The National Association of Federal Credit Unions is urging the Internal Revenue Service to withdraw a proposal that would require financial institutions, including credit unions, to disclose interest paid to nonresident aliens.
The IRS proposal would put an additional burden on credit unions while reporting their taxes, according to NAFCU.org.
Tessema Tefferi, NAFCU’s regulatory affairs counsel, said that because credit unions have a limited ability to raise funds, they would not be able to comply with the new regulatory burden and still provide their members with the same benefits.
“Currently, credit unions have to comply with numerous tax reporting requirements related to their members’ accounts,” Tefferi said, according to NAFCU.org. “As a result, they already allocate and expend considerable resources on tax reporting regulatory compliance.”
The IRS proposal would require all financial institutions to report interest paid to nonresident aliens whose accounts earn more than $10 in interest during a reporting year.
The existing IRS reporting requirement applies only when the account holder is a nonresident alien who resides in Canada, according to NAFCU.org. The IRS withdrew similar proposals in 2001 and 2002 after loud objections from policymakers and small business advocates.
“Regulatory burden on credit unions is at an all-time high,” Tefferi said, NAFCU.org reports. “The IRS’s proposal would only serve to make the regulatory environment under which credit unions operate worse, without providing discernable benefits.”