Computerworld — Senate legislation to address the housing crisis by helping homeowners who face foreclosure contains a measure that has nothing to do with housing and could harm millions of small merchants, privacy and small-business groups say.

The housing bill calls for credit card companies as well as Internet companies such as eBay Inc., PayPal Inc., Google Inc. and Amazon.com Inc., which electronically process payments for merchants, to track, aggregate and report information to the IRS on the payments they make to merchants. The reporting provision would apply to merchants who earn more than $10,000 and make more than 200 transactions annually.

The provision is tucked away on page 615 of the 631-page housing bill filed last week by Sen. Christopher Dodd (D-Conn.), chairman of the Senate Committee on Banking, Housing and Urban Affairs, and ranking member Sen. Richard Shelby (R-Ala.)

The measure, which is expected to bring in $9.8 billion over 10 years, was included in the housing bill to raise money to offset the costs of implementing the bill by collecting more taxes from merchants. But the process has raised the concerns of privacy groups and small-business organizations over higher risk of identity theft and a greater financial burden on merchants.

Small merchants who use their Social Security numbers as tax identification numbers will have to turn those numbers over to credit card companies as well as to the companies that electronically process their payments, said Ari Schwartz, vice president and chief operating officer for the Center for Democracy and Technology (CDT).

"Today, those companies don't keep merchants' Social Security numbers," he said. "Some credit card companies or banks require them when you set up an account, but the typical course is for them to then set up a merchant identification number and get rid of those Social Security numbers. That storage does not take place today."

But it will take place if the bill is passed, raising the risk of identity theft if the information is misused, Schwartz said. Although the provision will also affect large companies, those companies will not be at risk of identity theft because they typically use a government-issued tax identification number rather than Social Security numbers when they file their taxes.

"That's why the credit card companies don't take it in and store it today, because they have concerns about how it's going to be used internally and when they pass it on to others," Schwartz said. "They're concerned about the liability they have in storing the information."

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