U.S. banking lobby groups oppose proposed tax reporting law

FILE PHOTO: People are seen on Wall Street outside the NYSE in New York

(Reuters) – The largest U.S. banking lobby groups banded together on Friday to make another push to kill a proposed bank account reporting law being drawn up as part of the congressional reconciliation package.

In a letter to U.S. House of Representatives Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy, the lobby groups said the proposal would create “reputational challenges” for large financial services firms, increase the cost of tax preparations for Americans and small businesses, and create serious “financial privacy concerns”.

“We urge members to oppose any efforts to advance this ill-advised new reporting regime,” the groups said in the letter.

“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population.”

The proposed domestic account reporting requirement in the $3.5 trillion House package is becoming an important issue for the banking industry, which is opposed to the tax reporting changes that are being pushed forward by the Democrats.

The new proposal will require financial services companies to track and submit inflows and outflows from every bank account above a minimum threshold of $600 during a year to the Internal Revenue Service (IRS), including breakdowns for cash.

The proposal also opens up significant privacy concerns, which the lobbyists said would discourage taxpayers from participating in the financial services system and undermine efforts to include vulnerable populations and unbanked households.

(Reporting by Michelle Price in Washington D.C. and Sohini Podder in Bengaluru; Editing by Anil D’Silva)