Update: Bloomberg has reported that House Ways and Means Chairman Richard Neal (D-Mass.) has yet to support the new bank reporting provision. Additional reporting is below in Italics.
Senate Finance Chairman Ron Wyden (D-Ore.) on October 19th introduced an enforcement proposal that would require banks to report to the IRS annual transactions totaling at least $10,000. The aim is to include this measure in the budget reconciliation bill that is currently stalled in Congress.
Here is how the proposal is expected to work, according to the Treasury Department:
Financial institutions and banks will add just two additional numbers to the information that they already supply to taxpayers and the IRS: the total amount of funds deposited into the account and the total amount withdrawn over the course of a year. The scope of this information sharing is extremely limited. Banks will not share with the IRS any information to track individual transactions under this proposal, and the IRS will have no ability to track individual transactions.
The rationale for this reform is that the IRS can use this additional aggregate information to focus its enforcement efforts on wealthy tax evaders, with an improved ability to identify tax evasion and to decrease audits of compliant taxpayers.
More from Treasury:
In response to considerations about scope, it has crafted a new approach to include an exemption for wage and salary earners and federal program beneficiaries. Under this revised approach, such earners can be completely carved out of the reporting structure. This is a well-reasoned modification: for American workers and retirees, the IRS already has information on wage and salary income and the federal benefits they receive.
One key member of Congress who has set to sign-off on this provision is House Ways and Means Chairman Richard Neal (D-Mass.). Bloomberg reports that “Neal says he has yet to sign off on a deal to amend the Democrats’ original plan for the IRS to collect more information on financial accounts.”
Senator Wyden’s announcement comes on the heels of House Speaker Nancy Pelosi (D-Calif.) last week saying that she supports requiring banks to report to the IRS transactions over $600 to curb tax evasion, and that the provision should be included in the budget reconciliation bill.
President Joe Biden included in his budget proposal a requirement that banks report to the IRS transactions over $600.
“This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600,” according to the Treasury Department.
The proposal could raise as much as $460 billion over the next decade, according to Treasury.
The reporting requirement was excluded from legislation that the House Ways and Means Committee approved in September. But the committee’s chairman, Rep. Richard Neal (D-Mass.), said that the requirement would become part of the budget reconciliation bill.
The Neal-backed measure requires banks to report to the IRS on transactions at or above $10,000. The modification is expected to raise roughly $200 billion in revenue for the federal government over a ten-year period.
Where reconciliation negotiations stand:
For weeks, Democratic leaders have been negotiating with Senators Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) to win their support for the budget reconciliation tax and spending bill.
With every passing day, it seems that Senator Manchin has another issue with the bill. Here are just a few of his problems:
- Total cost of the bill should not exceed $1.5 trillion, which has been advertised as costing $3.5 trillion;
- Include in the bill the Hyde amendment (which prohibits federal funding for abortions);
- Require means testing for who qualifies for spending programs in the bill;
- Repeal all tax cuts in the 2017 tax reform bill that benefits wealthier taxpayers and corporations;
- Oppose the expansion of federal entitlement programs until they are solvent;
- Oppose anti-Climate Change provisions in the bill;
- Support a lower income threshold to qualify for the child tax credit;
- Curb paid family leave program in the bill.
Senator Sinema has vowed to oppose the budget reconciliation bill until the House passes $1.5 trillion bipartisan infrastructure bill. The legislation passed the Senate in August. Upon House approval, President Joe Biden can sign it into law.
Sinema also supports a bill costing less than $3.5 trillion, which is the price tag that Senator Bernie Sanders (I-Vt.) and other Senate Democrats support.
Democratic leaders in Congress would like to pass the budget reconciliation bill and the infrastructure bill by October 31st. Given the number of outstanding issues with the reconciliation package (Sinema and Manchin aren’t the only ones with problems), it seems like a tall order to meet this goal.
That being said, if Democratic leaders miss the October 31st deadline, they risk looking like they can’t govern – which could haunt them in the 2022 elections.
The House Budget Committee approved the budget reconciliation package on September 25th – roughly a month ago. Since then, the bill has been in legislative limbo. Democratic leaders have been trying to reduce the bill’s total cost while tinkering with its provisions without losing support for the measure within their Caucus.
The fate of the budget reconciliation bill is tied to the bipartisan infrastructure bill.
House Democratic leaders have signaled that they won’t vote on the infrastructure bill until the budget reconciliation bill has passed both chambers.
This pledge essentially gives Democratic leaders two options with the reconciliation bill: Either fix the multiple problems that lawmakers have with the legislation, or pressure those members into supporting the bill regardless of whether their issues get addressed.
The margins are tight when it comes to passing these bills. In the House, Democrats can only lose three votes before either bill fails to pass. House Republicans are not expected to support the budget reconciliation bill and only a handful of them might support the infrastructure bill. In the Senate, all Democrats must support the budget reconciliation bill, or it fails. No Senate Republicans are expected to support the reconciliation bill.
If Democrats miss their October 31st deadline, the next deadline is expected to be in December.