The chairman of the House Ways and Means Oversight Subcommittee demanded Tuesday that the Internal Revenue Service suspend a proposed regulation that would require banks to disclose the amount of interest paid to nonresident aliens.
Rep. Charles Boustany, R-La., wrote a letter to Treasury Secretary Timothy Geithner and IRS Commissioner Doug Shulman saying the proposed regulation could potentially drive foreign investment out of the U.S. economy and harm individuals and small businesses by reducing access to capital. He called on the Treasury to provide a cost-benefit analysis detailing the administrative burdens of the regulation before it is approved by the IRS.
“This is not the first time the IRS has attempted to issue this regulation,” said Boustany. “At the close of the Clinton Administration, the IRS tried to put in place similar reporting requirements. However, after members of Congress, the Federal Deposit Insurance Corporation, and the U.S. Small Business Administration raised strong concerns, the proposal was eventually withdrawn. It is disappointing to see the IRS once again try to impose unnecessary regulations and costs on U.S. banks.”
Boustany formally requested the IRS to halt its actions and provide additional information to justify the agency’s authority and policy objectives. In addition to asking for a cost-benefit analysis of the proposed regulation, he requested the agency to answer several important questions by Oct. 11, 2011.
"Has the IRS considered the administrative burden of this proposed regulation on U.S. banks?” he asked. “If so, how is this burden outweighed by the IRS’s policy goals?”
Agencies must conduct a cost-benefit analysis of all “significant regulatory action” under Executive Order 12866, which include regulations that have “an annual effect on the economy of $100 million or more or adversely affect in a material way… a sector of the economy,” Boustany pointed out. He asked the IRS to provide all correspondence and other documents relating to the proposed regulation and its “significant regulatory action” status.
Boustany also asked how the IRS planned to implement the proposed regulation, including how the agency plans to share information collected under the regulation with foreign countries, and the annual costs to the IRS in dollars and full-time employees.
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