By Pete Schroeder

WASHINGTON (Reuters), U.S. banks are no longer required to disclose additional information to the Internal Revenue Service about accounts after Democrats have removed this proposal from a sweeping package of government spending.

Some Democratic legislators originally wanted the provision to be used as a method of identifying people who underreport their income. This is a significant victory for credit unions and banks that have vigorously opposed it.

U.S. President Joe Biden unveiled https://www.reuters.com/world/us/biden-give-update-democrats-spending-plans-before-europe-trip-source-2021-10-28 the framework for a $1.75 trillion economic and climate change plan on Thursday, his latest attempt to unify Democrats in Congress behind a comprehensive bill pursuing many of his top policy priorities.

In earlier versions of this package, that reached up to $3 trillion in new investment, language was added to require banks to report every year to the IRS all accounts with $600 worth of money. The White House did not include this proposal in its framework on Thursday.

Janet Yellen from Treasury said that tax collectors would be able to quickly identify accounts experiencing significantly greater activity than what is reported to taxes. This information could also help to raise significant revenue to support the spending proposal.

Bank industry fought against the provision, calling it too intrusive and onerous. Democrats tried to moderate the provision by raising reporting threshold to $10,000. However, intense lobbying from the industry, along with concerns from moderate Democrats, saw it thrown out of the revised package.

Jim Nussle from the Credit Union National Association said that Americans don’t want the government spying on their accounts. It’s encouraging to see Congress acknowledge the importance of protecting consumer privacy and data security as a way to promote financial well-being.