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Fitzpatrick vows to defy proposed ‘nonsensical’ IRS reporting rules

Treasurer Scott Fitzpatrick said he would not comply with the Biden administration’s proposed reporting rules for financial institutions, which he warned would jeopardize Missourians’ privacy, if they were to pass.  

The proposal would require financial institutions to report information on personal and business accounts with the Internal Revenue Service (IRS) if they exceed $600 in incoming or outgoing cash, known as inflow or outflow, respectively. 

Now, financial institutions are required to report data after transactions amounting to $10,000.

Fitzpatrick pointed to the state’s MO ABLE program, which allows Missourians with disabilities to save up to $15,000 a year tax-free for health-related expenses without losing federal benefits, and the MOST 529 Education Plan allowing individuals to contribute up to $550,000 into education savings accounts. Fitzpatrick said the proposal would jeopardize the privacy of account holders. 

“Turning over their transaction data to the federal government is illegal under Missouri law and a gross violation of Missourians’ expectation of privacy when it comes to their personal financial records,” Fitzpatrick said. “I will not turn this information over to the IRS voluntarily and will fight in court to block any attempt by the federal government to compel my office to comply with this mandate. This proposal is nonsensical and unnecessary and should be rejected by every member of Congress.”

Financial records for MOST 529 and MO ABLE participants are protected under Missouri law, according to Fitzpatrick’s office. More than 200,000 accounts fall under the programs. 

Fitzpatrick, a Republican candidate for state auditor and vice-chair of the State Financial Officers Foundation, joined almost two dozen other state financial officers on a letter to President Joe Biden and Treasury Secretary Janet Yellen opposing the idea last month, pointing to concerns over privacy and the risk of cybersecurity breaches. 

While much of the outcry has said the IRS would receive individual data, the left-leaning Center for American Progress argued the proposal would see institutions reporting aggregate data rather than individual accounts. The change would bolster tax revenue by ensuring no revenue goes unreported, adding more than $460 billion to the nation’s coffers over the next decade, the Treasury Department estimated

“This proposal would create a comprehensive financial account information reporting regime,” the Treasury Department said in a memo on the administration’s revenue proposals published in May. “Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner.”

The proposal is part of the American Families Plan, which seeks to increase federal investments in child care, education, paid leave, and other initiatives through increased taxes on high-income taxpayers. 

Another provision that has drawn the ire of Missouri officials and agriculture groups is the elimination of the stepped-up basis rule that sees the government adjust appreciated values of a house or stock portfolio when passed down to the next generation as an inheritance. The rule protects heirs of properties under an $11.7 million threshold from paying what is known in agricultural circles as the “death tax” — a tax on the transfer of property after someone’s death.  

The bill is making its way through Congress.