U.S. Senator Thom Tillis (R-NC) and his colleagues recently introduced 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 should never, under any circumstance, target an individual taxpayer or business based on their legitimate business transactions, including firearm or ammunition sales,” said Senator Tillis. “Law-abiding North Carolinians should be able to exercise their constitutionally protected Second Amendment rights without fear of their government auditing them unnecessarily. I am proud to introduce this legislation with my colleagues to protect North Carolina businesses and ensure these audits never happen.”
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.
Read the full bill here.
