By Bernie Becker - 03/08/12 09:01 PM EST
Nevertheless, the Levin proposal passed the Senate by voice vote on Thursday as an amendment to the highway bill. The measure would essentially give the Treasury Department the same authority to battle offshore tax evasion as it already has to fight money laundering.
Treasury received the ability to sanction foreign governments or banks over money laundering through the Patriot Act.
The current proposal to broaden Treasury’s power was basically culled from a broader Levin bill aimed at reining in tax havens, and liberal supporters of the amendment have tried to marshal support for the idea. Sens. Kent Conrad (D-N.D.) and Sheldon WhitehouseSheldon WhitehouseDem senator: Clinton may command 'majority of the Republican caucus' Banking association backs financial transparency bill Shift in care could reverse the opioid epidemic MORE (D-R.I.) are also prominent supporters of the tax-evasion measure.
“Given the relationship between offshore tax avoidance and evasion and money laundering, this is a natural fit to combat financial crime and its dangerous downstream effects,” the Financial Accountability and Corporate Transparency (FACT) coalition wrote to lawmakers Wednesday, discussing a previous version of the amendment.
Levin himself said Thursday that lawmakers, under the Foreign Account Tax Compliance Act (FATCA), had already required foreign banks with U.S. investments to open up about accounts opened by Americans.
But, Levin added, foreign banks without investments in the U.S. did not face that requirement. The Michigan Democrat also said that he had worked with the administration, among others, to make improvements to his amendment.
"The United States needs authority to take special measures against foreign banks that not only refuse to disclose accounts opened by their U.S. clients, but also significantly impede U.S. tax enforcement efforts," Levin said on the Senate floor.
But skeptics of the current amendment are also worried that the tax-evasion measure is coming so closely on the heels of proposed IRS regulations for FATCA, a 2010 law that is also meant to combat offshore tax evasion.
Under FATCA, foreign banks are required to disclose data about Americans’ accounts to the IRS, or face a 30 percent withholding fee on certain payments received from the United States.
The financial services lobby has called FATCA extraordinarily complex — and now say that the Levin amendment would put even more on their plate, as they work to digest the nearly 400 pages worth of proposed FATCA regulations that the government released in February.
“When combined with the burdensome application of the FATCA rules, the amendment could represent another layer of compliance and complexity,” Scott Talbott of the Financial Services Roundtable told The Hill.
Sen. Orrin HatchOrrin HatchGOP lawmakers call for overhaul of proposed corporate tax rules DEA decision against reclassifying marijuana ignores public opinion Trump op-ed counters Clinton’s pitch to Utah voters MORE (Utah), ranking Republican on the tax-writing Senate Finance Committee, also has concerns about the Levin amendment following so closely behind those regulations.
“He believes that Congress should not consider adding to the burdens of FATCA until, at a minimum, the regulations have become fully effective and there has been an opportunity for the tax-writing committees to carefully analyze the effect of FATCA,” said Julia Lawless, a Hatch spokeswoman.
Lawless added that Hatch would be "tracking the progress of this amendment as the highway bill moves through the Congress."
Financial industry officials have also expressed concern with the speed at which the Senate is moving to consider the amendment, with SIFMA’s Peabody noting that the most recent version of the measure has been available for less than 24 hours.
Talbott also thought the measure needed a more-thorough vetting.
“Given the uncertainty of applying anti-money-laundering rules to try and prevent tax evasion, it makes sense to hold a hearing to examine the impact,” said Talbott, the Financial Services Roundtable’s senior vice president of government affairs.
At the same time, Levin has proposed similar language to expand Treasury’s reach in battling tax evasion since 2007.
The Senate Homeland Security permanent subcommittee on Investigations, of which Levin is chairman, also held hearings in 2008 on how banks in tax havens had facilitated tax evasion by American banks.
For its part, the Financial Action Task Force, a group that looks to combat the criminal use of the financial system, said last month that tax evasion should be a crime that can lead to a charge of money laundering.
Levin also said Thursday that his plan, which the Joint Committee on Taxation has said could bring in roughly $900 million over a decade, would help the government balance the need to reduce the deficit and still fund important priorities.
"We cannot accomplish those twin goals unless we restore revenue lost in part to the gaping loopholes in our tax law," he added. "With this amendment, we can take a step down the path of closing abusive loopholes, and continue building momentum for the work we must to in the months ahead."
This post was updated at 6:25 p.m.