Hundreds of thousands of Americans will be denied new or renewed passports because of unsettled and overdue tax debts, says the Internal Revenue Service.

The purpose of the bill is to generate funds for Federal-aid highways, highway safety programs, transit programs, and other purposes.

On page 418 of the 490-page act is Section 32101, which states the additional section to the Internal Revenue Code named the "Revocation or Denial of Passport in Case of Certain Tax Delinquencies."

The new section demands the IRS to release a list of taxpayers with delinquent tax debt for the purpose of canceling, denying, or limiting the passport. The agency has been sending the violators' names to the State Department, which administers passport applications, since February.

Outstanding Debts

Over 362,000 Americans will be affected by the law. According to the State Department, violators who fail to resolve their tax debts before they apply for a passport will have their application denied or delayed.

On the other hand, those with seriously delinquent tax payments who already have a passport will not be issued a renewed one until they have resolved their tax issues.

Mary Beth Murphy, IRS Division Commissioner, said that the new law has already had a large amount of tax collections. One person paid $1 million in overdue taxes in order to get the passport.

Additionally, as of June, at least 220 people have also paid a staggering total of $11.5 million in overdue taxes. Around 1,400 people have also signed installment agreements in order for them to continue traveling.

Payment Plans

According to the State Department, people with overdue taxes who are currently overseas will be issued a limited passport good for a direct return to the country. The IRS also added that it will offer payment plans to taxpayers who are "financially distressed," and people who have filed for bankruptcy, as well as victims of tax-related identity fraud or those who are living in a federally-declared disaster area so that their passports will not be put at risk.

Foreign Bank and Financial Accounts are not being considered for the law. This would offer some relief to people who have assets overseas and have failed to disclose it to the US Department of Treasury.

So far, the 2015 law is only applicable to denying applications for passport renewal or a new passport. The concerned agencies have not taken any action to revoke passports from citizens with delinquent tax debts.