While the New York Credit Union Association supports efforts to increase taxpayer compliance and promote overall equity, it is “deeply concerned” by current proposals to expand reporting requirements for financial institutions.
“We believe requiring financial institutions to report on accounts holding more than $600 is a deeply flawed approach,” stated a letter from William J. Mellin, Association president/CEO, to 29 New York state members of Congress concerning the budget reconciliation in President Joe Biden’s Build Back Better Agenda. “Such an approach would unjustifiably harm tax enforcement efforts, credit unions and consumers alike.”
The letter states that there is already a robust reporting structure in place ensuring credit unions do their part to report suspicious activity. Specifically, credit unions are subject to the BSA-AML, which are designed to detect tax evasion, money laundering and other crimes.
“What would set this mandate apart from existing requirements is that this would be the first to require ongoing policing of all accounts without any cause,” Mellin stated. “Collection and transmission of financial data should be targeted and justified to not violate a consumer’s fair expectation of privacy.”
Further, the “unreasonably low” $600 threshold (compared to the $10,000 threshold for BSA action) would trigger a “slew” of unfounded investigations into legal everyday transactions, according to Mellin. For example, creditors canceling a consumer’s debt in excess of $600 could wrongfully prompt an IRS audit, wasting government resources, hindering operations and inconveniencing innocent consumers. In addition, widespread policing and an exponential increase in the scrutiny of small-dollar amounts will lead to consumers losing access to financial services and operational difficulties for financial institutions,” Mellin said, adding that “it is simply a poor use of government resources.”
The letter asks policymakers to consider the unintended consequences of their approach to closing the tax gap and concludes that it is critical that Congress not inadvertently harm countless innocent consumers or businesses in search of purported tax-evaders.
“Instead, we encourage Congress to use the existing robust reporting structure to guide the IRS efforts instead of imposing an additional one.”