Congressional Democrats and the Biden administration are discussing a more narrowly targeted plan for financial institutions to provide more customer account data to the IRS, hoping that a tighter focus will assuage privacy concerns while still helping Democrats pay for their significant social spending plans.
An administration official said in a Thursday interview that while negotiations are fluid, the focus is on harder-to-track transactions related to business partnerships, rental income, proprietorships, and royalties. The additional data collection would be paired with increased penalties for unauthorized access to or leaks of taxpayer information, a felony already punishable by up to five years in prison, the official said.
The Biden administration anticipated its original plan to require data reporting on all accounts with more than $600 in annual flows would help raise billions in additional revenue for the federal government.The proposal to make banks and other financial institutions report annual inflow and outflow information on customer accounts ran into significant political headwinds, including constituent concerns, a lobbying effort by banks and credit unions, and reluctance among Democratic lawmakers in both chambers.
While the Treasury Department maintains the data would help better focus efforts to combat tax evasion, the policy was omitted from the administration’s revamped budget reconciliation framework last month.
Now, a group of Senate Democrats are with the Treasury Department to target the requirements much more narrowly towards the handful of income categories that are believed harbor a large chunk of unreported-though taxable-money.
“I would be very anxious to do that because Treasury has changed some of its positions on thresholds and eliminating business accounts and some of the things that maybe should’ve been done on the front end of this, before it got demagogued,” said Senator Mark Warner (D-Va.) said Thursday.
It isn’t immediately clear whether the discussed changes would be enough to win the support of Senator Joe Manchin (D-W.Va.) and other lawmakers who have said they weren’t comfortable with the idea of making banks turn over more customer data to the federal government. Manchin’s opposition alone would be enough to sink the effort in the Senate, while a bloc of more than 20 House Democrats who have opposed the idea have the power to do the same in that chamber.
Manchin’s office did not respond to requests for comment late Thursday.
Warner, who sits on both the Senate Banking Committee and the Finance Committee, said he is pushing some additional ideas meant to relax the industry’s implementation concerns. Those include a delayed effective date to give banks more time to get ready and a grant program to subsidize costs for community banks and other smaller financial institutions.
“There are so many protections that can be put in place and a long enough phase-in period that I think a vast majority of concerns could be addressed,” Warner said.
But Paul Merski, who heads congressional relations for the Independent Community Bankers of America, blasted the data collection policy, even with additional accommodations and narrower targeting.
“There hasn’t been a tweak or change that has changed the fundamental flaw with this,” Merski said. “What bank wants to tell their customer that they’re getting paid to send their private information into the IRS?”