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