Proposals for Reporting of Real Estate Taxes Paid and Information on Refinancings

On October 19, 2006, Senators Chuck Grassley (R-IA), then Chairman of the Senate Finance Committee, and Max Baucus (D-MT), the Ranking Member, released a set of discussion options for closing the "tax gap," described as the shortfall between the amount of taxes paid and what is actually owed by taxpayers. The options, described in a report entitled "Additional Options to Improve Tax Compliance," were developed by the staff of the Joint Committee on Taxation (JCT) and include proposals to require reporting to the IRS and taxpayers of: the amount of real estate taxes paid out of borrowers' escrow accounts during the year; and, information to distinguish mortgage interest paid on refinancings.

MBA has recommended that the proposals not be adopted because mortgage lenders' systems and procedures are not designed to capture the required information and because, in some circumstances, they would be unable to obtain the required information. These proposed reporting requirements would impose significant administrative and systems burdens on mortgage lenders for little, if any, benefit in terms of increased tax compliance.