In a letter to Treasury Secretary Tim Geithner and the IRS, Rep. Charles Boustany (R-LA) asked that the IRS suspend a proposed regulation requiring banks to disclose interest paid to non-resident aliens. IRS Notice of Proposed Rulemaking REG-146097-09 (“proposed regulation”). If the regulation were to take effect, said the Chairman of the Ways and Means Oversight Committee, it would not only run counter to the will of the Congress, but would potentially drive foreign investments out of the US economy, hurting individuals and small businesses by reducing access to capital.
The proposed regulation requires U.S. banks to collect and report information on interest paid to nonresident aliens who deposit funds in U.S. financial institutions, he noted. As the Internal Revenue Code imposes no taxation or reporting requirements on this deposit interest, reasoned Chairman Boustany, the proposed regulation serves no compelling tax collection purpose. Instead, it is his understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad.
The Chairman asks that this regulation be suspended until his Subcommittee has a better understanding of IRS’s authority, policy objectives, and intentions with regard to this matter. To assist in that effort, the Chairman asks the IRS to provide certain information by no later than October 11, 2011. He asks if the IRS has considered the administrative burden of this proposed regulation on U.S. banks and, if so, how is this burden outweighed by the IRS’s policy goals. The Oversight Chair notes that the proposed regulation states that neither Executive Order 12866 nor section 553(b) of the Administrative Procedure Act applies to it. In that light, he asks that the IRS provide all correspondence and other documents relating to the formation of this opinion.
The Chairman noted that federal 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.” He asks for all correspondence and other documents relating to the proposed regulation and its “significant regulatory action” status. He also wants a thorough cost-benefit analysis of the proposed regulation. Finally, he wants to know, how the IRS plans to share information collected under this regulation with