October 1, 2019Updated January 14, 2020
Internal Revenue Service Appropriations, FY2020
Overview
The Internal Revenue Service (IRS) has two primary
statutory responsibilities: (1) to collect most of the revenue
required to fund the federal government and a variety of
discretionary agencies and
programs, and (2) to enforce taxpayer
compliance with
federal tax laws and regulations. In
FY2018, the agency
processed 250.3 million tax and
information returns (not
including Form 1099 returns) and
collected $3.5 trillion in
gross revenue.
Appropriations provide the vast share of operating funds for
the IRS. In FY2018, 93% ($11.4 billion) of its budget came
from appropriations. The remaining 7% ($850 million)
stemmed from several sources, over which the IRS has
unlimited authority regarding the use of the funds:
reimbursements from other government agencies for
services rendered by the IRS, offsetting collections, user
fees, and carryovers of unobligated balances from previous
years.
Historically, IRS’s appropriated funds have been distributed
among four accounts: taxpayer services (TS), enforcement,
operations support (OS), and business systems
modernization (BSM). As Table 1 shows, enforcement
represented 43% of the $11.303 billion in enacted
appropriations for FY2019, followed by OS (33%), TS
(22%), and BSM (1%). Congress included another $77
million in FY2019 to allow the IRS to continue
implementing the many changes to the federal tax code
made in 2017 by P.L. 115-97.
The Trump Administration is asking forrequested $11.472 billion in
appropriations for the IRS in FY2020, or $169 million more
than the enacted amount for FY2019. This increase is the
represented the net result of cost savings from several
efficiency measures
and the discontinuation of the $77
million in funding for
implementing the provisions of P.L.
115-97, and added
spending of $180 million for the BSM
program, $34 million
for enhanced data analytics, $22.5
million for identity theft
prevention, and $107 million for cybersecurity
cybersecurity enhancement and maintaining and upgrading
IRS’s
information systems.
In addition, the Administration is proposing additional
funding requested additional funding
in FY2020 for enforcement activities ($200
million) and
operations support ($162 million) through a
program program
integrity cap adjustment under Section 251(b)(2)
of the
Balanced Budget and Emergency Deficit Control Act
of of
1985 (BBEDCA; P.L. 99-177). Congress would have had to
approve the adjustments before the associated funds could
be spent. The added funds, along with proposed cap
adjustments in future years, would behave been used to pay for
for “continuing investments in expanding and improving the
the effectiveness and efficiency of the IRS’s overall tax
enforcement program.” According to the IRS budget
documentsrequest, these investments would result in an estimated
gross have resulted in a gross
revenue gain of $47.1 billion over 10 years, at a total
cost of
$14.5 billion, yielding a net revenue gain of $32.6
billion.
This estimate does reflectdid not account for the revenue effects of
added enforcement initiatives on taxpayer noncompliance.
At the end of 2019, the Consolidated Appropriations Act,
2020 (P.L. 116-93) was enacted. It appropriated $11.511
billion for the IRS, which was $39 million (0.3%) more
than the budget request and $208 million (1.8%) more than
the enacted amount for FY2019.
The same act mandated a 3.1% pay increase for federal
civilian workers. Given that two-thirds of the IRS’s budget
goes to employee compensation, the pay increase might
effectively absorb much of the 1.8% increase in IRS
appropriations in FY2020.
Table 1. IRS’s FY2019 and FY2020 Appropriations,
Excluding Nonappropriated Funds
(millions of dollars)
FY2020
H.R.
3351a
FY2019
Enacted
FY2020
Request
FY2020
Enacted
$2,492
$2,402
$2,559
$2,482
4,860
4,705c
4,957d
5,060
3,724
4,075e
3,794f
3,722512
Enforcement
4,860
4,705
5,010
Operations
Support
3,724
4,075
3,809
Business
Systems
Modernization
150
290
290
150180
Administrative
Provision
77
—
—
—
$11,303
$11,472
$12,000
$11,41411,511
Account
Taxpayer
Services
Enforcement
Operations
Support
Total
FY2020
S. 2524b
Total
Sources: IRS’s FY2020 Budget Justification and House
Appropriations Committee report on H.R. 3351 (H.Rept. 116-122)
and Senate Appropriations Committee report on S. 2524 (S.Rept.
116-111).
a. As passed by the House.
b. As reported by the Senate Appropriations Committee.
c. Excludes Program Integrity Cap increase of $199.9 million.
d. Excludes Program Integrity Cap increase of $200 million.
e. Excludes Program Integrity Cap increase of $162 million.
f.
Excludes Program Integrity Cap increase of $200 million.Consolidated
Appropriations Act, 2020 (P.L. 116-93).
Individual Appropriations Accounts
Taxpayer Services
The Administration’s FY2020 budget request includesincluded
$2.402 billion for TS. Of the requested amount, $8.9
million would bewas set aside for the Tax Counseling for the
Elderly Elderly
Program (TCEP),; $12.0 million for low-income
taxpayer clinic grants, $15.0 taxpayer
clinic (LITC) grants; $15 million for matching grants
under under
the Community Volunteer Income Tax Assistance
(VITA)
program (available until September 30, 2021),; and
$206 million for the Taxpayer Advocate Service (TAS),
with $5 million designated for cases involving taxpayer
identity theft.
https://crsreports.congress.gov
Internal Revenue Service Appropriations, FY2020
Under H.R. 3351, as passed by the House, the IRS would
receive $2.559 billion in appropriations for TS in FY2020,
or $157 million more than the budget request. Of the
recommended amount, $12 million would go to the TCEP,
$13 million to low-income taxpayer clinic grants, $25.0
million to VITA matching grants (available until September
30, 2021), and $210 million for TAS, with $1 million
designated for cases involving identity theft and returns
filed by deceased children.
S. 2524, as reported, would give the IRS $2.482 billion in
appropriations for TS in FY2020, or $79 million more than
the budget request. Of the recommended amount, $9.9
million would be set aside for the TCEP, $12 million for
low-income taxpayer clinic grants, $25 million for VITA
matching grants (available until September 30, 2021), and
$207 million for TAS.
Enforcement
Under the Administration’s budget request, the IRS would
receive $4.705 billion in appropriations for enforcement
activities in FY2020, or $155 million less than the enacted
amount for FY2019. Of that amount, $60.3 million would
be set aside for the Interagency Crime and Drug
Enforcement program. Another $200 million for reducing
the federal tax gap would come from a requested program
integrity cap increase under the BBEDCA in FY2020.
H.R. 3351 would give the IRS $4.957 billion in
appropriations for enforcement in FY2020, or $252 million
more than the budget request. Of that amount, $60.3 million
would go to the Interagency Crime and Drug Enforcement
program. It also includes another $200 million for reducing
the federal tax gap, as a program integrity cap increase. The
gap refers to the difference between the total income,
employment, excise, gift, and estate taxes owed in a year
and the total amount of those taxes paid in full and on time.
According to the latest estimate from the IRS, the gross
federal tax gap averaged $441 billion per year from 2011 to
2013; late payments and IRS enforcement actions lowered
the gap to an annual average of $381 billion.
S. 2524 would provide the IRS with $5.060 billion in
appropriations for enforcement activities in FY2020, or
$155 million more than the budget request (including the
proposed program integrity cap increase). Of the
recommended funding, $635 million would be designated
for the IRS’s Criminal Investigation Division. The bill does
not call for a program integrity cap increase.
Operations Support
The Administration is asking for $4.075 billion in
appropriations for OS in FY2020, or $351 million more
than the enacted amount for FY2019. Of the requested
amount, $250 million would be available for use through
the end of FY2021. The budget request also calls for a
program integrity cap increase of $162 million to address
the federal tax gap through the OS account
H.R. 3351 would provide $3.794 billion in appropriations
for OS in FY2020, or $281 million less than the budget
request. It would also give the IRS another $200 million in
funding via OS to address the federal tax gap through a
program integrity cap increase.
S. 2524 recommends $3.722 billion in appropriations for
OS in FY2020, or $515 million less than the budget request
(including the proposed program integrity cap increase).
Business Systems Modernization
Under the Administration’s budget request, the BSM
program would receive $290 million in appropriations for
FY2020, or $140 million more than the enacted amount for
FY2019. The requested funds would be available for
obligation through the end of FY2022.
H.R. 3351 also recommends that the IRS receive $290
million in appropriations for BSM in FY2020.
S. 2524 would limit appropriations for BSM in FY2020 to
the same amount that was enacted in FY2019: $150 million.
Administrative Provisions
The budget request and the House and Senate FY2020
appropriations bills for the IRS contain a number of
administrative provisions (or policy riders) that provide
additional guidance to the agency on how it should use its
appropriated funds. Most of these provisions do not change
from year to year and appear to enjoy bipartisan backing.
They address issues such as training programs for IRS
employees on taxpayer rights; the protection of taxpayer
information; improving toll-free phone service for
taxpayers; awarding employee bonuses; and targeting
individuals because of their ideological beliefs.
The budget request includes three new provisions. Two of
them (§§108 and 109) would restore “streamlined critical
pay authority” for the IRS through the end of FY2023. This
authority, which lapsed in 2013, would enable the IRS to
hire up to 40 persons with needed information technology
skills for up to four years at a pay rate in excess of the
federal General Schedule pay scale for career employees. A
third provision (§110) would allow the IRS to reallocate up
to $10 million in appropriations to meet changing priorities,
without prior congressional approval.
Section 111 of H.R. 3351 would restore critical pay
authority to the IRS through the end of FY2023.
S. 2524 contains no new provisions affecting the IRS, but
Section 111 would prohibit the IRS from using appropriated
funds to create prefilled (or prepopulated) tax returns for
individuals with relatively uncomplicated tax situations.
H.R. 3351 and the budget request do not contain a similar
provision. A key issue behind the ban is the ability of the
IRS to provide free direct online tax filing that does not
conflict with the agency’s ongoing Free File program.
There is disagreement among Members of Congress over
whether or not to permanently extend the program and its
prohibition on the IRS offering prepopulated returns and
free direct online filing to all taxpayers
million for the Taxpayer Advocate Service (TAS), of which
https://crsreports.congress.gov
Internal Revenue Service Appropriations, FY2020
$5 million was designated for cases involving refund fraud
tied to taxpayer identity theft.
Under the Consolidated Appropriations Act, 2020 (P.L.
116-93), the IRS will receive $2.512 billion for TS, or $20
million more than the enacted amount for FY2019. Of that
amount, $11 million is to be used for the TCEP, $12 million
for LITC grants, $25 million for VITA matching grants
(available until the end of FY2021), and $209.0 million for
the TAS ($5.5 million of which is for casework on refund
fraud tied to identity theft.).
Enforcement
The Administration requested $4.705 billion in
appropriations for IRS enforcement activities in FY2020, or
$155 million less than the enacted amount for FY2019. Of
that amount, $60.3 million was set aside for the Interagency
Crime and Drug Enforcement program (ICDEP). Another
$200 million, for reducing the federal tax gap, would have
come from a requested program integrity cap increase under
the BBEDCA.
P.L. 116-93 provides the IRS with $5.010 billion in
appropriated funds for enforcement in FY2020, or $150
million more than the enacted amount for FY2019. None of
the funding is tied to a program integrity cap adjustment. Of
that amount, $250.0 million is to remain available until the
end of FY2021; $60.257 million is set aside for ICDEP; and
$15.0 million is for the acquisition of “investigative
technology” by the IRS’s Criminal Investigation Division
(in addition to any funding it receives under the OS
appropriations account).
Operations Support
The Administration asked for $4.075 billion in
appropriations for OS in FY2020, or $351 million more
than the enacted amount for FY2019. Of the requested
amount, $250 million would have been available for
obligation through the end of FY2021. The budget request
also called for a program integrity cap increase of $162
million for the OS account to reduce the federal tax gap.
The Consolidated Appropriations Act, 2020, provides
$3.809 billion in appropriated funds for FY2020, or $85
million more than the enacted amount for FY2019. None of
the funding comes from a program integrity cap adjustment.
Of that amount, $250 million is available for obligation
until the end of FY2021; $10 million is set aside for
equipment and the construction, repair, and renovation of
facilities; $1 million is designated for research through the
end of FY2022; and $10 million is for the IRS to modify
the federal System for Award Management to allow entities
registering or renewing their registration with the system to
request an electronic verification of whether they have
“seriously delinquent tax debt.”
The act also directs the IRS to submit quarterly reports to
the House and Senate Appropriations Committees and the
U.S. Comptroller General concerning the cost and
performance schedule for major information technology
(IT) investments. In addition, the IRS is required to include
similar information in its FY2021 budget request.
Business Systems Modernization
Under the Administration’s budget request, the BSM
program would have received $290 million in
appropriations for FY2020, or $140 million more than the
enacted amount for FY2019. The requested funds were
available for obligation through the end of FY2022.
P.L. 116-93 provides the IRS with $180 million for the
BSM program in FY2020, or $30 million more than the
enacted amount for FY2019. The funds will be available
through the end of FY2022 for the purchase of IT systems.
The IRS is required to prepare quarterly reports on the cost
and performance schedule for major IT investments made
by the BSM program for both appropriations committees
and the U.S. Comptroller General.
Administrative Provisions
The budget request and the appropriations act contain a
number of administrative provisions (or policy riders) that
provide additional guidance to the agency on how it should
use its appropriated funds. Most of these provisions do not
change from year to year and appear to enjoy bipartisan
backing. They address issues such as training programs for
IRS employees on taxpayer rights; the protection of the
confidentiality of taxpayer information; improving toll-free
phone service for taxpayers; criteria for attending
conferences and rehiring former IRS employees and
awarding employee bonuses; and targeting individuals
because of their religious or political beliefs.
The budget request included three new provisions. Two of
them (§108 and §109) would have restored “streamlined
critical pay authority” for the IRS through the end of
FY2023. This authority, which lapsed in 2013, would
enable the IRS to hire up to 40 persons with needed
information technology skills for up to four years at a salary
above the federal General Schedule pay scale for career
employees. A third provision (§110) would allow the IRS to
reallocate up to $10 million in appropriations to meet
changing priorities, without prior congressional approval.
P.L. 116-93 contains none of those provisions. Nor does it
include an administrative provision barring the IRS from
using appropriated funds to create prefilled (or
prepopulated) tax returns for individuals with relatively
uncomplicated tax situations. Such a prohibition has been
part of each appropriations act including the IRS in recent
years.
A key issue behind this prohibition was the ability of the
IRS to provide free direct online tax filing that does not
conflict with the agency’s obligations under the Free File
program (FFP). Since its start in 2003, the FFP has
prevented the IRS from developing and implementing its
own direct online filing system. There is disagreement
among Members of Congress over whether to permanently
extend the current FFP. The House-passed version of H.R.
1957, which eventually became the Taxpayer First Act
(P.L. 116-25) included a provision that would have done so.
But at the insistence of some Senators, the provision was
dropped from the version signed into law.
Gary Guenther, Analyst in Public Finance
IF11323
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Internal Revenue Service Appropriations, FY2020
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