September 27, 2021
Washington, DC–US Senators Mike Crapo (R-Idaho), member of the Senate Finance Committee; John Thune (R-South Dakota); Pat Toomey (R-Pennsylvania), senior member of the Senate Committee on Banking, Housing and Urban Affairs; and other Senate Republicans, including all Republican members of the Senate Finance Committee and the Senate Banking, Housing and Urban Affairs Committee, today urged Senate Majority Leader Chuck Schumer (D -New York) to drop the Biden administration’s unprecedented proposal to extend the reporting of private and confidential financial data of law-abiding Americans by financial institutions to the Internal Revenue Service (IRS). The Administration’s proposal would require financial institutions to report customer information such as gross inflow and outflow information and transaction information directly to the IRS.
“This proposal represents a radical departure from existing reporting requirements associated with national security and actual taxable events” the senators wrote. “Imposing more requirements on financial institutions would not only hurt these institutions and their clients – who ultimately pay the price for the costs of compliance – but it would also flood the IRS with layers of new documents and taxpayer data that is either redundant or unrelated to the improvement. federal tax compliance, because account entries and exits are not taxable events. Simply flooding the IRS with more data and burdening already overwhelmed taxpayers, financial institutions and IRS service centers with more paperwork is of questionable value, especially when the IRS is not using effectively the data already in its possession. ”
“We appreciate the letter from Senator Thune and his colleagues, and it highlights many of the concerns we are hearing about this misguided proposal from the bank’s customers,” said Rob Nichols, President and CEO of the American Bankers Association. âThis plan would force banks to develop an expensive new system to provide private financial data on almost all taxpayers to the IRS, not just those suspected of cheating on their taxes. It is not clear that the IRS could even process and protect all of this information. Perhaps most disturbing of all is that it risks taking people away from the banking system and all the economic benefits that come with having a bank account. We urge Congress to reject this bad idea.
âAn ICBA poll conducted by Morning Consult found that 67% of voters oppose financial institutions reporting accounts receivable information to the IRS, while consumers address their customers with more than 400,000 messages. members, the opposition Congress. noted Rebeca Romero Rainey, President and CEO of the Independent Community Bankers of America. “IRS Disclosure Proposal is an invasion of consumer privacy, a violation of American due process, a data security risk in the ongoing investigation into leaked claims of agency revenue and a threat to bipartisan efforts to reduce the unbanked population by driving out more Americans. banking system and predatory lenders.
“This proposal is deeply worrying for American credit unions and their 120 million members”, said Jim Nussle, president and CEO of the Credit Union National Association. âNot only would the regulatory burden create a disproportionate impact on credit unions serving rural communities, it would raise serious privacy concerns for consumers across the country. From the massive data breach in 2014 at the Office of Personnel Management to the leak of federal tax returns from the IRS this year, the federal government’s turbulent history of personal data warehousing underscores the dangerous impracticality of this policy proposal.
The letter was also signed by Senators John Barrasso (R-Wyoming), Marsha Blackburn (R-Tennessee), John Boozman (R-Arkansas), Richard Burr (R-North Carolina), Bill Cassidy (R-Louisiana) , John Cornyn (R-Texas), Kevin Cramer (R-North Dakota), Steve Daines (R-Montana), Chuck Grassley (R-Iowa), Bill Hagerty (R-Tennessee), John Hoeven (R-Dakota) North), John Kennedy (R-Louisiana), James Lankford (R-Oklahoma), Cynthia Lummis (R-Wyoming), Jerry Moran (R-Kansas), Rob Portman (R-Ohio), Michael Rounds (R-Dakota) South), Ben Sasse (R-Nebraska), Tim Scott (R-South Carolina), Richard Shelby (R-Alabama), Thom Tillis (R-North Carolina) and Todd Young (R-Indiana).
Full text of the letter below:
Dear Chef Schumer:
Congress is currently considering various proposals to close the tax gap and improve federal tax compliance. The tax gap – the difference between taxes owed and paid – has been a stubborn problem for decades. While we should pursue bipartisan action to narrow the tax gap and better enforce our tax laws, we write to stress our concern over the Biden administration’s proposal to expand the reporting of private and confidential taxpayer information to taxpayers. financial institutions to the Internal Revenue Service (IRS).
While details of the legislation being negotiated by Congressional Democrats remain unclear as Republicans continue to be excluded from the process, one of the flawed proposals incorporated into the US plan for President Biden’s families would violate privacy law-abiding taxpayers and impose onerous new reporting requirements. on financial institutions. Specifically, this proposal would require banks, credit unions, and other financial institutions to report financial account information for nearly all of their customers to the IRS, including entry and entry information. gross outflows, and possibly transaction information.
This troubling proposal would create serious privacy concerns for American taxpayers. Additionally, it would be unreasonably onerous on financial institutions across the country, especially community financial institutions serving families and small businesses across America.
Contrary to claims that this proposal would provide only a “distinct benefit” to already compliant taxpayers, this proposal would compromise the privacy of an excessive number of law-abiding Americans whose confidential financial information is sent by their financial institution directly. to the IRS. As you know, the IRS faces about 1.4 billion cyberattack attempts every year, and just a few months ago, the private returns of thousands of taxpayers were obtained and disclosed to the public by ProPublica. – a serious information security breach on which the agency has still not provided useful information to Congress.
Given the IRS’s troubling track record of failing to protect certain confidential taxpayer information and abuse of its authority, particularly targeting conservative political groups, this proposal would undermine confidence in the financial system and, in turn, undermine confidence in the financial system. in turn, would reduce financial inclusion. The most recent FDIC survey shows that the second most common reason unbanked households don’t have a bank account is because they don’t trust banks. About a quarter of all taxpayers don’t trust the IRS to protect their tax records or to fairly enforce tax laws. Giving the IRS access to additional confidential financial information would only worsen the existing mistrust and drive more people out of the financial system and access to regulated financial products.
This proposal also represents a radical departure from existing reporting requirements associated with national security and actual taxable events. Imposing more requirements on financial institutions would not only hurt those institutions and their clients – who ultimately pay the price for the costs of compliance – but it would also flood the IRS with layers of new documents and data on it. taxpayers who are either redundant or irrelevant to improving the federal government. tax compliance, because inflows and outflows are not taxable events. Simply flooding the IRS with more data and burdening already overwhelmed taxpayers, financial institutions and IRS service centers with more paperwork is of questionable value, especially when the IRS is not using effectively the data already in its possession.
Further, although the Biden administration has claimed that the proposed financial report will not result in increased audit rates for those with incomes below $ 400,000, it has provided no plausible reason to believe this statement. On the contrary, past experience indicates that the burden of costs imposed on compliant taxpayers would fall on low- and middle-income households and businesses with incomes well below $ 400,000, and not on âbillionairesâ and âcheatersâ. fiscal â, as the political message of the administration suggests. .
For these reasons, we reiterate our strong opposition to the inclusion of these new IRS reporting requirements on financial institutions. This is a misguided and privacy-invasive proposal, and its review is nothing more than an attempt to find a way to pay for a fraction of this irresponsible spending bill currently under consideration. .