The largest U.S. banking lobby groups banded together on Friday to make another push to kill a proposed bank account reporting law being drawn up as part of the congressional reconciliation package.

In a letter to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy, the lobby groups said the proposal would create "reputational challenges" for large financial services firms, increase the cost of tax preparations for Americans and small businesses, and create serious "financial privacy concerns."

"We urge members to oppose any efforts to advance this ill-advised new reporting regime," the groups said in the letter.

"While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population."

The proposed domestic account reporting requirement is becoming an important issue for the banking industry, which is opposed to various Dem-favored tax reporting changes.

Background

As The Wall Street Journal has reported, Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig pressed lawmakers on Wednesday to give the IRS more information on taxpayers’ bank accounts. The Journal said the call came as the Biden admininstration is making an attempt to salvage an embattled tax-compliance proposal.

Administration officials asked Congress in letters to require banks to report annual inflows and outflows from bank accounts with at least $600 or at least $600 worth of transactions.

The goal: to help the IRS target audits better. The administration said the move could yield some $460 billion over a decade to help defray the expense of expanded social safety net and climate programs.

The ideal brought swift opposition from banks and credit unions and fell off Dems' list of proposed taxc policy changes. But if support seemed unsteady, it didn't mean the idea was completely dead. The Journal said a scaled-back version may still emerge as the White House and Congress hold ongoing discussions. 

The proposal opens up significant privacy concerns, which lobbyists said would discourage taxpayers from participating in the financial services system and undermine efforts to include vulnerable populations and unbanked households.