The Arkansas banking community, supported by the state’s Congressional delegation, is opposing President Joe Biden’s efforts to require lenders to provide more information about consumers to the Internal Revenue Service.
The administration argues that new regulations would help find delinquent taxpayers and could add up to $ 7 trillion to the US treasury. Bankers nationwide, however, say the issue raises privacy concerns and could expose U.S. households and businesses to security risks.
The proposal would require banks, credit unions and other financial institutions to monitor deposits and withdrawals in accounts with balances greater than $ 600 at any time of the year and report the information to the IRS.
Critics say this would place new demands on financial institutions that amount to a breach of privacy and could increase cybersecurity concerns within the federal agency, which is already a prime target for attacks, said Lorrie Trogden , Executive Director of the Arkansas Bankers Association.
âThis is a broad reach of private financial data,â Trogden said Tuesday. “This potentially puts clients’ private financial data at risk.”
Banks would also have to build expensive infrastructure to comply with the rules, she said, noting that checking, savings and loan accounts are on different platforms.
âBanks should build a comprehensive infrastructure to pull data from all of these accounts to send to the IRS,â Trogden said. “It could really be an expensive process for the smaller community banks here in Arkansas.”
U.S. Representative Steve Womack, the Republican of Arkansas who is a prominent member of the House Appropriations Subcommittee on Financial Services and General Government, called the administration’s proposal “oversight of the government. IRS on Americans’ bank accounts and financial transactions.
The entire state congressional delegation opposes the plan. It violates the privacy of Americans, Womack said in a press release, and he is co-sponsoring legislation that would prevent the proposal from taking effect.
âThis is a sweeping invasion and an unprecedented invasion of privacy,â Womack said. “This bill will proactively stop this terrible mandate – and I am proud to sponsor it and protect the rights of the Arkansans.”
Arkansas Treasurer Dennis Milligan, 2021 National President of the State Financial Officers Foundation, is part of the organization’s efforts to resist IRS oversight.
âPut simply, this is a direct attack on all Americans of all economic demographics and includes all business and personal accounts,â the group said in a recent letter co-signed by Milligan and sent to Biden and to US Secretary of the Treasury Janet Yellen.
Along with data privacy and security concerns, Milligan said the increased scrutiny of the IRS could add another obstacle to efforts to encourage people in under-banked communities to open accounts. Almost 10% of Arkansas’ population is underbanked, above the national average of around 7%, Milligan said.
“This proposal would have a particularly bad effect on Arkansas,” he said Tuesday.
In Arkansas, the treasurer is responsible for overseeing an education savings plan and program that helps people with disabilities save for related expenses. Both of these programs would be required to submit data to the IRS under the administration’s proposal, Milligan said.
âIt would be absolutely absurd for me to hand over their private account data to the IRSâ¦ and I’m just not going to do it,â he said.
The administration is seeking to require banks to provide the IRS with new, detailed information about retail and business customers whose annual total deposits or withdrawals exceed $ 600. The proposal aims to help collect more than $ 7 trillion in unpaid taxes, mostly from wealthier individuals and larger corporations.
Bankers say they have public support to reject the proposal.
A poll funded by the Independent Community Bankers of America reported that 67% of voters oppose the requirement and only 22% support it.