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