Looming Irs Rule Could Drain Billions In Foreign Deposits From Florida Banks
By Zachary S. Fagenson
The Internal Revenue Service says it has no timeline for deciding whether a proposed rule that may cause billions to flee from Florida banks will be enacted.
"You’ll see it when you see it," said IRS spokesperson Eric Smith.
The rule, if enacted, would force US banks to report interest paid on nonresident aliens’ accounts to their home governments annually.
It’s not the first time the industry has faced this. The Treasury Department tried to enact the same regulation in the early 2000 but "withdrew and kind of compromised in that banks would only have to do it on Canadian citizens," said Florida Bankers Association President Alex Sanchez.
Last month Mr. Sanchez and others were in Washington to testify before an IRS panel on the potential impact if the rule were to take effect.
The meeting had been pushed back several times.
"It was basically three bureaucrats from the IRS and they wanted to listen to comments," Mr. Sanchez said. "I suspect, and I’m being very frank, the people at the hearing are not the ones who are going to make the decision. It’s the Obama administration policy decision-makers."
What happens next is unclear.
Florida’s entire legislative delegation has written to the president asking that he backpedal on the issue. Lawmakers from other states have joined in the effort.
There have been "letters from members of Congress from 12 different states," Mr. Sanchez said. It’s "not just a Florida issue, not just a New York, Texas and California issue. I think people are concerned about this around the country."
A Commerce Department study cited in the letter from Florida lawmakers to the president claims foreigners have about $3.6 trillion in US banks and securities. Of that, it’s estimated foreigners have $35 billion to $50 billion in Florida banks. Much of that could leave for Switzerland or the Caribbean.
"It’s the wrong idea at the wrong time… especially when the president himself has called for the infusion of capital to help create jobs," Mr. Sanchez argued. "This is money deposited in banks that they lend to small businesses."
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