No. 243
Thursday December 20, 2001 Page G-2 
ISSN 1523-567X
Tax, Budget & Accounting

Information Reporting
Center Urges OMB to Review Reporting Rules
For Interest Earnings of Nonresident Aliens

The Center for Freedom and Prosperity Foundation asked the Office of Management and Budget Dec. 19 to review proposed Internal Revenue Service regulations (REG-126100-00) that would require information reporting of bank deposit interest paid to nonresident aliens.

IRS "has effectively exempted itself from regulatory oversight" by labeling proposed regulations as "interpretative" and as not being "major," in violation of the Administrative Procedure Act and Executive Order 12866, the center said in a letter to OMB Director Mitchell E. Daniels Jr. Because of the "significant cost on the economy" from IRS rules, "regulatory review by OMB is needed," and is "long overdue," the letter said.

"Today we ask Director Daniels to please take this opportunity to halt this flagrant abuse of the regulatory process," said Andrew Quinlan, CFP foundation president, in a news release. "The IRS should not be above the law."

Bank testimony indicates that nonresident aliens "have about $1 trillion dollars deposited in U.S. financial institutions," CFP said in the letter. "Most foreign investors are attracted to America because of low taxes and financial privacy," commented Veronique de Rugy of the Cato Institute in the news release. The regulation "at a minimum would drive several hundred billion dollars out of the country," de Rugy said.

Withdrawal of these funds would harm financial institutions and the businesses, families, and consumers that seek to borrow funds, CFP said.

The CFP Foundation letter was co-signed by 25 groups that CFP described as the "largest and most prestigious free-market organizations" that represent "tens of millions of Americans."

IRS issued the proposed rules in January (11 DTR G-8, L-10, 1/17/01). It has received numerous comment letters objecting to the regulations.

Text of the CFP letter is in BNA TaxCore. 

By Brant Goldwyn

Copyright © 2001 by The Bureau of National Affairs, Inc., Washington D.C.

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