CUNA Comment Letter

Electronic Payee Statements

May 14, 2001

CC:M&SP:RU (REG-107186-00)
Room 5226
Internal Revenue Service
POB 7604
Ben Franklin Station
Washington, D.C. 20044

Dear Sir or Madam:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Internal Revenue Service’s (IRS’) temporary and proposed regulations that permit payors required to furnish certain payee statements -- IRS Form W-2, “Wage and Tax Statement,--and Form 1098-E, “Education Loan Statement-- -- the option to do so electronically. As a national trade association, CUNA represents more than 90 percent of the nation's over 10,600 state and federal credit unions.

CUNA generally supports the use of electronic technology to improve the efficiency of regulatory compliance. The National Credit Union Administration, the federal regulator of credit unions, has issued a letter to credit unions encouraging them to take advantage of the Internet in their operations. As credit unions gear up to provide regulatory disclosures electronically, it makes sense for them to also furnish W-2s and 1098-Es electronically. CUNA also believes it would be beneficial if the authority were expanded to allow organizations to use electronic means to furnish other common payee statements – namely, IRS Form 1099-INT, “Interest Income Statement,-- and Form 1099-R, “Distribution From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.-- electronically.

These temporary and proposed regulations would assist credit unions in eliminating paperwork and lowering their transaction costs. In particular, the postage savings would be significant for large credit union payors. In addition, offering electronic transaction alternatives is consistent with the purpose of the Electronic Signatures in Global and National Commerce (E-SIGN) Act. CUNA commends the flexibility of these IRS regulations. The voluntary nature of the regulations, which do not require payors to furnish those payee forms if they wish to continue to provide paper statements, allows smaller credit unions to implement electronic delivery when they feel it makes the most business sense for them.

CUNA, however, does have one main concern with the regulations as they are currently written. Specifically, the data storage requirement that the information be available for ten months (until October 15) is a long period to maintain the information on the credit union’s website. Furthermore, this could be expensive for credit unions that use third party providers. CUNA suggests that statement preparers be given the option of storing the information in an electronically accessible format for a shorter period, such as through August 15, with the condition that statements be provided upon request by other means until October 15.

For the near future, most credit unions will likely focus on delivery using website technology instead of other forms of electronic technology, such as e-mail, to furnish statements to their members and employees. At this stage of technological development, it is difficult to ensure the security and privacy of payee statements sent via e-mail.-- That format may be different from the attachment with instructions. As technology progresses, credit unions would like the option to select the electronic delivery means based on their evaluation effectiveness and ability of the various electronic technologies to support secure information sharing and which technologies make sense for their institution. For payee statements sent electronically using technology other than website technology, guidance similar to that in these regulations – the requirement that the statement must be posted by January 31 of the calendar year following the year to which the statement applies – would be sufficient. CUNA recommends that the regulations emphasize that if an institution posts the statement on its website on or before January 31 it is considered timely, regardless of when the recipient accesses it.

While CUNA is sensitive to the confidentiality needs of credit union members and employees, CUNA urges the IRS not to issue specific standards that would result in significant barriers to credit unions providing electronic payee statements. CUNA believes that any confidentiality standards should be broad enough to allow organizations to use their best business judgment to balance access and security based on sound business practice. It is also important that confidentiality standards are technology-neutral so that organizations can use technology that best fits with their technology strategy as well as take advantage of new technologies that are both more efficient in terms of download time as well as more secure as they become available.

Thank you for the opportunity to comment on the proposed and temporary regulations concerning electronic delivery of payee statements. If you have any questions about our comments, please contact Mary Dunn or Catherine Orr at (202) 682-4200.


Mary Mitchell Dunn
Associate General Counsel

Catherine A. Orr
Senior Regulatory Counsel