Arkansas' banking community, backed by the state's congressional delegation, is lining up in opposition to efforts by President Joe Biden to require lenders to provide more consumer information to the Internal Revenue Service.
The administration contends new regulations would help find delinquent taxpayers and could add up to $7 trillion to the U.S. treasury. The nation's bankers, however, say the issue raises privacy concerns and could expose American households and businesses to security risks.
The proposal would require banks, credit unions and other financial institutions to monitor deposits and withdrawals in accounts that have balances above $600 at any time during the year and report the information to the IRS.
Critics say this would burden financial institutions with new requirements that amount to an invasion of privacy and could increase cybersecurity problems at the federal agency, which already is a prime target for attacks, said Lorrie Trogden, chief executive officer of the Arkansas Bankers Association.
"This is a broad overreach into private financial data," Trogden said Tuesday. "This potentially puts customers' private financial data out there at risk."
Banks also would have to build costly infrastructure to comply with the rules, she said, noting that checking, savings and loan accounts are on different platforms.
"Banks would have to build an overarching infrastructure to pull data from all those accounts to send to the IRS," Trogden said. "This could really be a costly process for the smallest community banks here in Arkansas."
U.S. Rep. Steve Womack, the Arkansas Republican who is ranking member of the House Appropriations Subcommittee on Financial Services and General Government, called the administration's proposal "IRS surveillance on Americans' bank accounts and financial transactions."
The state's entire congressional delegation opposes the plan. It breaches Americans' privacy, Womack said in a news release, and he is cosponsoring legislation that would block the proposal from taking effect.
"It's a radical overreach and unprecedented invasion of privacy," Womack said. "This bill will proactively stop this terrible mandate -- and I am proud to cosponsor it and safeguard the rights of Arkansans."
Arkansas Treasurer Dennis Milligan, 2021 national chair of the State Financial Officers Foundation, is part of the organization's effort to resist the IRS oversight.
"Simply put, this is a direct assault on all Americans of all economic demographics and includes all business and personal accounts," the group said in a recent letter co-signed by Milligan and sent to Biden and U.S. Treasury Secretary Janet Yellen.
Along with privacy and data-security issues, Milligan said the increase in IRS scrutiny could add another barrier in efforts to encourage people in underbanked communities to open accounts. Nearly 10% of Arkansas' population is underbanked, above the national average of about 7%, Milligan said.
"This proposal would particularly have a detrimental effect on Arkansas," he said Tuesday.
In Arkansas, the treasurer is responsible for overseeing an education savings plan and a program that helps disabled people save for related expenses. Both of those programs would be required to submit data to the IRS under the administration's proposal, Milligan said.
"It would be absolutely absurd for me to turn over their private account data to the IRS ... and I'm just not going to do it," he said.
The administration seeks to require banks to give the IRS new detailed information on individual and business customers with total annual deposits or withdrawals of more than $600. The proposal is aimed at helping collect more than $7 trillion in unpaid taxes, primarily from the richest individuals and largest companies.
Bankers contend they have public support to reject the proposal.
A poll paid for by the Independent Community Bankers of America reported that 67% of voters oppose the requirement and only 22% support it.