Ways and Means Advances Legislative Package to Retool IRS (1)

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By Allyson Versprille and Robert Lee

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.

Not All Warm and Fuzzy

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.”

Moving Forward

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.

List of Bills

Here are the 12 bills approved by Ways and Means on April 11:

  • H.R. 5444: The Taxpayer First Act would establish a new IRS Independent Office of Appeals. The bill also proposes a number of “organizational modernization” measures, including eliminating the IRS Oversight Board and reforms to the Office of the National Taxpayer Advocate. The bill also would require the IRS to bring Congress a reorganization plan by Sept. 30, 2020.
  • H.R. 5445: The 21st Century IRS Act would require the Treasury secretary to work with public and private sector partners to address identity theft refund fraud. The bill would also require the IRS to appoint an IRS chief information officer who would be responsible for the development and maintenance of information technology.
  • H.R. 2901: The Volunteer Income Tax Assistance Permanence Act of 2017 would codify the Volunteer Income Tax Assistance program—created by the IRS in 1969 to provide matching grants to fund tax return preparation and filing services for low-income taxpayers—and allow the Treasury secretary to allocate up to $30 million in matching grants for low-income tax return preparation programs.
  • H.R. 5440: The bill would require the IRS to provide a 90-day notice in advance of closing a taxpayer assistance center and provide a report to Congress explaining the reasons for a proposed closure.
  • H.R. 5438: The bill would allow Treasury Department officials and employees to refer taxpayers to qualified low-income taxpayer clinics for advice and assistance.
  • H.R. 5446: The bill would amend the tax code rules for streamlined seizure and sale of perishable goods.
  • H.R. 5437: The bill would require the IRS to establish a program within five years to provide an identity protection personal identification number to any taxpayer. The proposal is modeled after a pilot program launched by the agency in 2011, which allowed the IRS to issue personal identification numbers to verify taxpayer identities on filed tax returns.
  • H.R. 5439: The bill would require the IRS to create a centralized team of specially trained employees to manage taxpayer identity theft cases to completion.
  • H.R. 5443: The bill would require all tax-exempt organizations to electronically file their Forms 990, Return of Organization Exempt From Tax, or Forms 8872, Political Organization Report of Contributions and Expenditures, and would instruct the IRS to make the information on the returns publicly available. Under current law, only exempt organizations that file at least 250 returns in a given tax year and have $10 million or more in total assets are required to file Forms 990 electronically. The draft bill text also would provide “transition relief” for “certain small organizations,” allowing the IRS to delay this requirement for those organizations for up to two years.
  • H.R. 4403: The Moving Americans Privacy Protection Act would amend the Tariff Act of 1930 directing the U.S. Customs and Border Protection agency to ensure Social Security numbers, passport numbers, and residential addresses are removed from the manifest of vessels or aircraft before being publicly disclosed.
  • H.R. 1512: The Social Security Child Protection Act of 2017 would amend Title II of the Social Security Act and allow new Social Security numbers to be reissued to young children “in cases where confidentiality has been compromised” due to identity theft.
  • H.R. 5192: The Protecting Children from Identity Theft Act would authorize the commissioner of Social Security to provide fraud protection data, including the names, birthdates, and Social Security numbers of individuals, to certain financial institutions or service providers for the purposes of addressing identity fraud.

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