WASHINGTON — Lawmakers are attempting to soften a plan to require bank and credit union reporting of account data to the Internal Revenue Service, but industry groups say they are still opposed to the idea.
After first leaving out the measure among revenue sources funding the Biden administration's $3.5 trillion budget overhaul, House Democratic leaders are now planning to include an IRS reporting provision, multiple news outlets reported.
But in an attempt to get more lawmakers on board, the House version will reportedly include a higher threshold for account inflows and outflows than the $600 cutoff proposed by the administration and Senate leaders. On the table is a $10,000 reporting threshold, according to Bloomberg News and the Wall Street Journal.
Some in the industry say the higher threshold would not make the IRS plan more palatable. Banks and credit unions had strongly
“A change in the threshold for this provision does not alleviate the serious concerns that credit unions and their members have about this provision’s burdens and impact on consumer privacy,” said Brad Thaler, vice president of legislative affairs for the National Association of Federally-Insured Credit Unions.
The financial sector has criticized the account reporting plan since the White House proposed it last spring to assist the IRS in conducting audits of tax evaders and ultimately raise more revenue for government programs.
The original $600 threshold was particularly unpopular with industry representatives and even some consumer advocates who said it would be overly burdensome and needlessly subject lower-income taxpayers to privacy risk.
In a letter Friday addressed to House leadership, the American Bankers Association and its state-level chapters wrote that while "policymakers insist this provision is aimed at high income earners, it sweeps in almost any American with a bank account."
The ABA-affiliated groups said their concerns over customer privacy violations "would not be mitigated by raising the reporting threshold to $10,000 or even $100,000."
"Regardless of the threshold, financial institutions would be required to develop the necessary technology and processes to identify the accounts, report to the IRS and customers, and educate customers and bank staff on what the information does (and does not) mean. The costs and related process improvements are fixed and will not materially change with threshold changes," the trade organizations said.
Even if Congress were to agree to a higher $10,000 threshold, Thaler argued that that would still affect some of the country’s lowest paid workers.
“Because the provision calls for the new concept of reporting total annual account inflows and outflows, and not income, even minimum wage workers would still find themselves subject to greater government scrutiny and privacy concerns at a proposed $10,000 annual reporting threshold,” he said.
Billy Rielly, a spokesman for the Consumer Bankers Association, said the IRS reporting plan would put both banks and their customers in an uncomfortable position regardless of how many accounts are subject.
“It’s not about the threshold," said Rielly. "This proposal in any form violates Americans’ privacy and forces banks to turn over personal financial information about the customers they serve — without their consent or control.
"We’re talking about every loan, mortgage, and investment account — whether it’s $600 or $10,000. The effects of this scheme are serious and far-reaching, putting the IRS between millions of people and their banks.”
On Thursday night, House Ways and Means Chair Richard Neal, D-Mass., told
“You want to make sure it doesn’t hit the unintended," Neal said. "You don’t want to hit people at the lower end.”
After the IRS reporting plan appeared in a Senate list of revenue raisers for the $3.5 trillion budget reconciliation, Treasury Secretary Janet Yellen wrote to Neal to
“These information reporting provisions will make use of information financial institutions already know to help shed light on taxpayers who evade their tax obligations,” Yellen said.
Meanwhile, some in the industry have embraced a higher threshold, saying it would ease the reporting burden.
“While any new reporting requirement will impose costs, the higher reporting threshold is more targeted to ending tax avoidance,” said Scott Talbott, senior vice president of government relations at the Electronic Transactions Association. “We support ending tax evasion and the higher reporting threshold is better suited to this goal.”
In a statement, Senate Banking Committee Chair Sherrod Brown told American Banker that Democrats "are still working to identify the best threshold but I’m open to a number higher than $600."
"We need more tools to crack down on wealthy tax cheats. I want to make sure most Ohio families aren’t affected — this is about the wealthiest people and companies that cheat on their taxes and stick Ohioans with the bill," Brown said.
