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House Panel OKs $12.1B Budget For IRS Updates, Virus Relief

By Stephen Cooper · July 15, 2020, 7:30 PM EDT

House lawmakers will vote the week of July 27 on a $12.1 billion Internal Revenue Service budget to support the agency's efforts to carry out taxpayer protections, modernize its business systems and provide service during the novel coronavirus pandemic.

The House Appropriations Committee, in a 30-20 vote Wednesday, approved the fiscal 2021 financial services and general government bill, which would boost the IRS budget by roughly $606 million over the prior year. The IRS budget was part of a $24.64 billion spending bill that also sets annual funding for the U.S. Department of the Treasury, the Small Business Administration and other independent federal agencies.

The Treasury budget would be set at $232 million for next year, an increase of $3.4 million from fiscal 2020. 

"During these uncertain times, it is important we do everything we can to provide Americans stability and ensure resources are available," said Rep. Mike Quigley, D-Ill., who chairs the appropriations subcommittee that has oversight over the IRS budget.

A spokesman for the committee said the budget legislation is slated to get a vote by the full House before lawmakers leave Washington, D.C., for their August recess.

The increase in the IRS budget comes on top of approximately $766 million in new funding enacted this spring as part of the Coronavirus Aid, Relief and Economic Security Act and the Families First Coronavirus Response Act for domestic and international response to COVID-19, the respiratory illness caused by the coronavirus.

"The committee is concerned over the level and quality of taxpayer customer service that will be offered post-COVID-19," lawmakers wrote in the committee report accompanying the legislation. "Not only will the IRS have to prepare for the upcoming tax season, but the agency will also have to handle taxpayer issues associated with COVID-19 economic income payments, which will increase the demand and need for quality customer service."

The budget directs the IRS to revamp its customer service efforts, protect taxpayers and update its online service platforms for individuals and businesses as mandated by the Taxpayer First Act of 2019. 

The bill also provides resources for the IRS business system modernization plan and directs the agency to provide lawmakers with detailed plans for retiring the Individual Master File, which is the database that maintains transactions or records of individual tax accounts.

"The committee looks forward to future briefings on the status and outputs of the Taxpayer First Act implementation, especially the IRS' reorganization plan," the committee report said.

During Wednesday's consideration of the bill, the committee approved a manager's amendment from Quigley that said the committee "encourages" community development financial institutions to invest $20 million to rebuild cities where damages occurred during the protests following the death of George Floyd, which resulted in second-degree murder charges against former Minneapolis police officer Derek Chauvin.

The committee spokesperson said the provision doesn't have the force of law, but it does represent the "strong position" of the committee.

The legislation also encourages the Office of Tax Policy, in consultation with the U.S. Department of Agriculture, to assess the feasibility of developing a soil carbon capture tax credit.

The funding increase for the IRS would be disbursed to several divisions under the House bill.

Taxpayer services at the agency would receive an additional $91 million devoted to expanding the Volunteer Income Tax Assistance grant program, providing access to low-income taxpayer clinics, and boosting funding for the Taxpayer Advocate Service, according to a bill summary.

IRS enforcement funding would increase almost $200 million under the House bill, and the agency's operations support would receive an additional $249 million when compared with last year's funding, according to the summary.

The House bill also includes a $70 million increase toward the IRS' technology modernization efforts, the summary said.

The legislation would provide $171.4 million for the Treasury Inspector General for Tax Administration next year. Lawmakers want TIGTA to report on the IRS policies and guidance to protect agency employees from the coronavirus, compared with the guidance from the Centers for Disease Control and Office of Personnel Management.

The TIGTA report should also include updated recommendations to improve compliance for 501(c) and 501(c)(5 ) organizations abusing their tax-exempt status. Lawmakers also want TIGTA to review whether taxpayers received the intended benefits of the CARES Act and if the IRS is able to identify fraud, abuse and noncompliance with the law.

--Additional reporting by Dylan Moroses. Editing by Neil Cohen.

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