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In a joint trade letter sent to Congress Thursday, NAFCU called on Congress to reject the proposed IRS reporting requirement under consideration in the budget reconciliation package, which is still making its way through Congress. 

In the letter, NAFCU and a group of over 100 associations representing a wide range of industries voiced objections against the proposal stating that while the intent of the requirement is to help the IRS identity those committing tax fraud, “the unintended consequence is the overly broad proposal will directly impact almost every American and small business with an account at a financial institution.” 

While several compromises to the proposal have been floated, such as increasing the de minimis threshold from $600 to $10,000 and excluding certain types of transactions, the group noted that this “will not significantly reduce the scale of this new IRS program.”

“These new proposed exceptions only add significant operational complexity for financial institutions and will not materially reduce the tens of millions of American taxpayers who would be captured by the new reporting regime,” wrote the group.

The group detailed the main concerns surrounding the proposal, specifically the significant operational and reputational challenges it would have for financial institutions, as well as the increase of tax preparation costs for individuals and small businesses, and serious financial privacy concerns for consumers. Privacy concerns for remain top of mind as the “IRS is not impervious to being hacked and has suffered massive data breaches in the recent past where the personal information of taxpayers was stolen,” expressed the group. 

The program itself “is costly for all parties, not fit for purpose, and loaded with the potential for unintended and serious negative consequences,” concluded the group.

NAFCU has consistently urged Congress to reject the provision since its inclusion in the Administration’s budget proposal. The association recently launched a new round of grassroots efforts against the proposal to encourage credit unions to engage with lawmakers on this issue to warn them of the impact on financial institutions and to reject the latest efforts to include it. 

The association will remain steadfast on this issue to ensure it is not included in legislation and will continue to advocate against provisions that would further complicate credit union compliance and reporting burdens. Read the full letter.