House Insurance and Commerce

September 30, 2021


Lowery [00:00:00] Sees a quorum. We have a very short agenda. Let me explain that the very first listing there is a concurrent resolution. Representative Haak is going to be passing over that. It’s been determined by leadership that we would not be doing concurrent resolutions. So she refiled as a House resolution, the same content. So Representative Haak, you are recognized to go to the end of the table to make your presentation. 


Haak [00:00:35] Excuse me, I’m sorry. Thank you, Mr. Chairman. Can everyone hear me OK? 


Lowery [00:00:40] Go ahead and pull the microphone in just a bit closer. 


Haak [00:00:42] All right. There we go. 


Lowery [00:00:43] Thank you. 


Haak [00:00:44] As many of you may be aware, recent conversations at the federal level are very concerning to us in Arkansas, but also for every financial consumer in the country that would be affected by potential legislation that is being considered. So you have before you a copy of the resolution. I just wanted to also share and Miss LorrieTrogden, president and CEO of Arkansas Bankers Association, is also on her way over here if we have any questions further for her. So I’ll just let you know that. But the proposal in federal legislation would be that it would be for any transaction over $600 would be, need to be reported to the IRS. And this is a major intrusion on consumer privacy for financial privacy. It’s also– makes it, excuse me– it also makes it potentially available to hackers. The IRS experienced 1.4 billion cyber attacks annually and recently experienced the SolarWinds hack, which infiltrated numerous, numerous government agencies, including the Treasury Department. So for the purposes of both being very difficult for banks to implement this, it’s also a burden on taxpayers and an invasion of their consumer privacy. Let’s see. The administration has failed to explain how this new information would be utilized to close the tax gap, which is their reason for passing this legislation, and that every American would sacrifice their financial privacy to enable closer inspection for what they deem to be tax evaders. It’s still not clear how this would help them find those that are trying to evade taxes through this method, so it’s basically providing information that has no purpose to the IRS in determining a consumer’s tax liability. So it’s unprecedented generation of taxpayer information, irrelevant to the calculation of the taxpayer’s taxable income being transmitted and stored in an uncertain environment with significant cost to taxpayers and financial institutions. It also assumes that every taxpayer is potentially a tax evader, which is a huge leap in determination of what is probably not the case, and so that the IRS has basically not shown the need for this either at a financial institution level or the individual consumer level. I have before me, if you would like submitted, a letter that was submitted to the Commissioner for the Internal Revenue Service by Rick Crawford, our 1st congressional district congressman, and a letter submitted by all 50 states signed by the Bankers Association. Thank you for coming today. Miss Lorrie Trogden and is president and CEO of Arkansas Bankers Association. A letter from the American Bankers Association signed by all 50 states’ bankers association in opposition to this legislation, potential legislation. So our resolution before you today would, would just state those facts in terms of how the House would be against such an intrusion in consumer privacy and a burden on our financial institutions, which really bore a lot of the brunt of the pandemic in trying to get our PPE loans out and a lot of things that they have helped our communities and businesses to stay afloat during this pandemic. If you have any questions and I would ask Miss Trogden if you would like to come or if you have any questions for either one of us. 


Lowery [00:05:11] Members, I see Representative Hodges, you have question? 


Hodges [00:05:15] I do for, for the Bankers Association. 


Lowery [00:05:18] OK, and you may join her at the end of the table. Just identify yourself for the record, Miss Trogden.


Trogden [00:05:27] Lorrie Trogden, President and CEO of the Arkansas Bankers Association. 


Hodges [00:05:32] Thank you, Mr. Chair. Since I, you know, I am a banker and I’m just not very familiar with, with this resolution, and so kind of enlighten me as far as banks concerns how this resolution benefits. 


Trogden [00:05:51] There are three main concerns about this. The first one being consumer privacy. This is going to report a whole lot more data than they already have. The data that they do have, they don’t use. They say this is targeted at finding tax evasion with the top one percent of America, and they have the data they need right now to do that. And so throwing more data that they can’t or won’t use at them is not going to be helpful. They experience 1.4 billion cyber attacks per year. There have been numerous breaches that have been reported. Most recently, you know, several of the top one percent tax returns were made public. So, you know, cybersecurity and data privacy, huge concern. The second concern would be the unbanked and the underbanked. This administration has made it very clear that that’s a priority of theirs to get that population into the financial system. But the number one concern for folks that aren’t putting their money in the bank is privacy. They don’t want the government having all their information. And so this really pushes them– it may– the ones that are already in the system, it may actually push them back out of the system. And I think it will be a real deterrent for those that are considering coming into the system. You know, Arkansas, our banks have really done a good job stepping up. The bank on plus accounts that the bank on Arkansas Plus have set up for specifically for this population, we actually have the most financial institutions involved in that program across the US. So Arkansas banks have really made a lot of progress in this area and we would hate to see that go backwards. And the third is, you know, banking, specifically banking related, that it is going to take a lot of resources and a lot of money to implement this. This is not something that they can just pull out of thin air and send to the IRS. It takes a specific system because it’s not just your bank account, your checking and your savings, it’s loan accounts, it’s your retirement accounts. It’s basically everything that money is going in and out of. So they have to build a platform that will search across all of those different things to report this data in. It’s new fields. So they have to also expand the reporting for those fields. And you know, you know, most of our banks in Arkansas are small community banks, and they rely on a third party platform to do all these things for them. And so they are at the mercy of that platform as to how much it’s going to cost and how long it’s going to take. And so just, you know, it all piles up to just being detrimental basically to every American taxpayer. 


Hodges [00:08:42] Thanks so much. Appreciate that. 


Lowery [00:08:45] Representative Wooten, I believe. 


Wooten [00:08:49] I have a motion at the appropriate time, Mr. Chairman. 


Lowery [00:08:53] OK. I think we still have several questions. Representative Richardson, did I see your hand? 


Richardson [00:09:00] Yeah, I think Ray– 


Lowery [00:09:01] OK, Representative Ray. 


Ray [00:09:03] Thank you, Mr. Chairman. Thank you, Miss Trogden, for being here today. Is– based on what you just described, is it fair to say that this proposal, if it were to go through, would create significant compliance costs on our banks and financial institutions? And is it fair to say that that would ultimately be a burden for consumers? 


Trogden [00:09:27] That’s, you know, that’s typically how, how it works is when there’s increased cost that does get passed on. But in addition, small business and everyday consumers are going to have to pay more to get their taxes done. You know, there will be a lot more to reconcile for the accountants and so that, that– they’re going to bear it on both sides, basically. 


Lowery [00:09:48] OK, thank you. Represent Richardson, again, I saw your–. 


Richardson [00:09:54] She answered my question. 


Lowery [00:09:55] OK. All right. Representative Flowers, did you have a question? 


Flowers [00:10:02] Yes, Mr. Chair. Thank you. I was just trying to just get clarity on exactly what this would do. I’ve read a little bit about it. I’m feverishly trying to find like what it does because I’m seeing a lot of articles saying what the implications would be. And I really am interested in what would this measure do if it were to pass Congress? 


Trogden [00:10:26] Sure. So if you have an inflow or outflow, gross inflow or outflow within a year, a 12 month period, of $600 or more, then there are additional data fields that will have to be reported to the IRS. Which honestly, that’s $25 a month. That captures basically every American. 


Flowers [00:10:48] Follow up? 


Lowery [00:10:49] Yes, you’re recognized. 


Flowers [00:10:50] So with whatever the standard is now, what is the threshold now as it relates to the dollar amount and then the field, the data fields? 


Trogden [00:11:02] Well, because those data fields don’t exist– I mean, currently reporting that data doesn’t exist. So as far as a threshold goes, there’s really not one for this specific instance, because they don’t have to report that right now. Some people are thinking about the $10,000 threshold. That’s a one time $10,000. So this will be different because it looks at an entire year. So $600 for an entire year, not just a $600 transaction. So that is the difference between those two things. 


Flowers [00:11:34] And one more. 


Lowery [00:11:35] Yeah. Yes. 


Flowers [00:11:36] So at any point in time in a given year that an account reaches the value of $600, then that makes it a reportable account?


Trogden [00:11:49] Whether it’s going in or coming out. 


Flowers [00:11:51] Got it. Okay. All right. Thank you very much. 


Lowery [00:11:55] Thank you very much. Representative Boyd. 


Boyd [00:11:59] Thank you, Mr. Chair. So you’re– so basically then what that might mean for me, I mean, I’m just being a little theoretical. But if I remove $600 from the bank over a given period of time less than a year, that the IRS might go, we want to know what you did with that $600, and it could be incumbent on me to keep receipts or keep the cash or something because now they, they have that information and otherwise might make accusations? 


Trogden [00:12:28] Correct. They could decide to audit you. Yes. 


Lowery [00:12:31] OK, thank you. Representative Lundstrom, you’re recognized. 


Lundstrum [00:12:35] Thank you. So not only do we have more expensive when our taxes are being done, we’re going to have the increased cost of banking, increased cost of doing business. This, this sounds like the government’s actually digging in my couch cushions, cushions for change instead of stopping spending or doing a better job of managing themselves. Am I understanding this correctly? 


Trogden [00:12:56] We are a firm believer that instead of, yes, looking for further money based on $600, that if they would put resources into the IRS as far as tech and people, they could use the data they have and don’t, wouldn’t need anything else. 


Lundstrum [00:13:14] OK, follow up. 


Lowery [00:13:16] You’re recognized.


Lundstrum [00:13:17] $600 going in or $600 going out. So every paycheck, every dime, that’s irrelevant– even irrelevant transactions now are going to have to be justified. 


Trogden [00:13:30] Yes. Like I said, that equates to about $25 a month over a 12 month span. So all of that, all of whatever data it is they, they’re going to require would have to be sent once you hit that $600 threshold. 


Lundstrum [00:13:43] Sounds like legalized harassment. Thank you. 


Lowery [00:13:46] OK, thank you. Members, any additional questions? All right. Seeing none, Representative Haak, you are recognized to close for your resolution. 


Haak [00:14:00] Thank you, Mr. Chairman. Thank you, committee, for hearing us today and taking this into consideration. As has been noted, it is a extreme form of overreach. 


Lowery [00:14:10] Let me– I’m sorry. Let me interrupt you. I’m a little out of practice here. I’m supposed to call for anyone in the audience who may wish to speak for or against the bill. And seeing none, OK. Yeah. Yeah, you may– thank you.  


Haak [00:14:26] Yes. And so while this is preemptive, we don’t know that this is going to be implemented. It is something that we would like to be on record as a Legislature that we oppose this kind of overreach for all the reasons that have been stated. But in particular, we want our financial institutions to partner with our communities and our consumers, both the banked and unbanked as well. And, and they have been really good partners. And this kind of scrutiny is not necessary, nor has it ever been deemed to be necessary up unto this point. So with that, I would just ask for a good vote. 


Lowery [00:15:06] All right. Thank you very much. And I believe at this point, Representative Wooten, did you have a motion? 


Wooten [00:15:11] Yes, sir, I do. Do pass. 


Lowery [00:15:13] OK. We have a motion of do pass. Is there any discussion among members? If not, all those in favor of the do pass motion, signify by saying aye. Any opposed say no. And there are none. Your resolution is passed. Congratulations. Yes, Representative Wooten.


Wooten [00:15:36] Point of personal privilege, I guess is what I’m– 


Lowery [00:15:40] Yes, sir. 


Wooten [00:15:40] For just a second. I don’t know whether the committee members are aware of this, and I’m not sure how it’s all flowing now in Washington with the agreement yesterday, but on Page 168 of the Reconciliation Act, which is a 2,500 page document, a waste of money and time, but nevertheless, there’s one sentence on Page 168 that says if a corporation or company does not mandate vaccination or they have an employee who is not vaccinated, they will pay a $700,000 fine. It’s hid in that bill. I’m, I’m– it’s just, it’s gone from ridiculous to being just idiotic, if you will. But I wanted, I wanted each of the committee members to be aware of that. Regardless of where you are on the vaccination or the mandates or anything, for the federal government to tell a company, we’re going to fine you $700,000. They had a chemical fire last year where two people were killed, six were injured. They fine them $12,000. Thank you, Mr. Chairman. 


Lowery [00:17:01] Thank you. Members, any other business before the committee? If not, I will accept a motion to adjourn. See a motion. OK. All those in favor of adjournment, signify by saying aye. We are adjourned. Thank you for meeting with us.