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U.S. citizens detained abroad still face tax fines. Lawmakers want to change that

When journalist Jason Rezaian returned to the U.S. in 2016 after being wrongfully imprisoned in Iran for 544 days, he got a surprise from the U.S. government.

“I got one of those bills from the IRS saying, you owe this much on this year, you owe this much on this year because of failure to pay on time — here's the interest that's accrued,” he told NPR.

The bill was for more than $6,000 — representing late penalties and interest on taxes he wasn’t able to file while imprisoned. Lawmakers on both sides of the aisle say it’s an unjust reality of U.S. law but a bill to fix the issue remains stalled in the House.

Rezaian, who was released in a prisoner swap, received help from Hostage U.S., an organization that provides resources to hostage families and hostages upon their return. His case was high profile, and he also had the support of then-presidential envoy for hostage affairs Robert O’Brien and current envoy Roger Carstens.

But as time went on, Rezaian’s bills from the IRS still ballooned to $22,000.

Rezaian said the agency told him they wanted to help, but were limited in how much they could do to eliminate the fees.

“I don't look at this as the IRS out for blood and treasure. It's not like that,” Rezaian said. “This is an oversight that nobody really thought about.”

The IRS said in a statement it will “work with the family of any individual who is being held hostage or unlawfully detained to resolve any tax issues that may arise from these heart-wrenching and unconscionable situations.”

It added that from time to time, the State Department provides the IRS with a list of people who have been taken hostage in a terrorist act, and advises the agency to “suspend enforcement related notices and collection activity on existing accounts.”

But while the agency has discretion to waive various fines, it doesn’t have the authority to fully forgive interest or penalties.

Rezaian said that has consequences that extend far beyond the financial for Americans returning home.

“Adding layers of bureaucratic red tape on top of what you've just been through, it feels like a new series of impediments when all you want to do is run, right? You want to move forward. You want to make up for the time that you've missed,” he said.

Ultimately, Rezaian paid $6,000 to the IRS.

A few years ago, Rezaian was interviewing Delaware Sen. Chris Coons when he paused to share his ordeal with the IRS.

“He leaned forward when I finished talking, asked a question that ended in an expletive and he said, ‘This is something that I want to fix and I think my colleagues will want to fix,’” Rezaian remembered.

‘That seemed outrageous to me’
Coons said he was surprised by Rezaian’s story.

“That seemed outrageous to me,” he told NPR. “It's unjust that Americans should have to pay this kind of a fee or a penalty.”

The number of Americans wrongfully detained abroad has generally increased over the last decade, and lawmakers say between 40 and 60 Americans are being held unjustly overseas.

Coons, a Democrat, said it was one of the easiest bills in his tenure to get the support of his colleagues.

“Their initial response is, ‘Wait, that's true? When you are released from being a hostage and come home to the United States, the IRS fines you?’ Yes, they have to. And if we don't pass this bill, they'll keep doing it,” he said.

Coons added the process has implications beyond the actual bill itself.

“Frankly, doing legislation like this also helps sustain the muscle memory of what it means to legislate together,” he said. 

When personal relationships drive legislative fixes
The “Stop Tax Penalties on American Hostages Act” would amend the Internal Revenue Code to prevent the IRS from imposing penalties on wrongful detainees and hostages who miss payments while they are held abroad.

Sen. Mike Rounds, R-S.D., who co-sponsored the Senate bill, said the effort is a reminder that while the attention in D.C. is often on the “bright and shiny thing rather than the critical items," there’s still quiet action to actually address pressing problems.

“There's still a need for each member to be responsive to what he thinks are issues that can't be solved anyplace else. The way that you solve it is by sharing with folks on the other side of the aisle and just saying, look, is there something we can do about fixing this problem? And it's amazing the number of times people immediately get on board,” he told NPR.

The bill passed through a mechanism called unanimous consent, which allows senators to expedite a bill by setting aside other procedural rules for legislation. Tax bills must originate in the House but the Senate didn’t want to wait to act. In April, the Senate agreed that there were no objections to the bill and it will be considered passed if the House approves the measure.

“I think that shows that there actually is a response to those types of really human needs that are out there,” Rounds said. “And the fact that we do it on a bipartisan basis and do it fairly quickly, I think that's what the American people want to see from Congress, even though it doesn't happen very often.”

He said members of both parties coming together to tackle narrow issues helps lay the foundation for other larger, thornier legislation like addressing the national debt.

“It starts by having friendships and by having a trust factor that you can build in to gather something that will stand the test of time,” he said.

Path for bill in House remains unclear

Like its Senate counterpart, the House bill has bipartisan support.

“Bipartisanship is alive and well every day in Congress but it's not covered because it's not of any interest to people who want to cover the conflict between individual personalities within parties or between parties,” said Republican Rep. French Hill of Arkansas, one of the co-sponsors of the bill. “But that is not indicative of what happens every day in Congress.”

Hill said he’s “optimistic that we can enact this this year,” but says the challenge is ascertaining the best approach for the tax-related bill.

“It’s conceivable that the bill could be put on the suspension calendar, but if it’s not, I think it’s a prime candidate for inclusion in this year’s National Defense Authorization Act draft,” he said, referring to the yearly policy and spending authorization for the Department of Defense.

The Treasury Department — which includes the IRS — said in a statement it’s “encouraged to see Congress is considering legislation to address this issue.”

“No American who experiences the terrible ordeal of being held hostage or wrongfully detained abroad should have to pay penalties on tax payments they are unable to make,” the statement continued.

One of the Democratic co-sponsors, Dina Titus of Nevada, said part of the strategy going forward is to raise awareness among more members.

“It's like a ripple. Pretty soon we'll have a pretty formidable list of co-sponsors. Once you have that, it's easier to bring it to the floor,” she said, adding that she thinks bills like this show Congress at its best.

“I've found that if you stay away from ideology, you can sometimes get things done that are just practical. It doesn't have to be a major nuclear policy treaty. It can be something that affects people's daily lives,” she said.

But bipartisan support in the House isn’t enough — the speaker has to bring it up for a vote.

Rezaian said he’s encouraged by the Senate’s passage and that if the House passes the bill, it will be a “huge step forward.”

“But even more than that, I hope it brings some awareness to the issues that we face,” he said. “Everybody thinks that you come home and this ordeal is over and that makes a really nice story. But that's almost never the case. It's never the case.”