[Link to signed PDF copy]
March 11, 2003
The Honorable John W. Snow
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Secretary Snow:
As members of the Senate Banking, Housing and Urban Affairs Committee, we are writing to express our concerns over a proposed IRS regulation (REG 133254-02) that would compel U.S. banks to report the deposit interest
paid to non-resident aliens. This new proposal is not needed to enforce any U.S. tax law, and we are concerned that it will put our financial markets at a competitive disadvantage and harm our economy by
driving much needed capital elsewhere.
It is important to note that Congress has examined the tax treatment of indirect foreign investment in our domestic economy on several occasions. On each occasion, it was determined that the substantial benefits from
attracting capital to the U.S. far exceeded either any revenue that would be derived from taxing that income in the U.S. or requiring it to be reported so that foreign governments could tax it. For this
reason, Congress has repeatedly rejected proposals to tax or report the income.
Furthermore, you may recall that when this committee and the Congress passed the money-laundering bill in the 107th Congress, Congress specifically rejected the use of money-laundering powers to enforce the tax laws
of foreign governments.
The IRS rule clearly outlines a distinct reporting role for U.S. financial institutions, and we continue to believe that it is not the responsibility of either the U.S. Government or U.S. financial institutions to enforce the tax laws of other nations,
We urge you to withdraw this rule and appreciate your consideration of our views.
Robert F. Bennett