October 16, 2002
Alexandra K. Helou
Office of Associate Chief Counsel (International).
Internal Revenue Service
P. O. Box 7604, Ben Franklin Station
Washington, DC 20044
Dear Ms. Helou,
I want to express my strong opposition to the IRS's recent effort to resuscitate a Clinton-era proposal to require the reporting of deposit interest paid to foreigners who invest their money in U.S.
banks. Such a scheme would contravene existing law and harm the competitiveness of American financial institutions. More importantly, it would put downward pressure on U.S. markets, threatening the well being of
small investors. In addition, millions of American borrowers -- including homebuyers and small businesses -- would be adversely affected as capital leaves the U.S. economy.
I am particularly distressed that the IRS is abusing the regulatory process by blatantly ignoring the will of Congress. Existing law -- and legislative history -- clearly shows that lawmakers did not
wish this income to be taxed or reported. Yet the IRS wants to overturn the outcome of the democratic process.
Finally, let me be clear that the "new and improved" version of the regulation is just as flawed as the initial proposal. The IRS's decision to temporarily exempt certain deposits from the reporting
requirement is a transparent effort to divide-and-conquer, one that assumes that lawmakers, and the banking industry, are too foolish to realize the depositors from all nations will be added to the list in a couple
I trust this misguided regulation will be withdrawn, and I look forward to an explanation of why the IRS did not perform the required cost-benefit analysis for this regulation.
W. Todd Akin
Member of Congress