CUNA Comment Letter
Third Party Payment Rules (26 CFR Parts 1, 5f, and 31)
January 17, 2001
Internal Revenue Service
POB 7604 Room 226
Ben Franklin Station
Washington, DC 20044
Re: Third Party Payment Rules (26 CFR Parts 1, 5f, and 31)
Dear Sir or Madam:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed Internal Revenue Service (IRS) rules regarding third-party payments. The proposed rules are intended to clarify the Form 1099 information reporting requirements for financial institutions, brokers, and others involved in third-party payments. CUNA represents more than 90 percent of our nations 10,500 state and federal credit unions.
The proposed rules will require that a party making the payment on behalf of another must report the payment under one of the following circumstances: when this party performs a management or oversight function in connection with the payment, as opposed to a ministerial or administrative function; or when this party has a significant economic interest in the payment, -- and the rules specifically mention that this will include a financial institution making payments to a contractor working on property that secures a mortgage held by the institution.
For credit unions, the significant difference between the proposed rules and the current rules is that under current rules, credit unions would not be subject to the reporting requirements if they collect and make payments on an infrequent and isolated basis.-- Under the proposed rules, credit unions would be subject to the reporting requirements under such circumstances if they perform a management or oversight function in connection with the payment.
CUNA opposes the proposed rules because it will impose additional burden on those credit unions that make payments on an infrequent and isolated basis. There also does not appear to be any statutory basis for imposing this additional burden. For these reasons, we respectively request that this proposal be withdrawn.
Thank you for the opportunity to comment on the IRS proposed rules regarding third-party payments. If you or other IRS staff have questions about our comments, please give me a call at (202) 218-7795.
Assistant General Counsel