U.S. Reps. Tom Emmer (R-MN), Young Kim (R-CA), Bill Huizenga (R-MI), and more than 140 GOP legislators expressed concerns about a recent Internal Revenue Service (IRS) data collection proposal that they say would increase tax information reporting requirements on America’s financial institutions.
The proposal would require financial institutions and other financial services providers to report yearly to the IRS on certain transaction level data, as well as information about the outflows and inflows on accounts over $600, according to a Sept. 13 letter the lawmakers sent to U.S. Speaker of the House Nancy Pelosi (D-CA), U.S. House Ways and Means Committee Chairman Richard Neal (D-MA), U.S. Treasury Department Secretary Janet Yellen, and IRS Commissioner Charles Rettig.
“The recent spending proposal to include new tax information reporting requirements for financial institutions would not only impose significant compliance costs on our banks, credit unions, and related financial institutions that have served as the backbone of this economy these past 18 months, but also infringe on the privacy of millions of Americans,” the members wrote.
Privacy, in fact, is one of the main reasons individuals choose not to open bank accounts, said Rep. Emmer, a member of the U.S. House Financial Services Committee who led the letter. “This proposal will further exacerbate the divide between the banked, unbanked and underbanked,” he said. “Our Main Street financial institutions are already required to report a tremendous amount of data to the IRS, and the IRS has proven time and time again that they cannot protect this sensitive taxpayer information.”
Rep. Huizenga agreed, calling the IRS proposal “a massive invasion of privacy for millions of Americans.”
“This obscene proposal would allow the IRS to collect an unbelievable amount of financial data with little to no tangible benefit, while imposing significant compliance costs on our community banks, credit unions, and related financial institutions,” said Rep. Huizenga. “This proposal is tantamount to spying on the financial records of law-abiding Americans and it should be abandoned immediately.”
Small financial service providers across the country are already burdened by costly reporting requirements to the IRS, added Rep. Kim.
“As our economic recovery continues, creating an expensive and burdensome proposal prevents financial institutions from providing access to credit to communities and small businesses in need, and does nothing to even the playing field,” Rep. Kim said, noting that because the IRS experiences 1.4 billion cyberattacks annually, its proposal “increases the likelihood of placing the personal data of millions of American citizens at risk.”
And not only are there serious privacy implications for the taxpayer and compliance burdens for financial institutions, there’s no reason to think that handing over more sensitive information to the IRS would help close the ‘tax gap,’ which is the difference between taxes paid and taxes owed by law, Rep. Emmer said.
“We should only legislate when it makes sense, and it must protect Americans and our financial system, not focus on raising revenue at the expense of our taxpayers and financial institutions,” he added.
The lawmakers requested that their concerns be addressed as they work to craft a regulatory environment focused on protecting Americans and the United States financial system, “not one focused on raising revenue at the expense of our taxpayers and financial institutions,” according to their letter.