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March 6, 2003
The Honorable John Snow
Secretary of the Treasury
Department of Treasury
1500 Pennsylvania Avenue
Washington, DC 20220
Dear Secretary Snow,
Congratulations on your confirmation as our nation's Treasury Secretary. I look forward to working with you.
I want to take this opportunity to ask you to withdraw a proposed IRS regulation
(REG-133254-02) that would compel American banks to report the deposit interest paid to nonresident aliens. This burdensome new proposal – a legacy of the previous Administration – is not needed to enforce U.S. tax
law and it will harm financial markets by driving capital out of the American economy. The Chairman of the Federal Deposit Insurance Corporation recently warned that the regulation could undermine the safety and
soundness of our banking system by leading to a large loss of deposits.
America has more than $1.7 trillion of foreign money in our banks, funds that have made credit more affordable for businesses and
consumers. Only a small part of this is nonresident alien deposits, but economists still fear that the capital flight could be significant if the regulation is implemented. Even if the actual damage to the U.S.
banking system is relatively minor, this is too high of a cost to pay for a regulation that would overturn decades of government policy designed to attract capital to the U.S. economy.
I also believe that it
is not the responsibility of the U.S. government or U.S. based financial institutions to enforce the tax laws of other nations. Therefore, I respectfully urge you to withdraw this regulation.
United States Senator