow US passport revocation for those individuals who were delinquent in taxes under statutorily defined circumstances. Notwithstanding the fact that this law had been promulgated, it appears that until now the IRS had not put a frame work in place for notifying the State Department that an individual had tax delinquency issues. As can be seen from the IRS’s own website, that is no longer the case moving forward. For this reason it is prudent for those who may have tax delinquency issues to retain the services of a competent professional in order to rectify such issues before a situation arises where one is unable to get a passport issued, or a passport is revoked either in the USA or while traveling abroad.

Meanwhile, it appears that authorities in Thailand have adjusted the tax structure for certain taxpayers in Thailand. To quote directly from the Bangkok Post:

A revamped personal income tax structure aimed at increasing disposable incomes for taxpayers has officially come into effect…The amendment to the Tax Code, published in the Royal Gazette on Jan 27, applies to incomes received from Jan 1, 2017 to be filed in 2018…

It appears that under the restructure individuals will be able to make larger deductions for certain expenses while certain filing requirements have been changed requiring a larger number of individuals to file taxes. Those interested in these developments are strongly encouraged to read the article cited above and consult appropriate professionals in order to be apprised of the posture of a given tax situation.

Finally, The United States Embassy in Bangkok, Thailand has recently increased their official exchange rate to 37-1 (baht to dollars). This change reflects the fact that the Baht has been weakening against the US dollar in recent months and may be a signal that said currency may weaken further. The US Embassy in Thailand utilizes a set exchange rate which provides a level of certainty regarding the cost (in baht terms) of service fees for services provided by the US Embassy personnel.

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In a recent article in the Wall Street Journal a new bill proposed by the United States Congress was discussed:

Under a new law expected to take effect in January, the State Department will block Americans with “seriously delinquent” tax debt from receiving new passports and will be allowed to rescind existing passports of people who fall into that category. The list of affected taxpayers will be compiled by the Internal Revenue Service using a threshold of $50,000 of unpaid federal taxes, including penalties and interest, which would be adjusted for inflation.

Clearly this proposed legislation could have significant ramifications for Americans living abroad. Presently, Americans abroad could only see their passports rescinded or applications for renewals denied where said applicants have outstanding criminal warrants in the United States of America or are delinquent on their child support. The proposed legislation comes after the relatively recent  implementation of FATCA (the Foreign Account Tax Compliance Act) which requires foreign banking institutions to report the financial activities of American citizens making financial transactions abroad. There have been some who disapprove of FATCA and there have been moves made in the US Federal Court to challenge the law’s constitutionality. However, at present the law remains part of the current American legal framework with respect to overseas bank accounts. As a possible consequence, in recent years there have been a growing number of individuals who have opted to renounce their United States Citizenship. It is clear that more and more people are opting to renounce their United States Citizenship. Each individual’s renunciation is likely based upon a different calculus, but it seems clear that recent changes to American tax policy have had a significant impact upon Americans living abroad.

The recent announcement that passports could be revoked as a consequence of tax delinquency seems likely to cause the number of Citizenship renunciations to increase. Although, it remains to be seen if this new policy will have a significant impact upon renunciations. Regardless of the fact that 50,000 USD seems like a substantial amount of money it will be interesting to see if the proposed legislation will allow for a form of COLA (Cost of Living Adjustment) style system whereby the amount of money in tax delinquency which would trigger a passport renunciation would increase year by year in order to track inflation. It is unlikely that such a scheme would be implemented because Foreign Bank Account Reporting (FBAR) requirements have not changed since the late 70′s. Therefore it stands to reason that the passport issuance requirements will stay frozen. Therefore, this legislation, although unlikely to have a significant impact upon Americans abroad anytime soon could have serious ramifications for Americans in 15-20 years time when 50,000 USD is not the representation of wealth that it is today.

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