July 29Updated August 26, 2020
IRS Appropriations, FY2021
Overview of Budget Request
The Internal Revenue Service (IRS) has two primary
responsibilities: (1) to collect most of the revenue to fund
federal government agencies and programs, and (2) to
enforce taxpayer compliance with federal tax laws .
According to the IRS Data Book, in FY2019, the agency
processed over 253 million tax returns and 3.5 billion
information returns, collected over $3.5 trillion in gross
revenue, and issued $452 billion in refunds.
Appropriations provide the vast sharemost of the IRS’s operating budget.
In FY2019, according to the agency’s FY2021 budget
request, 93% ($11,302 million) of its operating budget
came from appropriations. The remaining 7% ($817
million) was from several other sources, including (1)
reimbursements from other government agencies for
services rendered by the IRS, (2) offsetting collections, (3)
user fees, and (4) carryovers of unobligated balances from
previous years. The IRS has unrestricted authority over how
nonappropriated funds are used.
Historically, IRS appropriations have been distributed
among four accounts: taxpayer services (TS), enforcement
(ENF), operations support (OS), and business systems
modernization (BSM). As Table 1 shows, enforcement
accounted for 43.5% of the $11,511 million in enacted
appropriations for FY2020, followed by OS (33.0%), TS
(22%), and BSM (1%).
The Trump Administration has requested $12,039 million
in IRS appropriations for FY2021, or $528 million (4.6%)
more than the enacted amount for FY2020. Relative to
enacted amounts for FY2020, funding for OS would rise by
$196 million (7.8%), for BSM by $120 million (66.7%), for
ENF by $61 million (1.2%), and for taxpayer services by
$51 million (2.0%).
The Administration is also proposing to make more funding
available for reducing the federal tax gap by asking
Congress to exempt a total of $400 million of the proposed
budget ($280 million for ENF and $120 million for OS)
from the FY2021 caps on nondefense discretionary
spending under the Budget Control Act of 2011 (BCA; P.L.
112-25, as amended). The requested exemption is known as
a program integrity cap adjustment. It permits Congress and
the Administration to increase congressional allocations of
annual appropriations for particular purposes. These
purposes include activities to maintain “program integrity,”
such as efforts to improve a program’s effectiveness by
enforcing compliance with its regulations.
According to budget documents, the proposed $400 million
cap adjustment in FY2021, together with proposed annual
cap adjustments through FY2030, would result in a net
revenue gain of $64 billion in that period. This estimate
does not take into account the revenue gain from the
deterrent effect on taxpayers from increased enforcement.
The FY2021 budget proposal includes $106.4 million to
implement changes in IRS operations mandated by the
Taxpayer First Act (P.L. 116-25). Among these changes are
creating an internet platform for filing Form 1099s,
allowing 100% e-filing by tax-exempt entities, setting a
comprehensive service and training strategy, and
developing and developing
uniform standards for accepting electronic
signatures.
Table 1. IRS’s FY2020 and FY2021 Appropriations,
Excluding Nonappropriated Funds
(millions of dollars)
FY2021
FY2020
Enacted
FY2021
Request
H.R. 7668FY2021
Housepassed
Taxpayer
Services (TS)
$2,512
$2,563
$2,603
Enforcement
(ENF)
5,010
5,071
5,206
Operations
Support (OS)
3,809
4,105
4,058
Business
Systems
Modernization
(BSM)
180
300
250
$11,511
$12,039a
$12,117
Account
Taxpayer
Services
Business
Systems
Modernization
Total
Sources: IRS’s FY2021 Budget Justification, H.R. 7668, and H.R. 7668
7617.
a.
Excludes $400 million in Program Integrity Initiatives under the
ENF and OS accounts.
Specific Appropriations Accounts
Taxpayer Services (TS)
This account covers the cost of printing forms and
publications, processing returns, filing and account
services, and taxpayer assistance from the Taxpayer
Advocate Service (TAS).
The Administration is asking for $2,563 million in FY2021
for TS, or $51 million more than the enacted amount for
FY2020. Of this amount, $11 million would be set aside for
the Tax Counseling for the Elderly Program, $12 million
for low-income taxpayer clinic grants, and $25 million
(available through the end of FY2022) for matching grants
in the Community Volunteer Income Tax Assistance
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IRS Appropriations, FY2021
program. In addition, $209 million would go to the TAS.
The budget request calls for a reduction in full-time staffing
within TS of 1,081 employees, which represents 91.4% of
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IRS Appropriations, FY2021
the net reduction in overall full-time staffing (1,183
employees) at the IRS called for by the budget request.
construction and repair of facilities; and $1 million would
be available through FY2023 for research.
H.R. 7668, as reported, recommends that the IRS receive
$2,603 7617, as passed by the House, would provide $2,603
million in FY2021 appropriations for taxpayer services, or
$40
million more than the budget request. In its report
(H.Rept.
116-456) on the billinitial bill containing IRS
appropriations (H.R. 7668), the House Appropriations Committee
urges the IRS to do more to promote use of the Free File
Program. It also directs the agency to develop a plan for
allowing taxpayers to receive notices and information on
taxpayer rights in languages other than English and
Spanish.
The OS budget request also includes $120 million in new
budget authority for activities linked to enforcement actions
aimed at reducing the federal tax gap.
Enforcement
Committee urges the IRS to do more to promote the Free
File Program, among other things.
Enforcement (ENF)
This account covers expenses related to assessing and
collecting taxes owed, providing legal support, and
conducting criminal investigations.
The Administration is requesting $5,071 million in
appropriations (without a $280 million cap adjustment) for
IRS enforcement activities in FY2021, or $61 million more
than the enacted amount for FY2020. Of that amount, $60.3
million is set aside for the Interagency Crime and Drug
Enforcement program, and $15 15
million would be used to
upgrade the “investigative
technology” used by IRS’s
Criminal Investigative Division
(CID).
The funding request for enforcement also includes $280
million in new budget authority under the BCA to address
the federal tax gap. According to the IRS’s latest estimate,
the annual net tax gap averaged $381 billion from FY2011
to FY2013. The net gap refers to the amount of unpaid and
overdue taxes after allowing for late payments and the
results of IRS’s enforcement actions.
H.R. 7668, as reported,7617 would provide the IRS with $5,206
million in
FY2021 appropriations in FY2021 for enforcement
activities. This is
$145 million less than the budget request
(including $280
million for a program integrity cap
adjustment). The bill
does not endorse the requested cap
adjustment. Without the
adjustment, recommended
appropriations for enforcement are $135 would be $135
million more than
the budget request.
H.R. 7668, as reported, would provide the $4,058 in
appropriations for OS in FY2021. This amount is $167
million less than the budget request with the proposed $120
million program integrity cap adjustment, and $47 million
less than the budget request without the adjustment. H.R.
7668 does not endorse the cap adjustment for OS.
Business Systems Modernization
This account covers costs related to the upgrade of
Among other things, the committee report on H.R. 7668
directs the IRS to provide quarterly reports to the House
and Senate Appropriations Committees on the performance
of the three private debt collectors participating in the
private tax debt collection initiative.
Operations Support (OS)
This account covers expenses associated with facility
services (including rent), postage, telecommunications,
security at IRS facilities, research, and the maintenance,
security, and upgrade of agency information systems.
The Administration has requested $4,105 million in
appropriations (without a $120 million cap adjustment) for
OS in FY2021, or $296 million more than the enacted
amount for FY2020. Of the requested amount, $250 million
would be available for obligation through the end of
FY2022; $10 million would be available until spent for the
construction and repair of facilities; and $1 million would
be available through FY2023 for research.
The OS budget request also includes $120 million in new
budget authority for activities linked to enforcement actions
aimed at reducing the federal tax gap.
H.R. 7617 would provide $4,058 in appropriations for OS
in FY2021. This amount would be $167 million less than
the budget request with the $120 million program integrity
cap adjustment, and $47 million less without the
adjustment. The bill does not endorse the cap adjustment.
Business Systems Modernization (BSM)
This account covers costs related to upgrading key IRS
information technology systems.
Under the IRS’s budget request, the BSM program would
receive $300 million in appropriations for FY2021, or $120
million more than the enacted amount for FY2020. The
requested funds would be available for obligation through
the end of FY2023. They would cover costs associated with
the acquisition of information technology systems,
including contractor expenses.
H.R. 7668, as reported, recommends7617 would provide $250 million in
appropriations for
the BSM program in FY2021, or $50
million less than the
budget request. The report on the bill
H.R. 7668 directs the IRS to
continue providing quarterly reports on
the cost and status
of BSM-funded projects, such as CADE
2 and the Enterprise Case Management System 2.
Administrative Provisions
The FY2021 IRS budget request contains a number of
administrative provisions (or policy riders) that establish or
reiterate operational priorities for IRS management. These
provisions generally change little from year to year.
But itthe FY2021 request contains two new provisions.
Section 111 would
of the request would allow the IRS to transfer
its unobligated, expired
appropriations to the OS budget to pay for technology
investments and the upgrade of IRS’s facilities. Certain
restrictions would apply.
Among other things, the committee report on the bill directs
the IRS to provide quarterly reports to the House and
Senate Appropriations Committees on the performance of
the three private debt collectors participating in the private
tax debt collection initiative.
appropriations to OS to pay for
information technology (IT) investments and facility
improvements. Certain restrictions would apply.
Section 112 would authorize the IRS to reprogramrepurpose up to
$10
million in unused appropriations at the end of a fiscal year
without prior congressional approval. The reprogramming
would allow the IRS to allocate funds to meet its highest
priorities.
Operations Support
This account covers expenses associated with facility
services (including rent), postage, telecommunications,
security at IRS facilities, research, and the maintenance,
security, and upgrade of agency information systems.
H.R. 7668, as reported, contains one administrative
provision not included in the budget request. Section 111 of
the bill repurposing
would enable the IRS to allocate funds to meet its priorities.
H.R. 7617 contains all of the administrative provisions
included in the budget request except Section 112. It has
one provision that is consistent with Section 111 with a
notable difference: Section 111 of Division D of the bill
would create a “Nonrecurring Expenses Fund” for
the IRS. It is unclear from the language of the bill how
money in the fund could be used and how the fund would
be financed.
The Administration has requested $4,105 million in
appropriations (without a $120 million cap adjustment) for
OS in FY2021, or $296 million more than the enacted
amount for FY2020. Of the requested amount, $250 million
would be available for obligation through the end of
FY2022; $10 million would be available until spent for the
the IRS
not tied to the OS account. Unused appropriated funds
could be transferred into the fund and used for facility and
IT expenses under certain conditions.
Two floor amendments approved by voice vote during
House consideration of H.R. 7617 would have the impact of
administrative provisions. One provision would direct the
IRS to reduce the taxpayer correspondence backlog caused
by COVID-19. The other provision would add $10 million
to OS appropriations to improve IRS’s ability to deliver
“outstanding” economic impact payments and respond to
congressional inquiries about casework.
Gary Guenther, Analyst in Public Finance
IF11607
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IRS Appropriations, FY2021
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