House Republicans propose to withhold funds from FASB

House Republicans released a spending proposal that threatens to withhold funding from the Financial Accounting Standards Board unless it withdraws its income tax reporting standard.

FASB approved the income tax reporting standard in December 2023. The  Accounting Standards Update aims to enhance the transparency and usefulness of income tax disclosures by addressing investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. It would require entities to disclose on an annual basis the amount of income taxes paid (net of refunds received) disaggregated (1) by federal (national), state, and foreign taxes and (2) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). Public companies were supposed to begin reporting the information later this year. 

However, the spending proposal attempts to forestall the reporting requirement: "None of the funds made available by this Act may be used to review or approve the budget for the Financial Accounting Standards Board (FASB) as described in 15 U.S.C. 7219, until the FASB withdraws the Accounting Standards Update on Income Tax Disclosures issued in December 2023 (No. 2023-09)," said that section of the proposal, which was unveiled Sunday.

FASB declined to comment on the proposal.

"This is nothing short of Congress meddling where it has zero expertise," said Lynn Turner, former chief accountant at the Securities and Exchange Commission. "It will continue to do damage to the U.S. capital markets, which in the past have been a cornerstone of the American economic system. For the U.S. capital markets to function effectively, they must provide investors with the information necessary to make material decisions regarding whether to buy or sell stocks. This act by Congress would ensure that does not occur."

Paul Miller, emeritus professor of accounting at the University of Colorado at Colorado Springs, said the proposal reminded him of something out of the former Soviet Union. "I'm reminded of 'telephone justice' where Soviet judges heard cases and retreated to chambers for a call to deliver the verdict," he said. "This nonsense should raise everyone's hackles. Hopefully it comes from a tiny misguided but very ignorant minority. Once more, I'll explain that withholding useful information from capital markets is totally fruitless because it exacerbates and perpetuates uncertainty and risk, leading to uninformed decisions with highly discounted stock prices and other inefficiencies. What the markets don't know does hurt them, and surely management, all investors, and every one of us would be much worse off if this ignorance prevailed."

The spending proposal also would reduce spending on the Securities and Exchange Commission and certain functions of the Internal Revenue Service, such as enforcement and customer service, and prohibit them from carrying out some regulations, such as disclosing cybersecurity incidents to the SEC.

The National Treasury Employees Union criticized the proposal as well, noting that the IRS would receive $853 million less for taxpayer services than President Trump requested, so the IRS would have fewer employees available to answer calls from individuals and businesses.

"Customer service representatives are an incredibly vital piece of our tax system because they are on the front lines helping honest taxpayers meet their tax obligations and avoid errors," said NTEU national president Doreen Greenwald in a statement Monday. "Slashing this part of the workforce is a disservice to the millions of Americans who contact the IRS every year for help."