The chairman of an influential congressional subcommittee is demanding information from the Treasury Department on a recent Internal Revenue Service regulation requiring banks to disclose the interest they pay to nonresident aliens.
Congressman Charles Boustany Jr., R-La., who chairs the House Ways and Means Oversight Subcommittee, has written a letter to Treasury Secretary Tim Geithner asking for more information about the regulation.
The IRS issued the regulation last month as part of its effort to provide guidance on the controversial Foreign Account Tax Compliance Act (see IRS Issues FATCA Guidance on Reporting Interest Paid to Nonresident Aliens). FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions to report on the accounts and assets of U.S. taxpayers to the IRS.
Banks have balked at the new requirements, arguing that they violate national sovereignty. The Treasury and the IRS have relaxed and phased in some of the requirements in an effort to address some of the concerns. The U.S. government has also been in talks with foreign governments over easing the requirements, for example, for dual citizens. Canadian Minister of Finance James Flaherty told a conference sponsored by the George W. Bush Institute in New York last month that he was negotiating with Geithner about the FATCA requirements.
The U.S. has also signed agreements with several Western European governments—including the United Kingdom, France, Germany, Italy and Spain—to share information with them, including about their citizens who have accounts at U.S. banks (see IRS and Treasury Propose New FATCA Rules).The IRS argued that the regulations issued last month for reporting interest earned by nonresident aliens would facilitate intergovernmental cooperation on FATCA implementation by better enabling the agency, in appropriate circumstances, to reciprocate by exchanging information with foreign governments for tax administration purposes.
However, Boustany finds the regulations troubling. He had written to Geithner last September after the IRS issued a Notice of Proposed Rulemaking and received information in December. However, he said in his new letter that while Geithner’s initial response was helpful, it did not provide all of the information requested.
“This regulation could drive foreign investment out of our economy and burden banks with unnecessary reporting requirements, in turn hurting individuals and small businesses,” Boustany said.
In a new letter that he sent Friday, Boustany called on the Treasury Department to provide correspondence and other documents relating to the formation of the opinion that the proposed regulation is not a “significant regulatory action,” as well as other information requested in Boustany's earlier letter.
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