Small Business Lobby Attacks US Interest Reporting Proposals

Tax-News.com, Washington

08 January 2003

While the US banking industry continues to attack the IRS's proposed rules for reporting interest paid to non-resident aliens on the grounds that it will harm the competitiveness of American banks, a growing lobby is telling the administration about the deleterious effects the rules will have on small business, and insisting that they should be reviewed under the Regulatory Flexibility Act.

Just before Christmas, ten members of Congress wrote to Office of Management and Budget Director Mitchell Daniels urging him to delay the measures. The bi-partisan Congressional letter dated December 20, 2002 was signed by Ney, Watt, Pete Sessions (R-TX), Mark Foley (R-FL), Ron Paul (R-TX), Chris Cannon (R-UT), Ileana Ros-Lehtinen (R-FL), Butch Otter (R-ID), Joe Pitts (R-PA) and Gregory Meeks (D-NY).

'Dear Director Daniels,' said the letter,

'We are writing to strongly urge you to delay Proposed Regulation 133254-02, a rule proposed by the Internal Revenue Service (IRS) concerning guidance on the reporting of deposit interest paid to nonresident aliens. This regulation should be delayed until the IRS complies with the Regulatory Flexibility Act and certifies that the regulation will not have a significant economic impact on a substantial number of small entities, or the rule is withdrawn.

'The Regulatory Flexibility Act clearly applies to this situation where the IRS will require all financial institutions, both large and small, to collect information on interest paid to nonresident aliens. The Office of Advocacy of the U.S. Small Business Administration testified on December 5, 2002, in response to the notice of proposed rulemaking that they believe that there is ample evidence that the impact of the regulation is significant and that a substantial number of small businesses will be impacted.

'Due to the high likelihood that Proposed Regulation 133254-02 will have a substantial impact on Small Business entities within the United States, it is imperative that the IRS conducts a Flexibility Analysis reflecting the impact, or refuting the ample evidence that there will be an impact to a substantial number of small businesses. Pursuant to the Regulatory Flexibility Act, we urge that this proposed regulation be either withdrawn or postponed until the proper analysis can be conducted.

'We are outraged by the attempt of the IRS and U.S. Treasury Department to push through such a controversial and costly regulation, particularly in such haste during the holiday season. We urge you to delay this legislation until the requirements of the Regulatory Flexibility Act are met or the regulation is withdrawn.'

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