Democrats have dropped a controversial proposal requiring financial institutions to report information to the IRS on gross inflows and outflows for all accounts above a $10,000 threshold.
The decision to remove the proposal from ongoing budget negotiations came after bipartisan pushback and extensive advocacy against the plan from state and federal banking associations. Twenty-one House Democrats on Thursday urged congressional leaders to exclude the proposal from the reconciliation bill. Sen. Joe Manchin (D-W.Va.) was one of the most vocal opponents, indicating opposition no matter the threshold. The requirement was not included in a new version of President Joe Biden’s economic and climate change plan released on Thursday.
American Bankers Association President and CEO Rob Nichols called the decision a victory for consumers and small businesses. “Americans should honor their tax obligations, but forcing financial institutions to share private financial data from millions of customers with the IRS was the wrong way to reduce the tax gap,” he said.
The proposal could be added again later in the legislative process, the Independent Community Bankers of America and ABA warned, as Democratic policymakers continue negotiations on the budget framework. Closing the tax gap would raise an estimated $400 billion in revenue.
“We will continue to stay vigilant and educate members on this flawed proposal as the bill proceeds through the House and Senate,” Nichols said.
ICBA President and CEO Rebeca Romero Rainey said dropping the plan “will avoid privacy, due process and data security concerns that have prompted hundreds of thousands of consumer messages to policymakers in opposition.
“The omission of the IRS plan from the Biden administration budget proposal is evidence of the impact community banks and consumers nationwide are having on the debate,” Romero Rainey said.