Treasury Secretary Janet Yellen today faced tough questions from members of the Senate Banking Committee on the Biden administration’s controversial proposal to require financial institutions to report gross inflows and outflows on customer accounts as a way to close the so-called “tax gap.” Several lawmakers panned the idea—which the American Bankers Association has vigorously opposed—during the hearing.
“There are obvious privacy concerns for all Americans here,” said Sen. Cynthia Lummis (R-Wyo.) “This represents a dramatic new regulatory burden for community banks and credit unions.” She also raised concern that her constituents “will find alternatives to traditional banks just to thwart IRS access to their personal information,” echoing a concern raised by ABA that the proposal could serve to undermine financial inclusion efforts. Sen. Bill Hagerty (R-Tenn.) added that if enacted, the proposal “will be an extensive compliance burden,” and also noted that “there’s a huge concern . . . on the part of the American public” about the IRS’ ability to protect their data.
Attempting to defend the $600 de minimis threshold floated by the administration, Yellen said that “it’s important to have comprehensive information so that individuals can’t game the system and have multiple accounts.” ABA and the state bankers associations have vigorously opposed the proposal, and wrote last week to lawmakers urging them to keep it out of future versions of the budget resolution, regardless of the de minimis threshold.
As deliberations on the budget resolution continue, ABA is urging banks and their customers to continue their grassroots efforts to ensure that this provision stays out of any future versions of the bill. To help engage bank customers on this issue, ABA has created sample language for customer communications and social media posts banks can use. The association continues to closely monitor developments related to the bill, and will provide additional updates to members as needed.