Removing Barriers Blog

Tax Legislation under Consideration in Congress this Week
Posted April 16, 2018 by CUNA Advocacy

This week, the House of Representatives will consider a number of tax-related bills that passed out of the Ways and Means Committee last week.  These bipartisan and unanimously approved bills aim to combat identity theft, repair shortcomings at the IRS, and protect taxpayers.  Several of these bills will affect the operations of credit unions and other financial institutions.  It is likely that many or all of these bills will easily pass the House and Senate and be enacted into law. 

Of interest to credit unions are H.R. 5444, the Taxpayer First Act; H.R. 5445, the 21st Century IRS Act; H.R. 5192, the Protecting Children from Identity Theft Act; and H.R. 5443, to amend the Internal Revenue Code of 1986 to require electronic filing of the annual returns of exempt organizations and provide for making such returns available for public inspection.  I will highlight these four bills to be considered this week that will in some way affect credit unions and/or their advocacy operations. 

H.R. 5443 is a bill that would require electronic filing of the annual returns of tax-exempt organizations and make these returns available to the public.  This would be accomplished by extending the requirement to “e-file” to all tax-exempt organizations required to file statements or returns in the Form 990 series.  It would also require that the IRS make the information provided on the forms available to the public in a machine-readable format as soon as possible.  State-chartered credit unions, CUNA, and the Leagues all file IRS Form 990s.  Federal credit unions would not be impacted by this legislation. 

H.R. 5444, the “Taxpayer First Act,” includes a number of measures designed to protect taxpayers from unfair practices as well as improve IRS operations.  The bill includes provisions related to suspected or actual “structuring transactions” and their treatment under the Bank Secrecy Act.  This bill would only allow the IRS to pursue the seizure or forfeiture of assets if either the property to be seized was derived from an illegal source or the transactions were structured for the purpose of concealing a violation of a criminal law or regulation other than rules against structuring.  The legislation also includes post-seizure procedures. 

H.R. 5192, the “Protecting Children from Identity Theft Act,” directs the Social Security Administration to electronically verify for financial institutions whether or not a Social Security Number, name and date of birth are affiliated with an applicant or potential member. 

H.R. 5445, the “21st Century IRS Act,” aims to provide improved transparency, accountability, and information security at the IRS.  In addition, the bill: 

  • Regarding electronic fund transfers … the Treasury Department, the IRS, and the Bureau of Fiscal Service would be required to consult with financial institutions and submit a report to Congress within two years describing how the IRS can utilize new payment methods and platforms to increase the number of tax refunds that can be paid by electronic funds transfer.  The report is required to consider tax refund fraud, reducing the IRS’s costs in processing tax refunds, determining the costs and any associated fees charged to taxpayers (including monthly and point-of-service fees) to gain access to their tax refunds, assessing the impact on taxpayers who do not have access to traditional credit union or bank accounts, and ensuring that payments are only made to accounts that comply with the Bank Secrecy Act and the USA PATRIOT Act of 2001.  The report is required to include legislative recommendations necessary to accomplish these goals. 

  • Regarding IRS Form 1099 filings … the Treasury Department would be required to create a website to allow people to prepare, file, and distribute Form 1099s and maintain a record of completed and submitted 1099s.  This website would not be a replacement for services currently provided by the IRS. 

  • Regarding the disclosure of taxpayer information for third-party income verification … the current “Income Verification Express Service” (IVES) program requires that taxpayer transcript information requests be submitted to the IRS by fax and then the transcripts are furnished electronically.  This bill would require the Treasury to implement a disclosure program that is automated and on the internet and working in almost real time.  This is for people seeking to verify the income of a taxpayer who is a borrower in the process of a loan application.  Users of this system would be charged fees to cover the cost of the program.  However, the improvement and speed in the loan approval process likely justifies the new fees and this new feature will certainly be a welcome tool for credit union loan officers. 

  • Regarding the electronic filing of IRS returns … this bill would allow the Treasury to ease current and mandatory electronic filing based on the number of returns required to be filed by a taxpayer in a given taxable period.  It reduces the taxpayer’s electronic filing threshold requirement regarding the number of returns and statements filed in a year.  That threshold is reduced from 250 to 100 for 2020, from 100 to 10 for 2021 and thereafter. 

  • Payment of taxes by debit and credit cards … currently, taxpayers can generally pay their taxes with payment cards, through third party processors, only if the IRS does not incur any fees.  This bill allows direct payment of taxes by taxpayers using payment cards but does require that these taxpayers are as responsible as possible for any such fees assessed through these payments and card processing contracts.