Internal Revenue Service Budget, FY2018

Internal Revenue Service Budget, FY2018

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Updated April 10, 2018
Internal Revenue Service Budget, FY2018
Overview
appropriations than the IRS received in FY2017 (see Table
The Internal Revenue Service (IRS) collects the vast share
1).
of the revenue needed to fund the federal government and
enforces federal tax laws. In FY2017, the IRS processed
For FY2018, the Trump Administration requested $10.975
245.4 million returns and related documents for all federal
billion for the IRS, or 2.3% less than the amount enacted
taxes and collected $3.4 trillion in gross revenue.
for FY2017 (see Table 1). According to the Treasury
Department’s justification for the budget request, it was
Appropriations account for nearly all of the funds available
built around three elements: (1) an increase of $220.0
to the IRS for obligation. In FY2017, the most recent year
million to maintain FY2017 operating levels, (2) a transfer
for which enacted figures are available, 94% of those funds
of $179.4 million from the BSM account to the OS account
came from appropriations. The remainder consisted of
to reduce the backlog of deferred computer software and
reimbursements, offsetting collections, user fees, and
hardware updates, and (3) a decrease of $459 million from
unobligated balances from previous years. Under current
cutbacks in staffing and other costs across all four accounts.
law, the IRS may use these miscellaneous funds as it deems
The transfer was treated as both a program increase for OS
appropriate. They are expected to total an estimated $1.059
and a program decrease for BSM, resulting in no net change
billion in FY2018. (Non-appropriated funds are not
in requested FY2018 appropriations from the enacted
included in Table 1.)
amount for FY2017. Moreover, under the budget request,
the number of full-time employees at the IRS would total
Historically, the agency’s appropriations have been
71,035, or 5,797 fewer employees than the average number
distributed among four accounts: taxpayer services,
in FY2017. According to budget documents, the IRS
enforcement, operations support (OS), and business systems
planned to meet its FY2018 objectives by becoming more
modernization (BSM). As shown in Table 1, enforcement
streamlined in its operations and relying more on user fees
is receiving 42.5% of the $11.431 billion in enacted IRS
to meet critical needs.
appropriations, followed by operations support (31.8%),
taxpayer services (21.9%), the BSM program (1.0%), and
Individual Appropriation Accounts
an administrative provision (2.8%) in FY2018.
Taxpayer Services
Table 1. Internal Revenue Service’s FY2018 Budget
Funding for taxpayer services pays for the costs of helping
Request and FY2017 and FY2018 Appropriations
taxpayers meet their tax obligations, producing tax forms
(millions of dol ars)
and publications, processing tax returns and other
documents, and providing taxpayer advocacy services.
FY2017
FY2018
FY2018

Enacted
Request
Enacted
The Trump Administration’s FY2018 budget request for the
IRS allocated $2.212 billion to taxpayer services, or $55
Taxpayer Services
$2,157
$2,212
$2,507
million more than the enacted amount for FY2017. Of the
Enforcement
4,860
4,706
4,860
requested amount, $600.7 million would have gone to pre-
filing taxpayer assistance and education, and $1.612 billion
Operations
3,638
3,946
3,634
to filing and account services. In addition, $6.5 million was
Support
to be set aside for the Tax Counseling for the Elderly
Business Systems
290
110
110
program, $12.0 million for low-income taxpayer clinic
Modernization
grants, $15.0 million for matching grants under the
Volunteer Income Tax Assistance (VITA) program, and
Administrative
290
—
320
$206.0 million for the Taxpayer Advocate Service (TAS).
Provision
Total
$11,235
$10,975
$11,431
P.L. 115-141 provides $2.507 billion for taxpayer services,
in FY2018, or $295 million above the budget request. Of
Source: IRS’s FY2018 Budget Justification and Joint Explanatory
this amount, $9.9 million is set aside for the Tax
Statement for the Consolidated Appropriations Act, 2018 (P.L. 115-
Counseling for the Elderly program, $12.0 million for low-
141).
income taxpayer clinic grants, $15.0 million for VITA
grants (available through the end of FY2019), and $206.0
After being funded through several continuing resolutions
million for TAS, $5.0 million of which must be used for
during the first half of FY2018, the IRS received a final
identity theft casework. The act also requires the IRS to
budget for the year when President Trump signed the
submit reports in FY2018 to the House and Senate
Consolidated Appropriations Act, 2018 (P.L. 115-141) on
Appropriations Committees on steps it is taking to combat
March 23, 2018. The act provides $196 million more in
taxpayer identity theft, improve toll-free telephone and in-
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Internal Revenue Service Budget, FY2018
person assistance for taxpayers, and prevent the closure of
FY2018 to the two appropriations committees and the
Taxpayer Assistance Centers.
Government Accountability Office (GAO) on the
cumulative cost and performance record of major IT
Enforcement
investments made under the program. The IRS is also
Funding for enforcement enables the IRS to undertake a
required to submit to the same entities semi-annual reports
variety of activities to ensure that taxpayers meet their tax
on the cost, schedule, and goals of IT projects. GAO in turn
obligations in a timely manner. These activities include the
is required to give its own assessment of the projects’ cost
examination of U.S. and foreign tax returns, the collection
and “functionality.”
of overdue taxes, the investigation of criminal violations of
the federal tax code, and the settlement through judicial or
Administrative Provisions
administrative proceedings of taxpayer appeals of
P.L. 115-141 also contains 14 administrative provisions that
examination findings.
apply to IRS appropriations in FY2018. Some of the key
provisions are shown below:
Under the Administration’s budget request for FY2018, the
IRS would have received $4.706 billion in appropriations
 Section 104 directs the IRS Commissioner to make
for enforcement activities, or $154 million less than the
further improvements in toll-free telephone assistance
amount enacted for FY2017. Of this amount, $606.7
for taxpayers a “priority.”
million would have gone to investigations, $3.968 billion to
 Sections 107 and 108 bar the IRS from using
examinations and collections, and $131.9 million to
appropriated funds to subject certain groups to added
regulatory guidance and related activities.
regulatory scrutiny because of their “ideological belief”;
the same ban applies to targeting individuals for
Under P.L. 115-141, the IRS is getting $4.860 billion in
exercising their First Amendment rights and freedoms.
appropriations for enforcement in FY2018, or $154 million
 Section 112 bars the IRS from using any appropriated
more than the budget request. The only stipulation in the act
funds to develop or implement a return-free (or pre-
related to enforcement activities is that the IRS must notify
populated) tax filing system.
each appropriations committee, as well as the House Ways
and Means Committee and the Senate Finance Committee,
 Section 113 provides the IRS with $320 million to
before reducing the number of employees involved in the
implement the provisions of a new tax law (P.L. 115-
SS-8 processing program for determining a worker’s status
97). It also requires the IRS to submit a report to the two
for employment taxes.
appropriations committees within 30 days of the
enactment of P.L. 115-141 on it overall plans for
Operations Support
spending the money, by account and object class. This
Funding for operations support covers expenses for overall
report is to be followed by quarterly reports providing
planning and direction at the IRS; shared services; support
detailed information on obligations by account.
for facilities, rent, printing, postage, and security; and the
maintenance, upgrade, and security of IRS’s
 Section 125 bars the IRS from using any funds to issue
telecommunications and information systems.
or revise regulations on the criteria used to evaluate
applications for tax-exempt status under Section
The Trump Administration requested $3.946 billion in
501(c)(4) of the federal tax code.
appropriations for OS in FY2018, or $308 million more
than the amount enacted for FY2017. Of this amount,
Issue for Congress
$860.6 million would have been used for the maintenance
If P.L. 115-141 had not included an additional $320 million
of infrastructure unrelated to information technology (IT),
to implement the new tax law, enacted IRS appropriations
$1.011 billion for shared services and support (including
in FY2018 would have fallen below the amount for
research into taxpayer compliance), and $2.074 billion for
FY2017. Such a result would continue a trend of budget
IT services and support.
cuts for the IRS that goes back to the early 2000s. In light
of the significant increase in the IRS’s workload and
P.L. 115-141 provides $3.634 billion in appropriations for
administrative responsibilities since then, it could be argued
FY2018, or $312 million less than the budget request.
that Congress is expecting the agency to do more with less
by becoming more efficient. One issue that looms large in
Business Systems Modernization
the debate over making the IRS more efficient and
The BSM program, begun in 1998, is intended to upgrade
taxpayer-friendly is the condition of the agency’s
or create critical information systems, such as automated
information systems. According to some analysts, many of
taxpayer accounts. Funding for the program covers
these systems are outdated, and key improvements are
expenses for project planning and the acquisition of IT.
costing more and taking longer than initially expected to
develop and implement. The portion of the FY2018 IRS
In its budget request for FY2018, the Trump Administration
budget (BSM and OS) that covers the cost of maintaining
sought $110 million in appropriations for BSM, or $180
and upgrading its information systems is $184 million
million less than the amount enacted for FY2017.
below the enacted amount for FY2017.
The Consolidated Appropriations Act, 2018 maintains
Gary Guenther, Analyst in Public Finance
funding for the BSM program at $110 million in FY2018. It
also directs the IRS to submit quarterly reports during
IF10729
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Internal Revenue Service Budget, FY2018

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https://crsreports.congress.gov | IF10729 · VERSION 4 · UPDATED