Democrats attempt to revamp IRS financial data plan

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Congressional Democrats and the Biden administration are discussing a more targeted plan for financial institutions to provide more customer account data to the IRS, hoping a tighter focus will ease privacy concerns while helping Democrats to pay for their massive social spending plans.

An administration official said in an interview Thursday that while the negotiations are fluid, the focus is on harder-to-follow deals related to business partnerships, rental income, properties and royalties. The collection of additional data would be associated with increased penalties for unauthorized access or leakage of taxpayer information, a crime already punishable by up to five years in prison, the official said. .

The Biden administration predicted that its original plan to require data reporting on all accounts with more than $600 in annual flows would help generate billions in additional revenue for the federal government. the accounts ran into significant political headwinds, including voter concerns, a lobbying effort by banks and credit unions, and reluctance from Democratic lawmakers in both houses.

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While the Treasury Department maintains that the data would help better focus efforts to fight tax evasion, the policy was omitted from the administration’s revamped budget reconciliation framework last month.

Now, a group of Senate Democrats is with the Treasury Department to target the requirements much more narrowly toward the handful of income categories that would house much of the undeclared, albeit taxable, money.

“I would be very eager to do that because the Treasury has changed some of its positions on thresholds and the elimination of corporate accounts and some of the things that maybe should have been done upstream, before it be demagogued,” the senator said. Mark Warner (D-Va.) said Thursday.

It’s not immediately clear whether the changes being discussed would be enough to win support from Sen. Joe Manchin (DW.Va.) and other lawmakers who said they weren’t comfortable with the idea. to get banks to hand 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 opposed the idea has the power to do the same in this chamber.

Manchin’s office did not respond to requests for comment Thursday evening.

Warner, who sits on both the Senate Banking Committee and the Finance Committee, said he was pushing a few additional ideas intended to assuage industry concerns about implementation. These include a delayed effective date to give banks more time to prepare and a subsidy program to subsidize the costs of community banks and other small financial institutions.

“There are so many protections that can be put in place and a long enough period of putting in place that I think a large majority of the concerns could be addressed,” Warner said.

But Paul Merski, who leads congressional relations for the Independent Community Bankers of America, lambasted the data collection policy, even with additional accommodations and tighter targeting.

“There wasn’t an adjustment or a change that changed the fundamental flaw with this,” Merski said. “Which bank wants to tell their client that they are paid to send their private information to the IRS?”

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