More Congressmen Attack IRS Interest-Reporting Proposals

Tax-News.com, New York

06 March 2003

Spencer Bachus, Chairman of the US House Financial Services Subcommittee on Financial Institutions and Consumer Credit, has sent a very firm letter to Treasury Secretary Snow urging permanent withdrawal of the IRS’s nonresident alien interest reporting regulation. Mr. Bachus is the 14th Member of the Financial Services Committee to object to the IRS regulation, alongside Chairman Michael Oxley and two Democratic Members Melvin L. Watt and Gregory W. Meeks. In total, 38 House members and seven Senators have objected to the proposed rule, a remarkably large display of opposition.

Senators Sam Brownback and Mike Crapo also joined the opposition to the proposed rule by becoming the sixth and seventh members of the US Senate to speak out against the IRS’s proposed interest reporting rule.

Senator Brownback, a member of the Senate Appropriations Committee and Joint Economic Committee, stated that the “proposed IRS regulation reverses long-standing US policy of welcoming foreign capital to our shores, and it encroaches on policy-making territory reserved to Congress.”

Senator Crapo, a member of the Senate Banking and Senate Budget Committees, in a letter to Treasury Secretary Snow dated February 28th, stated that the proposed rule would “impose significant costs on banks if it is implemented. However, these paperwork costs will be trivial compared to the loss of international competitiveness since banks in London, Zurich, and Hong Kong will be delighted to accept deposits that will flee America. Indeed, the Chairman of the Federal Deposit Insurance Corporation has warned that this regulation could undermine the safety and soundness of the U.S. banking system.”

The proposed rules would require US banks to report interest paid on deposits by nonresident aliens in 16 countries, including the EU member states which have just adopted information-sharing rules under the Savings Directive. Currently such rules apply only to deposits made by Canadian citizens.

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