By Mark K. Matthews, The Orlando Sentinel –
WASHINGTON — A new IRS rule designed to find tax cheats got a thumbs-down Thursday from the U.S. House, which moved to delay its implementation over fears it would hurt the economy.
By a 251-165 vote, the U.S. House backed a measure sponsored by U.S. Rep. Bill Posey, R-Fla., that would postpone the IRS regulation — which will shine more light on foreign deposits in U.S. banks — until the nationwide unemployment rate improves to 6 percent; it now sits at 8.2 percent.
“My hope is that at the end of the day people will say this is not a good time to do this,” Posey said.
The regulation, set to go in effect next January, requires that U.S. banks disclose to the IRS the identities of foreigners with deposits.
It’s a major shift — as these profiles have been secret for decades — but a necessary one, said administration officials, because they can trade the list with foreign governments for information about U.S. tax cheats abroad.
“This rule simply requires the same reporting on foreign depositors that we require on our own citizens, and delaying it will only delay our efforts to crack down on offshore tax evasion,” responded the Treasury Department in a statement.
But critics, including Florida banks and lawmakers, have warned the regulation would prompt foreign depositors to put their money elsewhere — thereby diminishing banks’ ability to loan money.
Florida is home to tens of billions of dollars in foreign deposits, much of it the southern part of the state, and David Schwartz, head of the Florida International Bankers Association, said he’s heard anecdotally that the IRS rule already has prompted “several hundreds of millions of dollars” to leave the state — though Treasury Department officials have questioned that estimate.
“This could have a significant effect on the South Florida economy,” he said.
It remains uncertain whether Posey’s legislation will get through the Senate. U.S. Sen. Marco Rubio, R-Fla., is building support there to block the IRS rule, though he admitted another course could prove more effective.
“Ultimately, the best route is not a legislative one, but to put the IRS under pressure to reconsider their ruling,” he said.
