WASHINGTON — U.S. Sen. John Thune (R-S.D.), ranking member of the Subcommittee on Taxation and Internal Revenue Service (IRS) Oversight, today led his colleagues in introducing the Merchant Category Code (MCC) Neutrality Act, legislation that would prohibit the IRS from auditing taxpayers based primarily on the MCC used by their business. The bill would also require the IRS to issue a public report with an annual total of audits initiated for each MCC, and it would serve as an additional check against the Biden administration’s $80 billion in new funding for the agency.
“The IRS shouldn’t have free rein to use audits to inappropriately scrutinize or intimidate taxpayers due to the nature of their lawful business, including licensed firearm dealers,” said Thune. “I have been sounding the alarm on the lack of transparency and accountability from the Biden administration’s IRS for months now, which is why I’m proud to introduce this legislation that would provide much-needed oversight against potential targeted audits.”
“The IRS should never again be weaponized for political purposes to target politically-disfavored industries,” said Lawrence G. Keane, senior vice president and general counsel at NSSF and the Firearm Industry Trade Association. “We’ve already seen the devastating impacts when nonpartisan federal agencies are co-opted to advance political agendas, specifically to attack constitutionally-protected rights. Senator Thune’s leadership in introducing the Merchant Category Code Neutrality Act would ensure that private and lawful businesses would not be targeted for unwarranted IRS audits and a repeat of the illegal Operation Choke Point scheme that manipulated governmental powers to suppress free exercise of Second Amendment rights. The firearm and ammunition industry commends Senator Thune and colleagues for their steadfast leadership to protect industries from unjustified attacks by political special interests.”
“Using financial transaction information to surveil or discriminate against gun owners is just the latest attempt by corporate ideologues to chip away at the individual right to keep and bear arms,” said Randy Kozuch, interim executive director of the National Rifle Association-Institute for Legislative Action. “The NRA thanks Senator Thune and colleagues for their leadership in protecting the rights of law-abiding Americans and lawful industries across the nation.”
The legislation is cosponsored by U.S. Sens. Mike Crapo (R-Idaho), ranking member of the Senate Finance Committee, Marsha Blackburn (R-Tenn.), Dr. Bill Cassidy (R-La.), Steve Daines (R-Mont.), James Lankford (R-Okla.), and Thom Tillis (R-N.C.).
The MCC Neutrality Act responds to the recent creation of an MCC for firearm and ammunition stores by the Geneva-based International Organization for Standardization that would specifically categorize transactions made at firearm and ammunition retailers. MCCs enable payment processors to track purchases for functions like travel points and multipliers for dining or fuel without detailing the specific items purchased, but the creation of this new MCC was specifically sought with the intent to pressure lawful firearm retailers.
MCCs are submitted on IRS Form 1099-K, Payment Card, and Third-Party Network Transactions to verify transaction data, creating a potential avenue for the IRS to initiate targeted audits against certain MCCs. While leading payment processors have suspended implementation of the new MCC for firearm and ammunition stores, this legislation would protect any merchant or business from targeted audits primarily based on MCC designation.
Thune has been sounding the alarm on the IRS’s agenda-driven enforcement for years, following the 2015 bipartisan investigation into the agency’s treatment of certain conservative organizations that applied for tax-exempt status during the years 2010 to 2013. Thune also introduced the IRS Funding Accountability Act, bicameral legislation that would give Congress a direct say in how the IRS uses the unprecedented $80 billion in new funding, hold the agency more accountable, and provide more transparency for the American people. Additional background information on the bill can be found here.
