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24 House Members Ask Snow to Permanently Led by Ways and Means Committee member Mark Foley and Financial Services Committee member Walter Jones, twenty-four Members of the U.S. House of Representatives, in a bi-partisan letter, urged Treasury Secretary Snow "to permanently withdraw [the IRS's interest reporting] regulation." [Text of letter below.] The Congressmen object to a proposed Internal Revenue Service regulation (133254-02) that would require U.S. financial institutions to report bank deposit interest paid to certain nonresident aliens. For more information on the regulation: http://www.freedomandprosperity.org/update/irsreg/irsreg.shtml List of the 24 Members: Mark Foley, Walter Jones, Philip Crane, Cliff Stearns, Randy Forbes, Christopher Shays, Allen Boyd, Randy "Duke" Cunningham, Michael Burgess, Lincoln Diaz-Balart, James Saxton, Ron Paul, John Carter, Jim DeMint, Rick Renzi, Dan Burton, Scott Garrett, Frank Lucas, Patrick Toomey, Pete Sessions, Jon Porter, Jack Kingston, Peter Hoekstra, and Richard Baker. Link to full letter: Excerpts from the Letter: Undermine the Competitiveness of U.S. Financial Institutions "This rule would impose a harsh paperwork burden on American banks and undermine the competitiveness of U.S. financial institutions. Simply stated, international investors surely will move their funds – potentially more than $100 billion – to banks in London, Zurich, Hong Kong, and elsewhere if the regulation is finalized." Regulation is a Clear Violation of Congressional Intent "For more than 80 years, Congress deliberately has chosen not to tax nonresident alien bank accounts and not to require reporting of this information. The proposed regulation is therefore not only unnecessary, but also a clear violation of congressional intent. We have no objection to government agencies making legislative recommendations, but we are deeply troubled when those agencies unilaterally change the law and undermine the democratic process." FDIC: Undermines the Safety and Soundness of U.S. Banks "The Federal Deposit Insurance Corporation is worried it could undermine the safety and soundness of our banking system. Taxpayer groups and think tanks fear it will undermine tax reform. The financial services industry does not want a costly regulatory burden that will make them less competitive. And the Small Business Administration is concerned that important regulatory procedures have been ignored." Hurt U.S. Economy "[T]he biggest drawback is that the regulation will hurt our economy. When this regulation was first proposed at the end of the previous administration, foreigners responded in the first quarter of 2001 by withdrawing more than $40 billion (on an annualized basis) from U.S. savings accounts. We do not know how much money will leave the U.S. banking system if the regulation actually is implemented, in part because the IRS ignored the law and failed to conduct a cost/benefit analysis. But we do know that American consumers and businesses will have less access to affordable credit. *************************************************** Text of the full letter: May 16, 2003 The Honorable John Snow Dear Secretary Snow, We are writing to express our concern about a proposed IRS regulation (REG-133254-02) that would force banks to report deposit interest paid to nonresident aliens. This rule would impose a harsh paperwork burden on American banks and undermine the competitiveness of U.S. financial institutions. Simply stated, international investors surely will move their funds – potentially more than $100 billion – to banks in London, Zurich, Hong Kong, and elsewhere if the regulation is finalized. This regulation is particularly misguided since there is no need for the IRS to collect this information. For more than 80 years, Congress deliberately has chosen not to tax nonresident alien bank accounts and not to require reporting of this information. The proposed regulation is therefore not only unnecessary, but also a clear violation of congressional intent. We have no objection to government agencies making legislative recommendations, but we are deeply troubled when those agencies unilaterally change the law and undermine the democratic process. This regulation has attracted widespread opposition, and for good reason. The Federal Deposit Insurance Corporation is worried it could undermine the safety and soundness of our banking system. Taxpayer groups and think tanks fear it will undermine tax reform. The financial services industry does not want a costly regulatory burden that will make them less competitive. And the Small Business Administration is concerned that important regulatory procedures have been ignored. These are all valid points, but the biggest drawback is that the regulation will hurt our economy. When this regulation was first proposed at the end of the previous administration, foreigners responded in the first quarter of 2001 by withdrawing more than $40 billion (on an annualized basis) from U.S. savings accounts. We do not know how much money will leave the U.S. banking system if the regulation actually is implemented, in part because the IRS ignored the law and failed to conduct a cost/benefit analysis. But we do know that American consumers and businesses will have less access to affordable credit. We urge you to permanently withdraw this regulation. Sincerely, Mark Foley
Cc: Vice President Richard Cheney
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