Life support

IRS plan to report “on life-sustaining”, but banks don’t celebrate yet

WASHINGTON – A plan by the Biden administration that would require banks to report accounts receivable flows to the Internal Revenue Service appeared to run out of steam on Wednesday, a day after Sen. Joe Manchin, DW.Va., reported his opposition, but industry representatives said they were not ready to claim victory.

After Manchin’s comments, some news outlets reported that the IRS reporting plan was dead. But industry sources and subsequent reports said the Treasury Department was trying to dramatically reduce the scope of the proposal to preserve its chances.

The plan is seen as a key way to crack down on tax evasion and raise revenue to pay for President Biden’s social spending program that is making its way to Congress. But banks, many lawmakers and other critics say it would be a compliance nightmare and allow the government to snoop around citizens’ private finances.

“The point is, nothing is ‘dead’ until the Senate votes on the latest ‘pay off’ tax package included in the budget reconciliation bill,” said Paul Merski, executive vice president of relations. with Congress and strategy for the Independent Community Bankers of America. .

Opposition to the IRS whistleblowing plan by Sen. Joe Manchin, DW.Va., left, appeared to hurt his chances. But Sen. Mark Warner, D-Va., And other Democrats said: “Misconceptions about what the financial reporting proposal would do shouldn’t derail us from this important goal” of closing the tax gap .

Bloomberg News

Democrats have pursued a plan since the spring that would require the country’s banks to report inflows and outflows in which these flows exceed a certain threshold. They initially proposed a threshold of $ 600, but then increased it to $ 10,000 with exemptions for federal wages and benefits.

Manchin, a decisive vote to push the social spending package through Congress, said Tuesday he did not believe the IRS reporting plan would be included in the reconciliation bill.

“I think this one is going to go away,” he said, adding that he criticized the plan during a conversation with Biden. “I said, ‘Do you understand how fucked up this is? To think Uncle Sam is going to watch, and what does that do to the bankers and this and that? I told him, I said, Mr. President, “I don’t know what happened. It can’t happen.” “

Brad Thaler, vice president of legislative affairs for the National Association of Federally-Insured Credit Unions, praised Manchin in a statement to “recognize[ing] how bad this provision is, “but he stressed that the fight was not over yet.” We hope that means that the provision will be removed, but we will remain committed until the reconciliation package is finalized “Thaler said.

CNBC announced Wednesday morning that the IRS whistleblowing plan had been removed from the Democrats’ social spending program. But speculation later developed that the Treasury was trying to repackage the plan by restricting the reporting of bank accounts to households with at least $ 400,000 in annual income. The new plan was first reported by Bloomberg News.

“Today, two things are clear: This proposal is on life support because Democrats have resorted to hour-to-hour changes,” said Richard Hunt, chief executive officer of the Consumer Bankers Association. “No one can explain what this proposal would actually do and who it would affect because they haven’t had a single committee hearing and conducted a single study.

Still, Democratic lawmakers who support the IRS reporting plan have indicated they are not giving up their attempts to include it in the bill.

The plan grew out of efforts to close what is known as the “tax gap” between what the wealthiest taxpayers actually pay and owe due to under-reporting of income. Although the IRS reporting plan has been heavily criticized, many opponents say misinformation has been released suggesting it will reveal specific transaction data instead of general inflow and outflow amounts. The idea is to help the IRS coordinate audits.

“As former governors, we care deeply about closing the tax gap and making sure everyone pays their fair share,” Senses said. Tom Carper, D-Del., Mark Warner, D-Va., And Angus King, I-Maine. “Misconceptions about what the financial reporting proposal would do should not derail us from this important goal. We are committed to working with our colleagues to address any concerns about proposals to close the tax gap and to ensure that wealthy taxpayers and businesses pay the taxes they have the ability to pay and that they are able to pay. legally must. “

But the industry hasn’t stopped criticizing the plan.

Insiders say opposition from banks and some lawmakers in recent days has had a big impact on Congressional deliberations on the plan.

A financial services lobbyist said there was a 95% chance that the IRS proposal was not on the table, although the person warned that some form of the plan could still appear when a first draft budget reconciliation package will be published. (There is no legislation yet.)

“I worked in the US Senate for five years,” Merski said. “These proposals can resurface in a new format at any point in this process.”

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