The Washington-based Center for Freedom and Prosperity (CFP) Foundation yesterday
released a study which claims the proposed IRS interest-reporting regulation (REG-133254-02) will make it harder to investigate and prosecute financial crime.

Entitled *”How the IRS Interest-Reporting Regulation Will Undermine The Fight Against Dirty Money”,* the report was authored by Daniel J. Mitchell, a Heritage Foundation tax expert. He explains, *”The IRS regulation will hurt financial markets, undermine the competitiveness of U.S. banks, and hamper law enforcement. Secretary Snow should permanently withdraw this Clinton-era scheme.”*

Initially proposed during the final days of the Clinton Administration, the IRS interest-reporting regulation was reintroduced in July 2002. According to CFP reports, more than 100 individuals and institutions have denounced the proposed IRS regulation, including 18 Senators, 58 Congressmen and 35 of the nations largest and most prestigious public policy organisations.

Andrew F. Quinlan, CFP President, remarks, *”Ironically, certain Treasury Department officials in the Office of Tax Policy have argued that the regulation will help fight money laundering. What’s next? Will they claim that high taxes will boost the economy by encouraging people to work harder?”*

See attached links for a copy of the Report, and the Regulation. An “executive summary” released by the CFP is reproduced below.

**Executive Summary of the Analysis**

On January 17, 2001, as part of a blizzard of rulemaking during the final days of the Clinton Administration, the IRS proposed a regulation to compel U.S. financial institutions to report bank deposit interest paid to non-resident aliens – even though this information is not needed to enforce U.S. law. The Bush Administration withdrew most of the controversial “midnight regulations” proposed by the previous Administration, but officials in the Office of Tax Policy at the Treasury Department inexplicably have fought to keep the IRS’s interest-reporting regulation alive.

The latest argument used by these officials is that the regulation will help the fight against dirty money. Like every other assertion made by Treasury Department personnel, this claim is demonstrably false.

Indeed, the regulation will make it harder for U.S. law enforcement officials to investigate and prosecute criminals and terrorists by driving funds to foreign banks. Treasury Secretary Snow should withdraw the regulation and fire department employees who put the interests of foreign governments before the interests of the U.S. economy.