Act F.A.S.T. - Paving the Highway for Unhappy Travelers

What does “Fixing America’s Surface Transportation Act" have in common with American passports? Stipulations passed by US Congress means the IRS can now impact the denial, renewal, or attaining of a US passport, and it's all hidden within the F.A.S.T. Act.  Rebecca Murphy reports.

The 5-year infrastructure spending Bill recently passed by the US congress adds a new section (7345) to the US Internal Revenue Code as part of the “Fixing America’s Surface Transportation Act."  What does this new law have to do with issuing/revoking passports?  The idea stems from early 2012, when the Government Accountability Office suggested using the issuance of passports to collect overdue tax bills. 

The law governing the administration of passports by the State Department previously stated the Secretary of State may refuse a passport if the applicant owes in excess $2,500 in child support or other Federal debts.  The amendment states that if the applicant owes “seriously delinquent” federal debts the State Department is required to deny the issuance or renewal of a passport, and furthermore to revoke a previously issued passport.   Seriously delinquent debt is defined as any outstanding Federal debt in excess of $50,000, including interest and penalties.

According to Forbes, the IRS will notify the State Department when such delinquencies are overdue.  This is upsetting to many Americans, as passports are nowadays not only required for international travel, but in some cases domestic travel as well. 

Furthermore, the amendment allows the IRS to outsource, so to speak, the collection of taxes in arrears by using a third party.   What this means in practice is that your confidential information will now be shared with a debt collection agency.

This bill is not perfect, but it is a common-sense compromise, and an important first step in the right direction.
— President Obama

Another area of concern is that the State Department will no longer allow travelers to add additional pages for visas to their valid passports. Previously, US passport holders were allowed to pay an additional fee to add a 24-page visa insert.  When US passport holders run out of space, they will have to request an entirely new passport.  The new protocol was adopted “to enhance the security of the passport and to abide by international passport standards,” according to the State Department.   

Holding a passport used to provide a way to travel with certainty; a universal form of identity; a document that identified a person as a citizen of a certain country with a right to protection while abroad, guaranteeing safe travels.  It is now used as a form of government identification, a debt collector's tool, a means of holding you hostage in your own country and if taken away, it leaves citizens without a means to simply…travel.

US passports are not what they once were.  In fact, many American passport holders are now giving up their citizenships seeking second citizenships of other countries.  Not only are Americans abandoning their citizenships, but potential wealthy investor immigrants are as well.  Reports from NTL Trust show some investors considering the EB-5 programme and even others who are years into the process are jumping ship.  Once they realize the global tax liabilities on worldwide income they are vacating the process in favor of other citizenship options in countries with less stringent tax rules.

It’s not just the new bill provisions that lead American citizens to pursue second passports.  The United States is the only country to impose worldwide taxation on citizenship, not on residency.  Bad news for American citizens living and working abroad.  The rules for filing income, estate, and gift taxes are the same whether Americans reside in the US or live abroad; they are still required to file and pay taxes to the US on worldwide income, and if they fail to do so, they could be left with an outstanding balance owed to the IRS.

American citizens can also be denied the ability to open a foreign bank account, limiting their worldwide investment opportunities.  Banking and investing abroad is not illegal, and conducting business or holding bank accounts in these countries is not illegal.  However, most foreign banks are turning away American investors to eliminate the mandatory reporting caused by FATCA (Foreign Account Tax Compliance Act).  Offshore Living Letter suggests FACTA has been the cause of the  “closing of accounts, the closing of whole banks, and the dramatic increase in the cost of banking around the world.”

Convenience is the key for most.  Traveling and doing business in countries with a second passport allows for visa-free travel, an increase in business opportunities and an insurance policy for your personal freedom.  For these reasons, the number of millionaires in the Caribbean and other countries increases weekly, in part due to the many Citizenship by Investment Programmes available.

Rebecca Murphy is a freelance writer/blogger born and raised in the unforgiving Canada north, with a background as a financial advisor for Ameriprise Financial.  She currently lives with her husband and children in Seattle. 

Unbound works with a number of Citizenship by Investment  Programmes, and has helped many families to diversify their options for themselves and their children.  For subscribers, we offer a consultation service to personally help you to find the programme that is right for you.  Rather than living in fear of your government, isn't it time to begin a life…UnBound?