Yellen urges House to include IRS reporting provision in budget package

WASHINGTON — Treasury Secretary Janet Yellen urged the chairman of the House Ways and Means Committee to include a provision requiring banks to report customer transaction data to the Internal Revenue Service amid negotiations over the $3.5 trillion budget reconciliation bill.

The IRS reporting measure, which has come under fire from the banking industry, would mandate that banks and other financial institutions report transaction data to the government for all accounts with more than $600 in inflows or outflows.

Last week, American Banker reported that the provision was under Senate consideration as one of many items intended to help offset the costs of the $3.5 trillion package making its way through Congress. But a list of House "pay-fors" did not include the IRS reporting requirement.

Yellen argued in a letter dated Tuesday to House Ways and Means Chairman Richard Neal, D-Mass., that the impact of the reporting measure on reducing tax avoidance would be “substantial.”

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“I write in enthusiastic support of the financial institution reporting provisions advanced in the President's tax compliance agenda,” Yellen wrote. “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 the account reporting framework proposal, introduced by the Treasury Department last spring, was “designed to ensure that there will be no increase in taxpayer burden associated with this regime.”

“For already compliant taxpayers, the only effect is a distinct benefit — a lowered likelihood of costly and burdensome audits,” Yellen said.

Instead, the primary goal of the government’s tax reporting push was “to help the IRS pursue high-end noncompliance by providing some information about opaque income streams that disproportionately accrue to the top,” she said.

Yellen’s letter also came attached with a memorandum authored by Mark Mazur, the Treasury Department’s acting assistant secretary for tax policy. In it, Mazur shared a ballpark estimate for how much money the information reporting requirement could help the government collect, even if Congress settled on a reporting threshold higher than $600.

“We do not know the exact parameters of Congressional proposals, but we expect that they are likely to incorporate a narrower reporting regime than was the basis of the Administration’s information reporting proposal scored by Treasury,” Mazur wrote. “Although we have not scored any particular proposal, we suspect the revenue potential of a narrower reporting regime would be lower, perhaps in the range of $200-250 billion over the ten-year budget window.”