On April 24, 2012 the U.S. Senate approved an amendment to a
bill1 that would cause U.S. taxpayers to lose their
passport if they owe more than $50,000 in U.S. taxes. While this is
a significant development for those who reside in the U.S., it is
particularly significant for the estimated seven
million2 U.S. citizens who reside in Canada, Mexico,
Europe, or anywhere abroad because current law makes it unlawful to
depart, enter, or attempt to depart or enter the U.S. without a
valid U.S. passport.3
If the House of Representatives approves the Senate's
amendments the bill will then be presented to the President for
signature. You can read the full text of the bill by clicking
here. According to GovTrack,4 a website that
tracks bills as they make their way through Congress, 29% of all
House bills reported favorably by committee in 2009 –
2010 were enacted into law.
The bill demonstrates that the U.S. is serious in its efforts to
fight tax evasion and off-shore abuses, which is a noble cause.
However, consistent with other efforts to date, the inadvertent
casualties are U.S. citizens residing abroad. If the bill is signed
into law, and its constitutionality upheld, it will be even more
important for U.S. citizens residing abroad to bring their
reporting obligations current lest they inadvertently find
themselves in violation of immigration laws when they cross the
Section 4036 of the Senate amendment provides in relevant
"If the Secretary receives certification by the
Commissioner of Internal Revenue that any individual has a
seriously delinquent tax debt in an amount in excess of $50,000,
the Secretary shall transmit such certification to the Secretary of
State for action with respect to denial, revocation, or limitation
of a passport pursuant to the Passport Act of 1926."
The amendment is estimated to raise $743 million over 10
This is not the first time these particular tax and passport
provisions have been proposed in Congress. On March 14, 2012 the
Senate approved MAP-21, which was sent to the House for vote. The
bill was not presented for vote and, instead, the House voted on
and approved the Surface Transportation Extension Act of 2012.
Importantly, the House bill did not contain the passport and tax
provisions of MAP-21. When the House bill was presented to the
Senate, it was approved with the passport and tax amendments.
Given the torrent of media attention surrounding the
expatriation of Facebook co-founder Eduardo Saverin immediately
prior to the company's initial public offering (including
Senator Schumer's proposed Ex-Patriot tax), it is clear that
the tax compliance burden for U.S. citizens residing abroad will
not abate any time soon.
1. H.R. 4348 as passed by the House of Representatives,
the "Surface Transportation Extension Act of 2012, Part
II;" and MAP-21 as amended by the Senate, the "Moving
Ahead for Progress in the 21st Century
2. National Taxpayer Advocate 2011 Annual Report to
Congress at 129. Citing Memorandum for Secretary Geithner from J.
Russell George, Treasury Inspector General for Tax Administration,
Management and Performance Challenges Facing the Internal
Revenue Service for Fiscal Year 2011 13 (Oct. 15,
The new subsection 55(2) regime has now been enacted into law. With these new rules, the ability to pay tax-free dividends amongst related Canadian corporations, once a foundational concept of the Canadian tax system, can no longer be taken for granted for dividends received after April 20, 2015.
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