Internal Revenue Service Appropriations, FY2020

Internal Revenue Service Appropriations, FY2020

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Updated January 14, 2020
Internal Revenue Service Appropriations, FY2020
Overview
enforcement program.” According to the IRS budget
The Internal Revenue Service (IRS) has two primary
request, these investments would have resulted in a gross
statutory responsibilities: (1) to collect most of the revenue
revenue gain of $47.1 billion over 10 years, at a total cost of
required to fund the federal government agencies and
$14.5 billion, yielding a net revenue gain of $32.6 billion.
programs, and (2) to enforce taxpayer compliance with
This estimate did not account for the revenue effects of
federal tax laws and regulations. In FY2018, the agency
added enforcement initiatives on taxpayer noncompliance.
processed 250.3 million tax and information returns (not
including Form 1099 returns) and collected $3.5 trillion in
At the end of 2019, the Consolidated Appropriations Act,
gross revenue.
2020 (P.L. 116-93) was enacted. It appropriated $11.511
billion for the IRS, which was $39 million (0.3%) more
Appropriations provide the vast share of operating funds for
than the budget request and $208 million (1.8%) more than
the IRS. In FY2018, 93% ($11.4 billion) of its budget came
the enacted amount for FY2019.
from appropriations. The remaining 7% ($850 million)
stemmed from several sources, over which the IRS has
The same act mandated a 3.1% pay increase for federal
unlimited authority regarding the use of the funds:
civilian workers. Given that two-thirds of the IRS’s budget
reimbursements from other government agencies for
goes to employee compensation, the pay increase might
services rendered by the IRS, offsetting collections, user
effectively absorb much of the 1.8% increase in IRS
fees, and carryovers of unobligated balances from previous
appropriations in FY2020.
years.
Table 1. IRS’s FY2019 and FY2020 Appropriations,
Historically, IRS’s appropriated funds have been distributed
Excluding Nonappropriated Funds
among four accounts: taxpayer services (TS), enforcement,
(millions of dol ars)
operations support (OS), and business systems
modernization (BSM). As Table 1 shows, enforcement
FY2019
FY2020
FY2020
represented 43% of the $11.303 billion in enacted
Account
Enacted
Request
Enacted
appropriations for FY2019, followed by OS (33%), TS
(22%), and BSM (1%). Congress included another $77
Taxpayer
$2,492
$2,402
$2,512
million in FY2019 to allow the IRS to continue
Services
implementing the many changes to the federal tax code
Enforcement
4,860
4,705
5,010
made in 2017 by P.L. 115-97.
Operations
3,724
4,075
3,809
The Trump Administration requested $11.472 billion in
Support
appropriations for the IRS in FY2020, or $169 million more
Business
150
290
180
than the enacted amount for FY2019. This increase
Systems
represented the net result of cost savings from several
Modernization
efficiency measures and the discontinuation of the $77
million in funding for implementing the provisions of P.L.
Administrative
77
—
—
115-97, and added spending of $180 million for the BSM
Provision
program, $34 million for enhanced data analytics, $22.5
Total
$11,303 $11,472
$11,511
million for identity theft prevention, and $107 million for
cybersecurity enhancement and maintaining and upgrading
Sources: IRS’s FY2020 Budget Justification and Consolidated
IRS’s information systems.
Appropriations Act, 2020 (P.L. 116-93).
In addition, the Administration requested additional funding
Individual Appropriations Accounts
in FY2020 for enforcement activities ($200 million) and
operations support ($162 million) through a program
Taxpayer Services
integrity cap adjustment under Section 251(b)(2) of the
The Administration’s FY2020 budget request included
Balanced Budget and Emergency Deficit Control Act of
$2.402 billion for TS. Of the requested amount, $8.9
1985 (BBEDCA; P.L. 99-177). Congress would have had to
million was set aside for the Tax Counseling for the Elderly
approve the adjustments before the associated funds could
Program (TCEP); $12 million for low-income taxpayer
be spent. The added funds, along with proposed cap
clinic (LITC) grants; $15 million for matching grants under
adjustments in future years, would have been used to pay
the Community Volunteer Income Tax Assistance (VITA)
for “continuing investments in expanding and improving
program (available until September 30, 2021); and $206
the effectiveness and efficiency of the IRS’s overall tax
million for the Taxpayer Advocate Service (TAS), of which
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Internal Revenue Service Appropriations, FY2020
$5 million was designated for cases involving refund fraud
Business Systems Modernization
tied to taxpayer identity theft.
Under the Administration’s budget request, the BSM
program would have received $290 million in
Under the Consolidated Appropriations Act, 2020 (P.L.
appropriations for FY2020, or $140 million more than the
116-93), the IRS will receive $2.512 billion for TS, or $20
enacted amount for FY2019. The requested funds were
million more than the enacted amount for FY2019. Of that
available for obligation through the end of FY2022.
amount, $11 million is to be used for the TCEP, $12 million
for LITC grants, $25 million for VITA matching grants
P.L. 116-93 provides the IRS with $180 million for the
(available until the end of FY2021), and $209.0 million for
BSM program in FY2020, or $30 million more than the
the TAS ($5.5 million of which is for casework on refund
enacted amount for FY2019. The funds will be available
fraud tied to identity theft.).
through the end of FY2022 for the purchase of IT systems.
The IRS is required to prepare quarterly reports on the cost
Enforcement
and performance schedule for major IT investments made
The Administration requested $4.705 billion in
by the BSM program for both appropriations committees
appropriations for IRS enforcement activities in FY2020, or
and the U.S. Comptroller General.
$155 million less than the enacted amount for FY2019. Of
that amount, $60.3 million was set aside for the Interagency
Administrative Provisions
Crime and Drug Enforcement program (ICDEP). Another
The budget request and the appropriations act contain a
$200 million, for reducing the federal tax gap, would have
number of administrative provisions (or policy riders) that
come from a requested program integrity cap increase under
provide additional guidance to the agency on how it should
the BBEDCA.
use its appropriated funds. Most of these provisions do not
change from year to year and appear to enjoy bipartisan
P.L. 116-93 provides the IRS with $5.010 billion in
backing. They address issues such as training programs for
appropriated funds for enforcement in FY2020, or $150
IRS employees on taxpayer rights; the protection of the
million more than the enacted amount for FY2019. None of
confidentiality of taxpayer information; improving toll-free
the funding is tied to a program integrity cap adjustment. Of
phone service for taxpayers; criteria for attending
that amount, $250.0 million is to remain available until the
conferences and rehiring former IRS employees and
end of FY2021; $60.257 million is set aside for ICDEP; and
awarding employee bonuses; and targeting individuals
$15.0 million is for the acquisition of “investigative
because of their religious or political beliefs.
technology” by the IRS’s Criminal Investigation Division
The budget request included three new provisions. Two of
(in addition to any funding it receives under the OS
them (§108 and §109) would have restored “streamlined
appropriations account).
critical pay authority” for the IRS through the end of
Operations Support
FY2023. This authority, which lapsed in 2013, would
enable the IRS to hire up to 40 persons with needed
The Administration asked for $4.075 billion in
information technology skills for up to four years at a salary
appropriations for OS in FY2020, or $351 million more
above the federal General Schedule pay scale for career
than the enacted amount for FY2019. Of the requested
employees. A third provision (§110) would allow the IRS to
amount, $250 million would have been available for
reallocate up to $10 million in appropriations to meet
obligation through the end of FY2021. The budget request
changing priorities, without prior congressional approval.
also called for a program integrity cap increase of $162
million for the OS account to reduce the federal tax gap.
P.L. 116-93 contains none of those provisions. Nor does it
include an administrative provision barring the IRS from
The Consolidated Appropriations Act, 2020, provides
using appropriated funds to create prefilled (or
$3.809 billion in appropriated funds for FY2020, or $85
prepopulated) tax returns for individuals with relatively
million more than the enacted amount for FY2019. None of
uncomplicated tax situations. Such a prohibition has been
the funding comes from a program integrity cap adjustment.
part of each appropriations act including the IRS in recent
Of that amount, $250 million is available for obligation
years.
until the end of FY2021; $10 million is set aside for
equipment and the construction, repair, and renovation of
A key issue behind this prohibition was the ability of the
facilities; $1 million is designated for research through the
IRS to provide free direct online tax filing that does not
end of FY2022; and $10 million is for the IRS to modify
conflict with the agency’s obligations under the Free File
the federal System for Award Management to allow entities
program (FFP). Since its start in 2003, the FFP has
registering or renewing their registration with the system to
prevented the IRS from developing and implementing its
request an electronic verification of whether they have
own direct online filing system. There is disagreement
“seriously delinquent tax debt.”
among Members of Congress over whether to permanently
extend the current FFP. The House-passed version of H.R.
The act also directs the IRS to submit quarterly reports to
1957, which eventually became the Taxpayer First Act
the House and Senate Appropriations Committees and the
(P.L. 116-25) included a provision that would have done so.
U.S. Comptroller General concerning the cost and
But at the insistence of some Senators, the provision was
performance schedule for major information technology
dropped from the version signed into law.
(IT) investments. In addition, the IRS is required to include
similar information in its FY2021 budget request.
Gary Guenther, Analyst in Public Finance
IF11323
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Internal Revenue Service Appropriations, FY2020

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