Overview
Title
To amend the Internal Revenue Code of 1986 to reinstate the exception for de minimis payments by third party settlement organizations with respect to returns relating to payments made in settlement of payment card and third party network transactions, as in effect prior to the enactment of the American Rescue Plan Act, and for other purposes.
ELI5 AI
S. 1375 is a bill that wants to make it so people and companies using things like credit cards and PayPal only have to tell the government about their payments if they are over $20,000 for the year or if they make more than 200 payments. It's like saying, "Only tell us if it's a lot of money or a lot of buying and selling!"
Summary AI
S. 1375 seeks to amend the Internal Revenue Code to bring back an earlier exception for small payments made through third party settlement organizations, like the ones used in credit card and online payment networks, that existed before the American Rescue Plan Act. Specifically, it will only require reporting these transactions if they exceed $20,000 or 200 transactions within a year. The bill, titled the "Stop the Nosy Obsession with Online Payments Act of 2025" or "SNOOP Act of 2025", aims to apply these rules to backup withholding as well, starting for transactions after December 31, 2024.
Published
Keywords AI
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Bill Statistics
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AnalysisAI
General Summary of the Bill
The proposed legislation, titled the "Stop the Nosy Obsession with Online Payments Act of 2025" or simply the "SNOOP Act of 2025," aims to modify how certain financial transactions are reported by third-party settlement organizations. Specifically, it seeks to revert to previous standards regarding the reporting of de minimis (minor) payments. Under these revisions, such organizations would only be required to report transactions exceeding $20,000 and involving more than 200 transactions annually. These standards represent a reinstatement of the thresholds that existed prior to the changes enacted by the American Rescue Plan Act.
Summary of Significant Issues
Several significant issues emerge from the proposed changes. Firstly, the bill proposes high thresholds ($20,000 and 200 transactions) for reporting, which might exempt larger-than-anticipated sums from being reported. This can impact tax compliance and revenue collection. Additionally, the informal language used in the bill's title may not convey the gravity expected of legislative texts, potentially undermining its perceived formality.
Association with obscure sections of the Internal Revenue Code without adequate clarification could provide challenges for individuals and organizations trying to understand the full implications of the bill. There are also concerns regarding the applicability of reverting to pre-American Rescue Plan Act standards in an evolving economic digital landscape.
Impact on the Public and Stakeholders
Broad Public Impact
The bill could have mixed outcomes for the general public. On the one hand, small businesses and individuals engaging in fewer transactions might benefit from reduced paperwork and compliance obligations, potentially lowering their administrative burden. On the other hand, reduced reporting might affect overall tax revenue collection, which could have wider implications for public services funded by such revenues.
Impact on Specific Stakeholders
For third-party settlement organizations such as online payment facilitators, the raised reporting threshold would likely ease the administrative load, allowing them to operate with simplified reporting requirements for smaller-scale payments. However, this change could also create opportunities for larger sums to be transacted without oversight, posing risks to tax authorities responsible for enforcement and collections.
Compliance professionals might find the changes difficult to navigate due to the reliance on historical standards and undefined transaction categories. The potential for ambiguity and complexity in understanding reporting obligations could lead to broader economic uncertainties for businesses engaged with third-party transactions.
Ultimately, while the bill could simplify processes for some, it could simultaneously obscure financial activities that need systematic tracking, raising concerns among regulatory bodies about the adequacy of oversight in current digital payment environments.
Financial Assessment
The bill S. 1375, known as the "SNOOP Act of 2025," aims to amend the Internal Revenue Code to reinstate an exception for de minimis payments through third-party settlement organizations. This exception specifically addresses the reporting requirements for transactions within the realm of payment cards and online payment networks.
Financial Thresholds
The key financial reference in the bill concerns the exceptions to reporting requirements for third-party settlement organizations. The bill specifies that these organizations need only report transactions if:
- The aggregate number of those transactions exceeds 200 per calendar year, and
- The total value of these transactions exceeds $20,000 per calendar year.
These thresholds are significant because they determine the point at which payments must be reported to the IRS. Prior to the American Rescue Plan Act, these were the benchmarks used, and the bill seeks to return to them.
Analysis of Financial Implications
Potential Underreporting: One of the major issues with these financial thresholds is the risk of substantial underreporting. By setting the bar at $20,000 and 200 transactions, the bill might allow considerable financial activities to remain unreported. This poses a potential challenge to tax compliance and could affect national revenue collection efforts. The adequacy of these thresholds in today's digital payment ecosystem could be questioned, as e-commerce and online transactions have significantly increased since these thresholds were initially adopted.
Complex Compliance Requirements: The bill examines the application of these thresholds to backup withholding. This requires precise understanding and adherence to specific sections of the Internal Revenue Code (e.g., 6050W(e)(1) and 6050W(e)(2)). The specificity and technicality might increase the administrative burden on businesses, as they need to monitor their transaction numbers and values closely to comply with reporting obligations.
Lack of Rationale for Thresholds: The bill does not provide any insight into why these particular thresholds ($20,000 and 200 transactions) were chosen, nor does it address whether these numbers reflect the current state of digital payment systems. This absence of context might lead to questions regarding their suitability, particularly given the rapid evolution of online and digital payment methods.
In conclusion, the financial aspects of the bill primarily center on the reporting thresholds for transactions by third-party settlement organizations. While intended to streamline and define reporting requirements, these thresholds might inadvertently create loopholes for underreporting and present challenges related to compliance and adaptation to modern-day financial practices.
Issues
The amendment to reinstate the exception for de minimis payments in Section 2 might exempt significant financial activities from reporting due to the high threshold ($20,000 and 200 transactions), potentially allowing considerable sums to go unreported. This could lead to consequences in tax compliance and revenue collection, affecting public finance management.
The use of informal language in Section 1 ('Stop the Nosy Obsession with Online Payments Act of 2025' or 'SNOOP Act of 2025') may not be appropriate for a legislative document and might undermine the formal nature of legislative processes.
Section 3 introduces complexity in understanding the compliance requirements for backup withholding due to references to specific sections of the Internal Revenue Code (e.g., 6050W(e)(1) and 6050W(e)(2)), which might not be readily accessible or comprehensible to all stakeholders.
There is a lack of explanation or context in Section 2 on why the specific thresholds ($20,000 and 200 transactions) were chosen, raising questions about the appropriateness of these thresholds in the context of contemporary financial and digital economy practices.
The historical reliance in Sections 2 and 3 on pre-American Rescue Plan Act standards may not adequately address current digital payment ecosystems, potentially resulting in outdated or ineffective regulatory practices.
Section 3 does not define what constitutes a 'third party network transaction,' leading to potential ambiguity in implementation and compliance.
Section 3's amendments could introduce administrative burdens for entities due to the specificity of the transaction thresholds, which may complicate financial ledger management and compliance obligations.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section specifies the short title for the proposed legislation, which may be referred to as the "Stop the Nosy Obsession with Online Payments Act of 2025" or simply the "SNOOP Act of 2025".
2. Reinstatement of exception for de minimis payments as in effect prior to enactment of American Rescue Plan Act Read Opens in new tab
Summary AI
The section reinstates a previous rule regarding small payments through third party settlement organizations, requiring them to report transactions only if they exceed $20,000 and involve more than 200 transactions. This change is effective as if it had been part of the American Rescue Plan Act from the beginning.
Money References
- In general.—Section 6050W(e) of the Internal Revenue Code of 1986 is amended to read as follows: “(e) Exception for de minimis payments by third party settlement organizations.—A third party settlement organization shall be required to report any information under subsection (a) with respect to third party network transactions of any participating payee only if— “(1) the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions exceeds $20,000, and “(2) the aggregate number of such transactions exceeds 200.”. (b) Effective date.—The amendment made by this section shall take effect as if included in section 9674(a) of the American Rescue Plan Act.
3. Application of de minimis rule for third party network transactions to backup withholding Read Opens in new tab
Summary AI
The section updates the Internal Revenue Code to specify that payments from third-party network transactions are considered reportable only if they exceed certain thresholds in both the number of transactions and the total dollar amount in a calendar year. This change will take effect for transactions occurring after December 31, 2024, unless the payments were already deemed reportable in the previous year.
Money References
- In general.—Section 3406(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: “(8) OTHER REPORTABLE PAYMENTS INCLUDE PAYMENTS IN SETTLEMENT OF THIRD PARTY NETWORK TRANSACTIONS ONLY WHERE AGGREGATE TRANSACTIONS EXCEED REPORTING THRESHOLD FOR THE CALENDAR YEAR.— “(A) IN GENERAL.—Any payment in settlement of a third party network transaction required to be shown on a return required under section 6050W which is made during any calendar year shall be treated as a reportable payment only if— “(i) the aggregate number of transactions with respect to the participating payee during such calendar year exceeds the number of transactions specified in section 6050W(e)(2), and “(ii) the aggregate amount of transactions with respect to the participating payee during such calendar year exceeds the dollar amount specified in section 6050W(e)(1) at the time of such payment.