IRS Could Use Cyber Order in Pitch for Budget Increase

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By Colleen Murphy

The Internal Revenue Service may have more ammunition to push for a budget increase if President Donald Trump finalizes an executive order calling for cybersecurity upgrades across government agencies.

The draft order, which Trump initially planned to sign last week, requires agency officials to provide information about their existing infrastructure and plans to update it to a cloud-based system. The director of the Office of Management and Budget, an appointment the Senate hasn’t yet signed off on, would submit a report to the White House on cybersecurity plans at all agencies, according to a copy of the draft obtained by Bloomberg BNA.

The order also makes several mentions of addressing any “unmet budgetary needs” as part of cybersecurity upgrades, which the IRS could use as a jumping-off point in budget talks if the order is signed, practitioners told Bloomberg BNA Feb. 10. Congress has cut the agency’s budget by $900 million since 2010, but previously approved small line-item increases for cybersecurity and identity theft prevention efforts.

“It’s potentially another avenue for once again elevating this issue,” said James R. Gadwood, counsel in the tax department at Miller & Chevalier Chartered in Washington. Gadwood is a member of the American Bar Association Section of Taxation’s Administrative Practice Committee.

The IRS declined to comment. The White House didn’t return a request for comment. Many similar draft orders have been floating around since Trump’s inauguration, although there isn’t a public timeline as to when—or if—they will be signed. The administration has reportedly considered about 200 such documents, some of which were submitted by outside groups.

The Pitch

The agency has been laser-focused on making cybersecurity improvements and stopping fraud over the last several years, and IRS Commissioner John Koskinen has repeatedly said that a larger budget would make it easier for the agency to make progress in those areas. The IRS created a partnership with industry groups and state revenue offices to track fraud trends, and regularly responds to reports from its watchdog on areas where improvement is necessary.

The IRS could use the mandates included in the order to make a point, noting “we stand ready, willing and able to do so, but we just don’t have the budget,” Gadwood said.

That push could have a high-profile supporter: Steven Mnuchin, Trump’s pick for Treasury secretary, highlighted the importance of proper IRS staffing and data security during his Senate Finance Committee nomination hearing. The Senate is expected to vote on Mnuchin next week.

Potential Hiccups

The order is likely a response to cybersecurity “lapses” throughout the government, such as the data breach at the Office of Personnel Management, John Breyault of the National Consumers League told Bloomberg BNA. Breyault is the NCL’s vice president of public policy, telecommunications and fraud, and one of the newest members of the IRS’s Electronic Tax Administration Advisory Committee.

The Trump administration could face some hurdles if it decides to move forward on the order, which may contradict an existing freeze on hiring across the government, Breyault said. Because of the complexity of cybersecurity issues, top-tier talent is needed—and recruiting those people requires paying them competitively, he said.

Trump signed an executive order Jan. 23 placing a moratorium on federal hiring—barring the creation of new positions or filling of existing vacancies—and fulfilling one of his main campaign pledges.

“It’s going to be hard to square a philosophy of reducing spending at government agencies with the need to invest in and continue investing in cybersecurity,” Breyault said.

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

For More Information

Text of the draft executive order is at http://src.bna.com/l9R.

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