Internal Revenue Service Appropriations, FY2023

Internal Revenue Service Appropriations, FY2023

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Updated April 10, 2023
Internal Revenue Service Appropriations, FY2023
Overview of the IRS Budget
purpose would have come from three accounts: TS ($119
The Internal Revenue Service (IRS) has two primary
million), ENF ($54 million), and OS ($147 million).
responsibilities: (1) collecting most of the revenue to fund
Another $10 million was reserved for a Mississippi Delta
federal government agencies and programs, and (2)
hiring initiative, as part of IRS efforts to reach out to
enforcing taxpayer compliance with federal tax laws
underserved communities.
through taxpayer services and activities like audits. In
FY2021, the agency processed 269 million tax returns and
Action in the House and the Senate
collected $4.1 trillion in gross revenue and $75 billion in
In December 2022, Congress passed a bill (P.L. 117-328,
enforcement revenue.
Consolidated Appropriations Act [CAA], 2023) funding
The IRS’s operating budget
most government operations in FY2023, including the
is a blend of annual
IRS’s. The agency’s enacted appropriations (see Table 1)
appropriations and miscellaneous resources. In FY2021,
were identical to FY2022 for three of the four
90.5% ($11.92 billion) of that budget came from
appropriations accounts; the only difference is that
appropriations. The remaining 9.5% ($1.25 billion)
Congress provided no funds for the BSM program in
consisted of (1) reimbursements from other government
FY2023.
agencies for IRS-provided services, (2) offsetting
collections, (3) user fees, and (4) carryovers of unobligated
Table 1. IRS’s FY2023 Appropriations, Excluding
balances from previous fiscal years. The IRS has
Nonappropriated Funds
considerable leeway in how it uses nonappropriated funds.
(bil ions of dol ars)
Historically, IRS appropriations have been distributed
among four accounts: taxpayer services (TS), enforcement
FY2022
FY2023
FY2023
(ENF), operations support (OS), and business systems
Account Enacted Request Enacted
modernization (BSM). As Table 1 suggests, ENF has been
TS
$2.781
$3.386
$2.781
the largest of the four in recent years, accounting for just
over 44% of FY2023 enacted appropriations.
ENF
$5.438
$5.862
$5.438
Overview of the FY2023 IRS
OS
$4.101
$4.543
$4.101
Budget Request
BSM
$0.275
$0.310
$0
The Biden Administration requested $14.1 billion in IRS
appropriations for FY2023, nearly 11.0% more than the
Total
$12.595
$14.100 $12.320a
FY2022 enacted amount. Requested funding for each of the
Sources: IRS’s FY2023 Budget Justification and Consolidated
four appropriations accounts is also larger. Relative to
Appropriations Act, 2023 (P.L. 117-328).
FY2022, requested TS funding was 21.8% greater, ENF
funding 7.8% greater, OS funding 10.8% greater, and BSM
Notes:
funding 12.7% greater. Including an estimated $1.1 billion
a.
in miscellaneous resources, the IRS’s FY2023 operating

This figure does not include any of the funds the IRS received
from Congress to implement pandemic-related tax benefits,
budget would have totaled $15.2 billion.
which totaled $3.1 bil ion when they were enacted. The
In a departure from standard practice, the budget request
supplemental funds came from P.L. 116-136, P.L. 116-260, and
adjusted the requested amounts for TS and ENF for
P.L. 117-2.
“employee support costs.” The adjustment would have
reduced requested OS FY2023 funding by $709 million and
P.L. 117-169 (Inflation Reduction Act)
transferred that amount to TS ($299 million) and ENF
In August 2022, President Biden signed into law P.L. 117-
($411 million), to more accurately reflect actual
169, commonly called the Inflation Reduction Act or IRA,
employment costs for TS and ENF activities. These costs
which included $78.9 billion in mandatory funding for the
encompass employee compensation, hiring and training
IRS; the funds are available for obligation until September
costs, and the information technology and office space to
30, 2031. The law specified how that amount should be
allow employees to be productive.
distributed among the IRS’s four appropriations accounts.
These funds are available regardless of the amounts
The budget request also set aside $320 million for
received by the IRS through annual appropriations. The
implementing the Taxpayer First Act (P.L. 116-25)
figures in Table 1 exclude IRA’s mandatory funding. This
provisions. In general, the provisions codify and strengthen
is the first time that Congress has approved multiyear
taxpayer rights and compel the IRS to become more
funding for the IRS’s appropriations accounts.
taxpayer-friendly by bolstering its cybersecurity, adopting
more advanced interactive technologies, and developing a
comprehensive taxpayer service strategy. Funding for this
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Internal Revenue Service Appropriations, FY2023
FY2023 IRS Appropriations
Business Systems Modernization (BSM)
This account pays for expenses related to the BSM
Taxpayer Services (TS)
program, such as the acquisition of information technology
This account pays for prefiling assistance and education,
systems and related services.
filing and account services, taxpayer advocacy services, and
associated support costs.
The CAA 2023 provides no appropriations for the BSM
program in FY2023. It is unclear why Congress chose this
The CAA 2023 provides $2.781 billion in appropriations
course of action. The Biden Administration, the House, and
for taxpayer services. Of this amount, $100 million is
the Senate Finance Committee all called for $310 million in
available through the end of FY2024. In addition, not less
BSM appropriations in FY2023.
than $11 million is set aside for the TCE program; $26
million for low-income taxpayer program grants, which are
Administrative Provisions
limited to no more than $200,000 for a single clinic; $40
The IRS’s FY2023 appropriations are subject to 12
million (available until September 30, 2024) in matching
administrative provisions (or policy riders). They are
grants for the Community Volunteer Income Tax
intended to inform the IRS about specific congressional
Assistance program; and $236 million for the Taxpayer
priorities in how the agency spends appropriated funds. The
Advocate Service ($7 million of which would is reserved
provisions in the CAA address a variety of issues important
for casework involving identity theft and refund fraud.)
to Congress, such as an employee training program focused
on taxpayer rights, safeguarding the confidentiality of
Enforcement (ENF)
taxpayer information, and preventing identity theft.
This account covers the costs associated with collecting
taxes owed, legal and litigation support, criminal
All but two of the provisions have been included in
investigations, and enforcement of tax laws.
previous IRS appropriations measures.
The CAA 2023 provides $5.438 billion in ENF
One new provision (Section 111) specified that the IRS
appropriations in FY2023. Of this amount, $250 million is
may use FY2023 appropriated funds to recruit and hire
available through the end of FY2024; $60.3 million goes to
qualified applicants under a “direct- hire authority” to
the Interagency Crime and Drug Enforcement program; and
process “backlogged tax returns and return information”
$25 million is set aside for the acquisition of “investigative
only. Direct-hire authority allows a federal agency to recruit
technology” by the Criminal Investigation Division (CID),
and hire qualified applicants to fill positions for which there
in addition to any amounts for the division provided
is a severe shortage of candidates or a critical hiring need
through OS appropriations.
without going through the standard rating and review
process. In February 2022, OPM granted the IRS direct-hire
Operations Support (OS)
authority to hire up to 10,000 persons to work in the
This account funds the operation of the IRS’s infrastructure,
agency’s accounts management and submission processing
including headquarters maintenance, agency information
units. This authority will expire at the end of 2023.
systems, and operating expenses for the Internal Revenue
Service Oversight Board.
Section 111 was a way of signaling the IRS that Congress
expected it to use its current direct-hire authority to reduce
The CAA 2023 provides $4.101 billion for OS. Of this
backlogs of unprocessed returns and taxpayer
amount, $275 million is available through the end of
correspondence before using the authority to address other
FY2024; $10 million is reserved for capital projects like
critical hiring needs.
acquiring equipment and repairing facilities; and $1 million
is available for research through the end of FY2025. This
The other new provision (Section 112) allowed the IRS to
funding depends on the IRS submitting quarterly reports to
use appropriated funds to transport the IRS Commissioner,
both appropriations committees and the U.S. Comptroller
for his/her protection, between his/her residence and place
General on the status, results, and costs of technology
of employment.
improvement projects in the IRS’s Integrated
Modernization Business plan.

Gary Guenther, Analyst in Public Finance
IF12098

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Internal Revenue Service Appropriations, FY2023

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https://crsreports.congress.gov | IF12098 · VERSION 6 · UPDATED