EconomicPolicyJournal.com
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Housing Bill Has Provision To Track Financial Activity
of Small Businesses
of Small Businesses
EconomicPolicyJournal.com-June 25,2008-Hidden deep in Senator
Christopher Dodd's 630-page Senate housing legislation is a sweeping
provision that affects the privacy and operation of nearly all of Americas
small businesses. The provision, which was added by the bill's managers
without debate, would require the nation's payment systems to track,
aggregate, and report information on nearly every electronic transaction to
the federal government.
"This is a provision with astonishing reach, and that was slipped into the bill.
Not only does it affect nearly every credit card transaction in America, such
as Visa, MasterCard, Discover, and American Express, but the bill
specifically targets payment systems like eBay's PayPal, Amazon, and
Google Checkout that are used by many small online businesses. The
privacy implications for America's small businesses are breathtaking," says
Dick Armey, chairman of the policy watchdog group, FreedomWorks.
"Privacy groups like the Center for Democracy and Technology and small
business organizations like the NFIB sharply criticized this idea when it first
appeared earlier this year. What is the federal government's purpose with
this kind of detailed data? How will this database be secured, and who will
have access? Many small proprietors use their Social Security number as
their tax ID. How will their privacy be protected? What compliance costs will
this impose on businesses? Why is Sen. Chris Dodd putting this provision in
a housing bailout bill?," Armey continued.
"At a time when concerns about both identity theft and government spying
are paramount, Congress wants to create a new honey pot of private data
that includes Social Security numbers," Armey said. "This bill reduces privacy
across America's payment processing systems and treats every American
small business or eBay power seller like a criminal on parole by requiring
an unprecedented level of reporting to the federal government. This
outrageous idea is another reason to delay the housing bailout legislation
so that Senators and the public at large have time to examine its full
implications."
From the Senate Bill Summary:
Payment Card and Third Party Network Information Reporting. The
proposal requires information reporting on payment card and third party
network transactions. Payment settlement entities, including merchant
acquiring banks and third party settlement organizations, or third party
payment facilitators acting on their behalf, will be required to report the
annual gross amount of reportable transactions to the IRS and to the
participating payee. Reportable transactions include any payment card
transaction and any third party network transaction. Participating payees
include persons who accept a payment card as payment and third party
networks who accept payment from a third party settlement organization in
settlement of transactions. A payment card means any card issued pursuant
to an agreement or arrangement which provides for standards and
mechanisms for settling the transactions. Use of an account number or
other indicia associated with a payment card will be treated in the same
manner as a payment card. A de minimis exception for transactions of
$10,000 or less and 200 transactions or less applies to payments by third
party settlement organizations. The proposal applies to returns for calendar
years beginning after December 31, 2010. Back-up withholding provisions
apply to amounts paid after December 31, 2011. This proposal is estimated
to raise $9.802 billion over ten years.
Christopher Dodd's 630-page Senate housing legislation is a sweeping
provision that affects the privacy and operation of nearly all of Americas
small businesses. The provision, which was added by the bill's managers
without debate, would require the nation's payment systems to track,
aggregate, and report information on nearly every electronic transaction to
the federal government.
"This is a provision with astonishing reach, and that was slipped into the bill.
Not only does it affect nearly every credit card transaction in America, such
as Visa, MasterCard, Discover, and American Express, but the bill
specifically targets payment systems like eBay's PayPal, Amazon, and
Google Checkout that are used by many small online businesses. The
privacy implications for America's small businesses are breathtaking," says
Dick Armey, chairman of the policy watchdog group, FreedomWorks.
"Privacy groups like the Center for Democracy and Technology and small
business organizations like the NFIB sharply criticized this idea when it first
appeared earlier this year. What is the federal government's purpose with
this kind of detailed data? How will this database be secured, and who will
have access? Many small proprietors use their Social Security number as
their tax ID. How will their privacy be protected? What compliance costs will
this impose on businesses? Why is Sen. Chris Dodd putting this provision in
a housing bailout bill?," Armey continued.
"At a time when concerns about both identity theft and government spying
are paramount, Congress wants to create a new honey pot of private data
that includes Social Security numbers," Armey said. "This bill reduces privacy
across America's payment processing systems and treats every American
small business or eBay power seller like a criminal on parole by requiring
an unprecedented level of reporting to the federal government. This
outrageous idea is another reason to delay the housing bailout legislation
so that Senators and the public at large have time to examine its full
implications."
From the Senate Bill Summary:
Payment Card and Third Party Network Information Reporting. The
proposal requires information reporting on payment card and third party
network transactions. Payment settlement entities, including merchant
acquiring banks and third party settlement organizations, or third party
payment facilitators acting on their behalf, will be required to report the
annual gross amount of reportable transactions to the IRS and to the
participating payee. Reportable transactions include any payment card
transaction and any third party network transaction. Participating payees
include persons who accept a payment card as payment and third party
networks who accept payment from a third party settlement organization in
settlement of transactions. A payment card means any card issued pursuant
to an agreement or arrangement which provides for standards and
mechanisms for settling the transactions. Use of an account number or
other indicia associated with a payment card will be treated in the same
manner as a payment card. A de minimis exception for transactions of
$10,000 or less and 200 transactions or less applies to payments by third
party settlement organizations. The proposal applies to returns for calendar
years beginning after December 31, 2010. Back-up withholding provisions
apply to amounts paid after December 31, 2011. This proposal is estimated
to raise $9.802 billion over ten years.