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The House Ways and Means Committee voted unanimously to advance a package of 12 bills aimed at retooling the IRS.
The bipartisan package, released April 10 by Oversight Subcommittee Chairman Lynn Jenkins (R-Kan.) and ranking member John Lewis (D-Ga.), would create a new independent Internal Revenue Service Office of Appeals and establish an income threshold for referring taxpayers to the agency’s controversial private debt collection program. Provisions include measures to enhance cybersecurity and prevent identity fraud, modernize the agency’s information technology systems, and improve customer service.
“It’s been 20 years since Congress and the Ways & Means Committee last considered major legislation to overhaul the IRS,” Committee Chairman Kevin Brady (R-Texas) said April 11 in his opening statement at the markup of the legislation. “During that time much has changed, and the IRS must change with it.”
Jenkins told Bloomberg Tax that the full House would vote on the package the week of April 16.
Unlike the IRS Restructuring and Reform Act of 1998, the legislative package wouldn’t require any major shifts in the agency’s organizational structure. The package would, however, require the IRS to send Congress by Sept. 30, 2020, a comprehensive written plan for reorganizing the agency, incorporating priorities laid out by lawmakers—including emphasis on taxpayer services and streamlining of the IRS’s structure.
Brady told reporters April 10 that this long-term approach stemmed partially from Congress’s desire to give the IRS a buffer between implementing the 2017 tax act (Pub. L. No. 115-97) and considering a major overhaul of its structure.
Brady offered 12 amendments—one for each bill—that were primarily administrative and clarifying in nature, all of which were adopted.
While lawmakers on both sides of the aisle lauded the bipartisan process behind the drafting of the legislation, some warned that Congress’s job in fixing the IRS is far from over.
Rep. Earl Blumenauer (D-Ore.) said he hopes that in this “new era of cooperation” Republicans and Democrats can now agree to give the IRS, which has faced massive budget cuts in recent years, more resources. “I appreciate the warm words that are talked about customer service, but I have been in IRS offices and had members of the staff break into tears because” they don’t have the finances or personnel to meet taxpayers’ needs, he said.
IRS funding has been slashed by more than $900 million since 2010. The agency’s baseline budget was boosted slightly to $11.43 billion for fiscal year 2018 in the recently passed omnibus spending bill—$195.6 million above the fiscal year 2017 enacted level. But that number is still far below the $12.15 billion the agency received in 2010—at a time when it wasn’t implementing the largest tax overhaul since 1986. For fiscal year 2019, President Donald Trump has proposed more cuts, reducing the agency’s base funding to $11.1 billion.
Budget cuts have hurt the IRS’s ability to modernize its information technology systems, Rep. Suzan DelBene (D-Wash.) said. “After hearing from IRS administrators and others over the past couple of years, I think we may be in or approaching the red zone of becoming too broken to fix,” she said. “We need to be making smart investments in IRS technology today before they become increasingly insurmountable and expensive tomorrow.”
Republicans aren’t the only ones responsible for the agency’s reduced budget, Brady told Bloomberg Tax after the markup in response to the Democratic lawmakers’ comments. “President Obama was president and signed those spending bills during that period.”
It’s encouraging to see Democrats and Republicans comes together to advance the legislative package, Brady said, adding that he hopes “with this type of momentum,” the legislation will make it to the finish line.
In an April 11 emailed statement, Edward S. Karl, vice president of taxation at the American Institute of CPAs, called the legislative package “a step in the right direction to redesign and modernize the IRS.” However, lawmakers may want to consider recommendations the AICPA and a coalition of the IRS’s most significant stakeholders made last year that aren’t included in the package, he said.
Brady said the Ways and Means Committee has been meeting with the Senate Finance Committee, specifically with Chairman Orrin G. Hatch (R-Utah), to discuss this effort to rework parts of the IRS. “We expect to have more conversations this week.”
Brady said, to his knowledge, the Senate Finance Committee hasn’t decided how to proceed.
Here are the 12 bills approved by Ways and Means on April 11:
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