Reconciliation Update: IRS Reporting, Tax Hikes, and Needed Grassroots

By Rebeca Romero Rainey

Community bankers are witnessing the fruits of their labor in ICBA’s months-long campaign opposing the onerous IRS bank reporting proposal. However, the grassroots push must continue because the pending reconciliation package still contains harmful tax increases while Congress could slip the IRS reporting proposal back in at the last minute.

IRS State of Play

First, the good news. The “Build Back Better” budget package advancing in Congress leaves out the widely opposed IRS plan, which would require banks to report their customers’ financial account information to the agency.

Advocacy Works: While the legislative process is far from over, the IRS plan’s omission is a direct result of the vocal opposition of ICBA and community bankers and their customers. ICBA pushback started in April, with our #KeepMyBankingPrivate campaign generating hundreds of thousands of messages to Congress and 16 billion media views since August.

Stay on Guard: However, this proposal can be added to the bill at any time. To keep the pressure on lawmakers, ICBA continues encouraging community bankers to call their members of Congress and rally consumers in opposition.

Tax Challenges

Additionally, ICBA continues to strongly advocate against several tax increases included in the reconciliation framework, with our Be Heard resource center helping community bankers speak out.

Positive Developments: Here again, ICBA and community bankers have already made progress. The framework leaves out ICBA-opposed provisions to hike the corporate and capital gains rates, limit the 199A deduction for Subchapter S banks, eliminate the “stepped-up basis” policy avoiding taxation at death, curb Section 1031 transfers widely used in rural areas, and restrict Individual Retirement Account investments.

Negative Provisions: Nevertheless, the framework continues to contain harmful provisions, such as Small Business Administration direct lending, a new “net investment income tax” on S-corp shareholders, and a surtax on small businesses held in trusts. ICBA continues to strongly oppose these provisions, but grassroots outreach remains critical.

Next Steps

In summary, community bankers are on the verge of several momentous advocacy successes—but we must remain vigilant.

To keep pushing until the whistle blows, community bankers can use the following ICBA resources:

Community bankers are again proving to be powerful and effective advocates. Now let’s work together to finish the job on these harmful policies.

Rebeca Romero Rainey is ICBA president and CEO.

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