A proposal to require financial institutions to report certain transactions by customers and members still is alive, following Senate approval of its massive budget resolution.
An attempt to place the Senate on record as opposing that proposal failed on Tuesday.
In his FY22 budget proposal, President Biden proposed requiring financial institutions to report data to the IRS from accounts that have “gross flow thresholds” over $600 as a way of increasing tax compliance. That plan expressed the administration’s preferences and was not binding on Congress.
Financial services trade groups immediately jumped on that proposal, saying it would create a huge regulatory burden on banks and credit unions. The Credit Union National Association and the National Association of Federally-Insured Credit Unions wrote letters to senators this week, in an attempt to ensure that the proposal will not be enacted.
This week, the Senate debated and approved the $3.5 trillion Senate version of a budget resolution. The resolution does not specifically mention the controversial reporting provision, but it does direct the Senate Finance Committee to find $1 billion in savings from programs under its jurisdiction. The committee can find the savings from any programs in its jurisdiction, including by closing the tax gap.
Senate Finance Committee ranking Republican Sen. Mike Crapo, R-Id., offered an amendment that instructed the committee not to rely on the financial institution tax reporting proposal for part of its savings. That amendment was defeated, 50-49.
The Senate then approved an amendment offered by Finance Committee Chairman Sen. Ron Wyden, R-Ore. That amendment simply states that financial institutions should only be required to report transactions from large accounts. However, it does not define large.
The Finance Committee will vote on and then report savings proposals to the Senate Budget Committee, which will bundle the proposals from the Finance panel and other authorizing committees into a budget reconciliation bill, which the Senate then will consider. With Wyden as Finance Committee chairman, it is likely that some form of the financial transaction plan will be included in the Finance Committee’s savings package.
The House will be required to undertake a similar process, so the battle over the provision is far from over.
Credit union trade groups on Tuesday reiterated their opposition to the financial reporting proposal.
“Whether it is the massive data breach at the federal Office of Personnel Management in 2014 or this year’s IRS leak of federal tax returns of many wealthy Americans, CUNA remains doubtful that such data will be safe and private,” CUNA President/CEO Jim Nussle wrote in a letter to senators.
“This new requirement further puts credit unions in the position of further policing their members and account holders,” Nussle continued. “CUNA believes that better tax compliance can be achieved through other means such as the IRS using its existing audit authority.”
Brad Thaler, NAFCU’s vice president of legislative affairs,” also bluntly criticized the proposal.
“We agree that requiring credit unions and other financial institutions to report on gross inflows and outflows for all accounts above $600 is a misguided proposal that stands to pose more harm and burdens on community institutions with uncertain returns,” he wrote.