Letter to Hon. Janet Yellen, Secretary, Department of Treasury - Crapo Asks Treasury for Details of Democrats' "new Approach" to Monitoring Private Financial Accounts

Letter

Dear Secretary Yellen,
The Treasury Department released a fact sheet yesterday on a "new approach" that has been
developed in Congress to enact the Biden Administration's proposed tax compliance reform.1

The sweeping reform involves a "comprehensive financial account information reporting
regime" under which private companies report on "all business and personal accounts from
financial institutions, including bank, loan, and investment accounts, with the exception of
accounts below a low de minimis gross flow threshold of $600 or fair market value of $600." In
addition "[s]imilar reporting requirements would apply in cases in which taxpayers buy crypto
assets from one broker and then transfer the crypto assets to another broker, and businesses that
receive crypto assets in transactions with a fair market value of more than $10,000 would have to
report such transactions." Further, according to the proposal "[t]he [Treasury] Secretary would
be given broad authority to issue regulations necessary to implement this proposal." Treasury
estimates that the sweeping reform would increase federal revenues by $463 billion over fiscal
years 2022-2031.
Yesterday's fact sheet from Treasury identifies that "Congress reviewed the Administration's
proposed tax compliance reform" and "has crafted a new approach to include an exemption for
wage and salary earners and federal program beneficiaries."
To be clear, Congress as a whole has not crafted a new approach. Instead, there have been
ongoing reports of an evolving set of possible carve-outs and carve-ins and threshold changes to the Administration's Green Book proposal, under development by Members of one party. The
"revised approach" to which Treasury's fact sheet refers has not been made publicly available.
There is no publicly available legislative text or even a written outline of the revised approach.
There have been no markups of either the initial Green Book proposal or the revised approach in
committees of jurisdiction. Any revised approach in existence has been kept under wraps and is
not available for analysis and scrutiny by Republicans in Congress, or the American people who
would be swept into the proposed reporting regime designed to monitor private financial
activities and force financial institutions and payment providers to report the activities to the
IRS.
Treasury's fact sheet refers to "the financial reporting proposal," "the current proposal," "this
proposal," and "the version before Congress" in reference to a proposal that is reportedly a
revision to the Administration's initial Green Book proposed regime but is nowhere to be found
publicly. The purported version before Congress seems to be something that may still be
evolving, under negotiation within one party in Congress, and not publicly available in even
outline form to all Member of Congress for consideration.
An inquiry to Treasury officials requesting details of whatever is "the current proposal" was met
with a response that the proposal is still under development, and its content is known only to
Members of one party in Congress. Nonetheless, yesterday's fact sheet from Treasury conveys a
false sense that whatever is the revised proposal is something under consideration in Congress by
both sides of the aisle. That is not the case, and Republicans have not seen legislative text or
even so much as an outline. Treasury's fact sheet and press reporting on "the current proposal"
falsely suggest otherwise.
There have been reports in the press that the "revised approach" to the Administration's initial
Green Book financial reporting regime includes an increase in the reporting threshold from the
initially proposed $600 to $10,000. Treasury's fact sheet identifies new carve-outs for wage and
salary earners and federal program beneficiaries, which adds confusion and complexity for
taxpayers as well as complexity and costs to private reporting institutions who would begin to be
turned into auditors of the IRS. There have been reports of possible additional convoluted
netting schemes within the reporting regime, carve-outs for things like mortgage payments that
presumably would be outflow transactions made to outflow-approved mortgage servicers, carveouts for outflows associated with undefined large purchases, and possibly more.
Because of the sweeping nature of the privacy-invading regime envisioned by one political party
and the clear public opposition to having taxpayers' financial institutions reporting on their
private financial activities to the IRS, I ask that you provide details of what Treasury now
describes as "the current proposal" for the reporting regime. What is the reporting threshold?
What inflows and outflows are carved out or carved in? How can it be credibly claimed,
especially with a proposal granting "broad authority" to Treasury to impose whatever regulations
it desires surrounding the reporting regime, that audit rates for anyone with "actual income"
below $400,000 will not increase? What is the current proposal in legislative-text form? What
is the current proposal even in outline form?
Closing the tax gap is a worthwhile endeavor, but not at the cost of invading Americans' privacy
using a scheme that only one political party has seen. Rather than sweeping all American
taxpayers into an all-encompassing financial-activity reporting dragnet, efforts to close the tax
gap focused on taxpayer service would be a better approach. That could include helping update
and improve the IRS technological capacities so taxpayers obtain better and timelier service as
they continuously face burdens of complying with an overly complex tax code and unresponsive
IRS. It would be far better to begin to at least get the IRS to answer phone calls before turning
our financial institutions and payment providers effectively into IRS agents performing preaudits on taxpayers of all income levels.
I look forward to receiving details on Treasury's understanding of whatever is the current
financial reporting proposal.
Sincerely,

Source