Snow Once Again Urged To Drop Interest Reporting Regulation

by Mike Godfrey, Tax-News.com, Washington

15 October 2004

It emerged recently that another senior Congressman has come out in support of the withdrawal of the Internal Revenue Service's planned interest reporting regulation.

In a letter addressed to Treasury Secretary, John Snow, Rep. Clay Shaw (R-Florida), the third most senior Republican on the Ways and Means Committee, and chairman of the Social Security Subcommittee, argued that:

"I encourage you to withdraw a proposed regulation (REG 133254-02) that would require banks to report deposit interest paid to nonresident aliens. This proposed rule is contrary to America's national interests and could lead to substantial capital flight from US banks."

Citing figures released by research facility, the Mercatus Center, which estimate that the regulation – if implemented – could cause $87 billion of capital to flee the US economy, Rep Shaw announced that:

"This is an unacceptable risk and could threaten the nation's economic recovery. My state of Florida would be particularly impacted, especially if the IRS follows through on its reported intention to apply the regulation to depositors from Latin America."

The letter concluded by observing that:

"This regulation also should be withdrawn since it seeks to use regulatory decree to overturn 83 years of existing law. If the IRS truly believes that foreign governments should be able to double-tax income earned in America, it should submit legislation rather than pursue a policy change through the regulatory process."

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