Tax Gap: Proposals in the 110th Congress to Require Brokers to Report Basis on Publicly Traded Securities (CRS Report for Congress)
Premium Purchase PDF for $24.95 (16 pages)
add to cart or
subscribe for unlimited access
Pro Premium subscribers have free access to our full library of CRS reports.
Subscribe today, or
request a demo to learn more.
| Release Date |
Revised Oct. 8, 2008 |
| Report Number |
RL34216 |
| Report Type |
Report |
| Authors |
James M. Bickley, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
-
Premium Nov. 9, 2007 (14 pages, $24.95)
add
|
Summary:
Recent and projected large deficits and the need for revenue to offset spending or tax reduction proposals generated congressional and executive branch interest in reducing the tax gap. Proposals in the 110th Congress to require brokers to report adjusted basis on publicly traded securities sold by individuals are examined in this report because this is a source of revenue. Basis is the amount a taxpayer uses to determine the cost of acquiring an asset, which is used to determine the asset's capital gain or loss. In order to calculate the appropriate "adjusted basis" for tax calculations the original cost may have to be altered.
Proposals to report basis were included in the President's FY2008 Budget and FY2009 Budget and are initially discussed in this report. Then the Senate Finance Committee's draft proposal to report basis on publicly traded securities, which was released on May 25, 2007, is examined. On June 29, 2007, the committee held a hearing on this proposal. Written comments of representatives of private financial associations are examined and legislative implications presented. Lastly, relevant legislation in the 110th Congress is described, including P.L. 110-343.
The President's FY2009 Budget proposes that information reporting to the IRS be expanded to include requiring basis reporting on security sales. The Senate Finance Committee drafted a proposal similar to the proposal in the President's Budget that brokers be required to report basis to the IRS and customers for publicly traded securities. Witnesses at a committee hearing on reporting basis included representatives from five financial associations. The written comments of these witnesses provide useful insights. Numerous implications for drafting legislation to report basis may be derived from their testimony.
Two bills had been introduced in the 110th Congress that would require broker reporting of a customer's adjusted basis in securities transactions. These bills, H.R. 878 and S. 601, have almost the exact same wording and the same title, the Simplification Through Additional Reporting Tax Act of 2007. Nine other bills have been introduced in the 110th Congress that include a section to raise revenue by requiring broker reporting of customers' basis to the Internal Revenue Service on the sale of publicly traded securities. These bills are H.R. 2147 (Healthy Kids Act of 2007), H.R. 3395 (Responsible Fatherhood and Healthy Families Act of 2007), H.R. 3970 (Tax Reduction and Reform Act of 2007), H.R. 5720 (Housing Assistance Tax Act of 2008), S. 1111 (Fair Flat Tax Act of 2007), S. 1626 (Responsible Fatherhood and Healthy Families Act of 2007), S. 2362 (Property Tax Fairness Act of 2007), S. 3335 (The Jobs, Energy, Families, and Disaster Relief Act of 2008), and HR. 1424 (Emergency Economic Stabilization Act of 2008). On October 3, 2008, President George W. Bush signed H.R. 1424 into law (P.L. 110-343), which included Section 403, "Broker Reporting of Customer's Basis in Securities Transactions."
This report will not be updated.
