Florida Bankers Assail IRS Reporting Rule for Nonresident Aliens

The Florida Bankers Association on Monday blasted a proposal by the U.S. Department of Treasury requiring banks to report interest payments to nonresident alien individual depositors to the Internal Revenue Service.

This proposal will literally drain tens of billions of dollars from the U.S. economy, said FBA President and CEO Alex Sanchez.The impacts would be hard-hitting and immediate.

The proposed regulation (REG-146097-09) is strongly opposed by the FBA because of concern that there would be a dramatic backlash by bank customers who would promptly move their deposits to countries without such restrictions.

We are convinced that adoption of the proposal will place U.S. banks at a competitive disadvantage relative to the banks of our trading partners and will result in significant withdrawals of foreign deposits from U.S. banks, said Sanchez. This will ultimately reduce the amount of credit available to local communities and others who traditionally seek bank loans as their chief source of credit.

When a similar proposal was floated 10 years ago, the Washington Economics Group predicted that Florida business-operating revenues could suffer a loss ranging from $4.4 billion to $8.36 billion each year on average for 15 years.WEG estimated that job losses in Florida during the first year following the implementation could range between 62,000 and 188,000.

A 2004 study by the Mercatus Center at George Mason University estimated that a scaled-back version of the rule would drive $88 billion from American financial institutions, and this version of the regulation will be far more damaging.

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