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IRS-Related Excerpts Available of Senate Appropriations Report

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IRS-Related Excerpts Available of Senate Appropriations Report

UNDATED
DOCUMENT ATTRIBUTES
  • Institutional Authors
    U.S. Senate
    U.S. Senate Appropriations Committee
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2020-44256
  • Tax Analysts Electronic Citation
    2020 TNTF 218-15
[Editor's Note:

Asterisks indicate omitted text.

]

EXPLANATORY STATEMENT FOR FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS BILL, 2021

OVERVIEW AND SUMMARY OF THE BILL

The Financial Services and General Government appropriations bill provides funding for the Department of the Treasury, including the Internal Revenue Service; the Executive Office of the President; the Judiciary; the District of Columbia; and more than two dozen independent Federal agencies.

The Committee recommends $47,113,364,000 in discretionary and mandatory appropriations. Of the total, $24,247,364,000 is provided in discretionary appropriations, including $142,864,000 for the Small Business Administration Disaster Loans Program Account designated by Congress as disaster relief pursuant to Public Law 112–25. Mandatory appropriations less scorekeeping adjustments total $22,866,000,000.

PROGRAM, PROJECT, AND ACTIVITY

During fiscal year 2021, for the purposes of the Balanced Budget and Emergency Deficit Control Act of 1985 (Public Law 99–177), as amended, with respect to appropriations contained in the accompanying bill, the terms "program, project, and activity" [PPA] shall mean any item for which a dollar amount is contained in appropriations acts (including joint resolutions providing continuing appropriations) or accompanying reports of the House and Senate Committees on Appropriations, or accompanying conference reports and joint explanatory statements of the committee of conference.

REPROGRAMMING GUIDELINES

The Committee includes a provision (section 608) establishing the authority of agencies to reprogram funds and the limitation on that authority. The provision specifically requires the advance approval of the House and Senate Committees on Appropriations of any proposal to reprogram funds that: (1) creates a new program; (2) eliminates a program, project, or activity; (3) increases funds or personnel for any PPA for which funds have been denied or restricted by the Congress; (4) proposes to redirect funds that were directed in such reports for a specific activity to a different purpose; (5) augments an existing PPA in excess of $5,000,000 or 10 percent, whichever is less; (6) reduces an existing PPA by $5,000,000 or 10 percent, whichever is less; or (7) creates, reorganizes, or restructures offices differently than the congressional budget justifications or the table at the end of the Committee report, whichever is more detailed.

The Committee retains the requirement that each agency submit an operating plan to the House and Senate Committees on Appropriations not later than 60 days after enactment of this act to establish the baseline for application of reprogramming and transfer authorities provided in this act. Specifically, each agency should provide a table for each appropriation with columns displaying the budget request; adjustments made by Congress; adjustments for rescissions, if appropriate; and the fiscal year enacted level. The table shall delineate the appropriation both by object class and by PPA. The report must also identify items of special congressional interest.

The Committee expects the agencies and bureaus to submit reprogramming requests in a timely manner and to provide a thorough explanation of the proposed reallocations, including a detailed justification of increases and reductions and the specific impact the proposed changes will have on the budget request for the following fiscal year. Except in emergency situations, reprogramming requests should be submitted no later than June 30.

The Committee expects each agency to manage the expenditures of its programs and activities to remain within the amounts appropriated by Congress. The Committee reminds agencies that reprogramming requests should be submitted only in the case of an unforeseeable emergency or a situation that could not have been anticipated when formulating the budget request for the current fiscal year. Further, the Committee notes that when a department or agency submits a reprogramming or transfer request to the Committees on Appropriations and does not receive identical responses from the House and the Senate, it is the responsibility of the department or agency to reconcile the House and the Senate differences before proceeding, and if reconciliation is not possible, to consider the request to reprogram funds unapproved.

RELATIONSHIP WITH BUDGET OFFICES

Through the years, the Committee has channeled most of its inquiries and requests for information and assistance through the budget offices of the various departments, agencies, offices, and commissions. The Committee has often pointed to the natural affinity and relationship between the budget offices and the Committee which makes such a relationship workable. The Committee reiterates its longstanding position that while the Committee reserves the right to call upon any office or officer in the departments, agencies, and commissions, the primary conjunction between the Committee and these entities must be through the budget offices. To help ensure the Committee's ability to perform its responsibilities, the Committee insists on having direct, unobstructed, and timely access to the budget offices and expects to be able to receive forthright and complete responses from those offices and their employees.

The Committee expects timely agency compliance with mandated reporting requirements. The Committee directs all agencies from which reports are required to allow sufficient time to secure any necessary internal and external clearances of reports in order to satisfy congressional deadlines. The Committee strongly urges agencies to alert the Committee as far as possible in advance of any expected slippage in meeting a report delivery due date.

CONGRESSIONAL BUDGET JUSTIFICATIONS

Budget justifications are prepared not for the use of the agency, but instead are the primary tool used by the House and Senate Committees on Appropriations to evaluate the resource requirements and fiscal needs of agencies. The Committee is aware that the format and presentation of budget materials is largely left to the agency within presentation objectives set forth by the Office of Management and Budget. However, the Committee expects agencies to consult with the Committees on Appropriations in advance regarding any plans to modify the format of agency budget documents to ensure that the data needed to make appropriate and meaningful funding decisions is provided.

The Committee directs that justifications submitted with the fiscal year 2022 budget requests by agencies funded under this act must contain the customary level of detailed data and explanatory statements to support the appropriations requests at the level of detail contained in the funding table included at the end of the report. Among other items, agencies shall provide a detailed discussion of proposed new initiatives, proposed changes in the agency's financial plan from prior year enactment, and detailed data on all programs and comprehensive information on any office or agency restructurings. At a minimum, each agency must also provide adequate justification for funding and staffing changes for each individual office. Explanatory materials should compare programs, projects, and activities that are proposed for fiscal year 2022 to the fiscal year 2021 enacted level.

The Committee is aware that the analytical materials required for review by the Committee are unique to each agency in this act. Therefore, the Committee expects that each agency will coordinate with the House and Senate Committees on Appropriations in advance regarding the planned presentation for its budget justification materials in support of the fiscal year 2022 budget request.

AGENCY REPORTS

As a measure to reduce costs and conserve paper, the Committee reminds agencies funded by this act that currently provide separate copies of periodic reports (such as Performance and Accountability Reports) and correspondence to the chairs of the House and Senate Appropriations Committees and Subcommittees on Financial Services and General Government, and also to the ranking members of the committees and subcommittees, to use a single cover letter jointly addressed to the chairs and ranking members of the Committee and subcommittee of both the House and the Senate. To the greatest extent feasible, agencies should include in the cover letter a reference or hyperlink to facilitate electronic access to the report and provide the documents by electronic mail delivery. Consolidating addressees and remitting a copy of the letter and attachments to each recipient should expedite agency processing. This should also help ensure that consistent information is conveyed concurrently to the majority and minority committee offices of both chambers of Congress.

* * *

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

SALARIES AND EXPENSES

Appropriations, 2020

$170,250,000

Budget estimate, 2021

171,350,000

Committee recommendation

170,250,000

PROGRAM DESCRIPTION

The Treasury Inspector General for Tax Administration [TIGTA] was established by the IRS Restructuring and Reform Act of 1998 (Public Law 105–206). TIGTA was created to provide independent audit and investigative services necessary to improve the quality and credibility of oversight of the Internal Revenue Service [IRS] and ensure that the IRS is held to a high level of accountability.

TIGTA conducts audits, investigations, and inspections and evaluations to assess the operations and programs of the IRS and related entities, the IRS Oversight Board, and the Office of Chief Counsel to (1) promote the economic, efficient, and effective administration of the Nation's tax laws and to detect and deter fraud and abuse in IRS programs and operations; and (2) recommend actions to resolve fraud and other serious problems, abuses, and deficiencies in these programs and operations, and keep the Secretary and Congress fully and currently informed of these issues and the progress made in resolving them.

The audit function provides program audit, limited contract audit, and financial audit services. Program audits review and audit all facets of the IRS and related entities in an effort to improve IRS systems and operations while ensuring fair and equitable treatment of taxpayers. Contract audits focus on invoices/vouchers submitted to the IRS to determine whether charges are valid and to identify erroneous and improper payments. The investigative function provides for the detection and investigation of improper and illegal activities involving IRS programs and operations and protects the IRS and related entities against external attempts to corrupt or threaten the administration of the tax laws.

COMMITTEE RECOMMENDATION

The Committee recommends an appropriation of $170,250,000 for TIGTA, which is equal to the enacted level. The Committee appreciates TIGTA's efforts to promote the security of taxpayer data, to improve implementation of tax law changes, to combat identity theft and impersonation fraud, to ensure efficient and economical investments in information technology modernization, and to address all of the management and performance challenges confronting the IRS.

Improper Payments. — An improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. By virtue of its substantial procurement budget and the issuance of tax refunds and refundable credits, the IRS faces significant risks of improper payments. The Committee is pleased that TIGTA continues to investigate and issue reports relating to improper payments, particularly the report from May 4, 2020, entitled "Improper Payment Reporting Has Improved; However, There Have Been No Significant Reductions to the Billions of Dollars of Improper Payments," which sheds critical light on this issue. The Committee encourages TIGTA to continue to investigate improper payments at the IRS and to identify possible solutions.

Combatting IRS Impersonation Scams. — According to TIGTA, as of March 2020, more than 2,500,000 Americans have been targeted by an IRS impersonation scam. Additionally, more than 15,800 Americans have lost more than $75,100,000 to these scams. Given the ubiquitous nature of these scams, the Committee commends the work that TIGTA has done and encourages TIGTA to continue to prioritize working with the IRS to increase awareness of these scams, and urges TIGTA to continue aggressively pursue the criminals perpetrating this fraud.

SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM

SALARIES AND EXPENSES

Appropriations, 2020

$22,000,000

Budget estimate, 2021

17,500,000

Committee recommendation

15,000,000

PROGRAM DESCRIPTION

The Emergency Economic Stabilization Act (Public Law 110–343) established the Office of the Special Inspector General for the Troubled Asset Relief Program [SIGTARP] to perform audits and investigations of the Troubled Asset Relief Program [TARP].

COMMITTEE RECOMMENDATION

The Committee recommends $15,000,000 for SIGTARP for fiscal year 2021.

The Committee notes that less than 1 percent of TARP investments remain outstanding, the application periods for the Federal Housing Administration Refinance program and Making Home Affordable initiative have ended, and approximately 90 percent of housing finance agency Hardest Hit Fund disbursements have occurred. The Committee notes SIGTARP has found fraud, waste, and abuse in TARP programs that have disbursed funds. The Committee expects SIGTARP to continue winding down its operations as disbursements under TARP housing programs are paid out and SIGTARP approaches its sunset date.

FINANCIAL CRIMES ENFORCEMENT NETWORK

SALARIES AND EXPENSES

Appropriations, 2020

$126,000,000

Budget estimate, 2021

126,963,000

Committee recommendation

126,963,000

PROGRAM DESCRIPTION

The Financial Crimes Enforcement Network [FinCEN], a bureau within the Treasury Department's Office of Terrorism and Financial Intelligence, is the largest overt collector of financial intelligence in the United States. FinCEN's mission is to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity. FinCEN accomplishes its mission by administering the Bank Secrecy Act, a collection of statutes that form the Nation's anti-money laundering/counterterrorist financing regulatory regime. As the delegated administrator of the Bank Secrecy Act, FinCEN is responsible for the development and implementation of regulations, rules, and guidance issued under the Bank Secrecy Act. FinCEN also oversees the work of eight Federal agencies with delegated responsibility to examine various sectors of the financial industry for compliance with the Bank Secrecy Act's requirements. FinCEN is responsible for collecting, maintaining, and disseminating the information reported by financial institutions under the Bank Secrecy Act through a Governmentwide access service. FinCEN is the United States' Financial Intelligence Unit [FIU] and a founding member of the Egmont Group of Financial Intelligence Units. As the United States' FIU, FinCEN routinely shares information and cooperates with other FIUs around the world to address the global problems of terrorist financing, money laundering, and other illicit activity.

COMMITTEE RECOMMENDATION

The Committee recommends $126,963,000 for FinCEN. The amount is equal to the budget request.

Money Laundering of Cybercrime Proceeds. — The Committee recognizes that major data security breaches are becoming more common and are often orchestrated by sophisticated cybercriminal enterprises who then monetize the data and launder it through U.S. financial institutions. The Committee notes FinCEN's history of supporting law enforcement cases that combat cybercrime, and emphasizes the importance of continuing this effort as part of the bureau's broader mission to detect and disrupt all forms of financial crime. In addition to analyzing financial flows for this important effort in the course of ongoing strategic operations, to the extent that FinCEN has vetted, releasable and relevant information, it should use this data to ensure reporting institutions remain vigilant in detecting the laundering of cybercriminal proceeds by considering issuing an advisory on filing suspicious activity reports regarding specific cybercriminal activities. The advisories assisted financial institutions in understanding how to identify and report suspicious cyber-related activity. The Committee encourages FinCEN to continue to issue cyber-related advisories or other publications, as appropriate, to keep financial institutions apprised of the trends, typologies, red flag indicators, and other information that may assist financial institutions in reporting cyber-related suspicious activities.

Geographic Targeting Orders [GTOs]. — The committee is encouraged by the Department's ongoing efforts to expand the use and scope of GTOs, an important tool that enables the collection of shell corporations' beneficial ownership information to prevent illegal money from terrorism, sex trafficking, money laundering, and other illegal activities from being hidden in real estate transactions. The Committee expects FinCEN to continue to keep the Committee apprised of the Department's efforts to identify money laundering schemes through GTOs.

E-mail Compromise Fraud. — The Committee is aware of e-mail fraud schemes in real estate in which the e-mail accounts of victims are compromised to send fraudulent wire transfer instructions to financial institutions in order to misappropriate funds. Since 2013, there have been reported cases of business e-mail compromise and e-mail account compromise involving more than $3,000,000,000. FinCEN is directed to brief the Committee within 60 days of enactment of this act on its efforts to help financial institutions identify and prevent such e-mail fraud schemes.

BUREAU OF THE FISCAL SERVICE

SALARIES AND EXPENSES

Appropriations, 2020

$340,280,000

Budget estimate, 2021

360,200,000

Committee recommendation

350,200,000

PROGRAM DESCRIPTION

The mission of the Fiscal Service is to promote the financial integrity and operational efficiency of the U.S. Government through accounting, borrowing, collections, payments, and shared services. The Fiscal Service provides central payment services to Federal agencies and operates the Federal Government's collections and deposit systems in addition to providing governmentwide accounting and reporting services, managing the collection of delinquent debt owed to the Federal Government, borrowing on behalf of the Federal Government, and providing support services for other Federal agencies on a reimbursable basis.

COMMITTEE RECOMMENDATION

The Committee recommends an appropriation of $350,200,000. The recommendation includes $3,200,000 for the Bureau to complete implementation of the Treasury Internet Connection 3.0 standard and secure connectivity for the Bureau's data center, provide enhanced data encryption, and support other critical cyber remediation efforts within the Bureau.

Quality Service Management Office. — In 2019, the Bureau of the Fiscal Service was designated as the Quality Service Management Office for financial management. The bureau is leveraging existing Treasury authorities and in-house expertise to create and implement a readiness assessment process for agencies and legacy financial management shared service providers. The Committee recommendation includes funding to support this initiative and encourages Fiscal Service to prioritize necessary resources to continue implementation.

Death Data. — In May 2020, the Social Security Advisory Board reiterated its recommendation for Congress to transfer responsibility for the collection of death data from the Social Security Administration [SSA] to the Department of the Treasury. Within 120 days of enactment of this act, the Bureau of Fiscal Service is directed to report to the Committee on the feasibility of shifting responsibility for the collection and dissemination of death data from SSA to Treasury's Do Not Pay portal. The report should include projected implementation costs and recurring annual costs, including which costs would need to be funded by direct appropriations.

Improper Payments. — The Bureau is expected to continue implementation of the Payment Integrity Information Act (Public Law 116–117), which will allow the Bureau to work more closely with states and federal agencies to efficiently curb improper payments. The Committee expects the Bureau to remain in close communication with Congress and the Office of Management and Budget regarding implementation of this Act and the Bureau's progress assisting in the reduction of improper payments.

ALCOHOL AND TOBACCO TAX AND TRADE BUREAU

SALARIES AND EXPENSES

Appropriations, 2020

$119,600,000

Budget estimate, 2021

125,837,000

Committee recommendation

124,337,000

PROGRAM DESCRIPTION

The Alcohol and Tobacco Tax and Trade Bureau [TTB] is charged with collecting revenue and protecting the public and is responsible for enforcement of certain Federal laws and regulations relating to alcohol and tobacco. TTB works directly and in cooperation with others to maintain a sound revenue management and collection system that continues to reduce the regulatory burden, improve service, collect the revenue due, and prevent tax evasion and other criminal conduct. TTB is also responsible for preventing consumer deception, ensuring that regulated products comply with Federal commodity, safety, and distribution requirements, and providing customer service.

COMMITTEE RECOMMENDATION

The Committee recommends an appropriation of $124,337,000 for TTB. The Committee recommendation includes $5,000,000 for TTB's enforcement efforts for industry trade practice violations. Enforcement of trade practices functions, as required under the Federal Alcohol Administration Act (Public Law 74–401), is critical to ensuring a competitive, fair, and safe marketplace. The Committee will continue to monitor enforcement efforts for industry trade practice violations and the process for securing basic label and formula approvals under the Federal Alcohol Administration Act.

UNITED STATES MINT
UNITED STATES MINT PUBLIC ENTERPRISE FUND

PROGRAM DESCRIPTION

The United States Mint manufactures coins, sells numismatic and investment products, and provides for security and asset protection. Public Law 104–52 established the U.S. Mint Public Enterprise Fund [the Fund]. The Fund encompasses the previous Salaries and Expenses, Coinage Profit Fund, Coinage Metal Fund, and the Numismatic Public Enterprise Fund. The Mint submits annual audited business-type financial statements to the Secretary of the Treasury and to Congress in support of the operations of the revolving fund.

The operations of the Mint are divided into two major activities: manufacturing and sales (including circulating coinage and numismatic and investment products); and protection. The Mint is credited with receipts from its circulating coinage operations, equal to the full cost of producing and distributing coins that are put into circulation, including depreciation of the Mint's plant and equipment on the basis of current replacement value. Those receipts pay for the costs of the Mint's operations, which include the costs of production and distribution.

COMMITTEE RECOMMENDATION

The Committee recommends a spending level of $50,000,000 for circulating coinage and protective service capital investments for the Mint.

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND PROGRAM ACCOUNT

Appropriations, 2020

$262,000,000

Budget estimate, 2021

14,000,000

Committee recommendation

262,000,000

PROGRAM DESCRIPTION

The Community Development Financial Institutions Fund makes investments in the form of grants, loans, equity investments, deposits, and technical assistance grants to new and existing community development financial institutions [CDFIs] through the CDFI program. CDFIs include community development banks, credit unions, venture capital funds, revolving loan funds, and microloan funds, among others. Recipient institutions engage in lending and investment for affordable housing, small business, and community development within underserved communities. The CDFI Fund administers the Bank Enterprise Award Program, which provides a financial incentive to insured depository institutions that undertake community development financing activities.

COMMITTEE RECOMMENDATION

The Committee recommends $262,000,000 for the CDFI Fund. Of the amounts provided, $165,500,000 is for financial and technical assistance grants, of which up to $4,000,000 may be used to provide technical and financial assistance to CDFIs that fund projects to help individuals with disabilities; $16,000,000 is for Native American initiatives; $25,000,000 is for the Bank Enterprise Award program; $22,000,000 is for the Healthy Food Financing Initiative; and $28,500,000 is for the administrative expenses for all programs.

The Committee notes the CDFI Fund's ability to leverage private sector investment in community development projects such as affordable housing, retail development, and community centers, as well as lending to small businesses. However, the Committee remains concerned about an overall lack of transparency into many of the CDFI Fund's programs and nominal ability to verify investment impacts. The Committee strongly believes it is important to ensure that CDFIs are delivering investments to the borrowers and communities that need it most. The Committee urges the CDFI Fund to prioritize completion of such tools in fiscal year 2021. In addition, the Committee directs the Secretary to report to the Appropriations Committees within 90 days of enactment of this act on the impact fiscal year 2018 CDFI Fund Awardees are having in the communities they serve; the overall risk to which the Fund's portfolio is exposed; and a description of awardees that are at risk of noncompliance.

The CDFI Fund is expected to ensure that funding is not allocated to entities that support activities in contradiction of the Controlled Substances Act (21 U.S.C. 801 et seq.) and report to the Committee on any CDFI award recipient who uses Federal funds in contradiction of the Controlled Substances Act.

Economic Mobility Corps. — The Committee recommendation for the Core Program includes $2,000,000 for the CDFI Fund to continue to fund an interagency agreement with the Corporation for National and Community Service to place national service members at certified CDFIs. The Committee directs the CDFI Fund to submit a report no later than December 31, 2021, to the Committee that describes activities outlined in the agreement, a description of the process utilized to place national service members into CDFIs, and a list of CDFIs receiving funding for the placement of national services members.

Bond Guarantee Program. — The Committee includes a provision enabling the Secretary of the Treasury to guarantee up to $300,000,000 in bonds until December 31, 2021, an amount equal to the request level. The bond guarantees will not result in a cost to the taxpayer. The bonds are intended to support CDFI lending and investment activities in underserved communities by providing a source of long-term capital, and the funds raised through the bonds will be used to capitalize new loans or refinance existing loans.

Non-Metropolitan and Rural Areas. — The Committee directs Treasury to take into consideration the unique conditions, challenges, and scale of nonmetropolitan and rural areas when designing and administering programs to address economic revitalization and community development and when making CDFI award decisions. The Committee notes that the CDFI Fund is required by 12 U.S.C. 4706(b) to seek to fund a geographically diverse group of award recipients, including those from non-metropolitan and rural areas. In addition, the Committee directs funding to be used in each program for projects that serve populations living in persistent poverty counties in accordance with this act. The Committee directs the Secretary to report to the Appropriations Committees within 90 days of enactment of this act detailing how the CDFI Fund will ensure fiscal year 2021 CDFI Program recipients will serve nonmetropolitan and rural areas and populations living in persistent poverty counties.

CDFI Investments in Severely Distressed Areas. — The Committee requests the Comptroller General conduct a study and report within 12 months regarding the impact of CDFI Fund award and tax credit allocation in severely distressed areas. The report should evaluate (1) how the CDFI Fund awards funds and allocates tax credits to recipients and how program policies affect the amount of funding and tax credits to severely distressed areas, and (2) the extent to which CDFIs are investing in severely distressed areas. If appropriate, the Comptroller General should provide recommendations for how to improve distribution channels to these communities.

BUREAU OF ENGRAVING AND PRINTING

PROGRAM DESCRIPTION

The Bureau of Engraving and Printing [BEP] has been the sole manufacturer of U.S. paper currency for almost 150 years. The origin of the BEP is traced to an Act of Congress passed on February 25, 1862, 12 Stat. 345, authorizing the Secretary of the Treasury to issue a new currency — United States notes. While this law was the cornerstone authority for the operations of the engraving and printing division of the Treasury for many years, it was not until an Act of June 20, 1874, 18 Stat. 100, that the Congress first referred to this division as the "Bureau of Engraving and Printing." The Bureau's status as a distinct bureau within the Department of the Treasury was solidified by section 1 of the Act of June 4, 1897, 30 Stat. 18, which placed all of the business of the BEP under the immediate control of a director, subject to the direction of the Secretary of the Treasury. The 1897 law is now codified in 31 U.S.C. 303.

The BEP designs, manufactures, and supplies Federal Reserve notes and other security documents issued by the Federal Government. The operations of the BEP are currently financed by means of a revolving fund, which requires the BEP to be reimbursed by customer agencies for all costs of manufacturing products and services performed. The BEP is also authorized to assess amounts to acquire capital equipment and provide for working capital needs.

INTERNAL REVENUE SERVICE

PROGRAM DESCRIPTION

The Internal Revenue Service [IRS] collects the revenue that funds the Government and administers the Nation's tax laws. During 2019, the IRS processed 255 million tax forms and collected $3,600,000,000,000 in taxes (gross receipts before tax refunds), totaling 95 percent of Federal Government receipts. The IRS taxpayer service program assists millions of taxpayers in understanding and meeting their tax obligations. The IRS tax enforcement and compliance program deters taxpayers inclined to evade their responsibilities while pursuing those who violate tax laws.

COMMITTEE RECOMMENDATION

The Committee recommends a total of $11,510,054,000 for the Internal Revenue Service for fiscal year 2021.

Tax Gap. — The vast majority of Americans voluntarily pay their fair share of taxes, yet there is still a "tax gap." The tax gap is the shortfall between the amount of tax voluntarily and timely paid by taxpayers and the actual tax liability of taxpayers. In December 2019, IRS estimated that the average annual gross tax gap was $441,000,000,000 for tax years 2011–2013. However, IRS estimates that through late payments and enforcement actions, it eventually will collect an additional $60,000,000,000 on average for those years, leaving the average net tax gap at $381,000,000,000 for tax years 2011–2013. The Committee expects the IRS to continue to assess and implement all outstanding recommendations from the Government Accountability Office [GAO] and TIGTA concerning efforts to reduce the tax gap.

User Fees. — The IRS is authorized to charge user fees to recover the cost of providing certain services to the public that confer a special benefit to the recipient. In its congressional budget justification, IRS estimates it will collect $549,930,000 in user fees in fiscal year 2021. The Committee directs the IRS to submit a user fee spend plan, within 60 days of enactment of this act, detailing planned spending on its four appropriations accounts — Taxpayer Services, Enforcement, Operations Support, and Business Modernization Systems. Specifically, the Committee would like to see how programs, investments, and initiatives funded through each appropriations account are supported by user fees.

Cybersecurity. — The IRS is responsible for safeguarding a vast amount of sensitive financial and personal data, processing returns that contain confidential information for more than 300 million taxpayers. Persistent information security weaknesses put the IRS at risk of disruption, fraud, or inappropriate disclosure of sensitive information. TIGTA stated that the security of taxpayer data and protection of the IRS resources was the top priority in its list of top ten management challenges for the IRS for fiscal year 2020. GAO has reported that numerous deficiencies in the IRS's controls increase the risk that the IRS's network devices and systems could be compromised and used by unauthorized individuals to access sensitive taxpayer data (GAO–18–165). Given the recent breaches to individuals' data, it is clear the IRS cannot afford to have taxpayer information misused, improperly disclosed, or destroyed. Securing the IRS's systems and protecting taxpayers' information should be a top priority for the IRS. The Committee looks forward to receiving the report required by Public Law 116–93 regarding the recommendations of TIGTA, GAO, and the National Taxpayer Advocate and describing the IRS's disposition of recommendations from audits completed prior to enactment of this law, as well as related plans and the status for work that will contribute to addressing known security weaknesses and deficiencies. The IRS should also consider any recommendations from the National Taxpayer Advocate.

Taxpayer Protections. — The Committee is very concerned about the rising threats to citizens as they engage with the government online and encourages the IRS to leverage commercially available, affordable, proven, automated technology to protect taxpayers from criminals who would impersonate legitimate IRS resources or take other measures to defraud US citizens of their personal information and funds.

Opportunity Zones. — The Committee encourages the IRS to collect and make public data on the location, amount, and project purpose of any Qualified Opportunity Zone investments by a Qualified Opportunity Fund, as well as indicate those projects that are owned by or employ residents of an Opportunity Zone.

Reconciling Income Guidelines for Disabled Veterans. — There are 4,700,000 veterans with disabilities and 1,500,000 veterans living in poverty in the United States. However, connecting veterans to affordable housing opportunities based on their disability and/or income status can be difficult. Many multifamily affordable housing developments are financed with a combination of the Department of Housing and Urban Development's [HUD] HOME Investment Partnerships Program funds and the Low Income Housing Tax Credits [LIHTC]. However, the income guidelines for HUD's HOME program and the LIHTC vary, and reconciling the two program's requirements can be challenging. As such, the Committee urges the IRS to work with HUD to examine ways to better align HUD and LIHTC guidelines.

Private Debt Collection Agencies. — The Committee continues to monitor closely the activities and performance of the IRS private debt collection program and its vendors. The Committee encourages the IRS to review the performance of private collection agencies working with the program to determine if additional competition by eligible venders would be beneficial to both taxpayers and the IRS.

Modernizing Taxpayer Notices and Communications. — The Committee supports the Internal Revenue Service in its tax compliance mission. However, the Committee also understands that taxpayers in rural areas face significant challenges and are often in situations where broadband access may be poor or non-existent, and where access to the nearest IRS Service Centers may be hundreds of miles away. Recent IRS announcements to shift communications to the Internet would be a disservice to these taxpayers. The Committee encourages the Internal Revenue Service to examine options during their modernization efforts that ensure taxpayers in rural areas will not be faced with undue burdens following the conclusion of the modernization period.

Improper Payments. — An improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. By virtue of its substantial procurement budget and the issuance of tax refunds and refundable credits, the IRS faces significant risks of improper payments. The Committee directs the IRS to make the elimination of improper payments an utmost priority. The IRS is further directed to implement, within 270 days of enactment of this act, all open and unimplemented recommendations from TIGTA and GAO that address improper payments, or report to the Committee on impediments to implementation of each open recommendation. This report shall include the dollar value of improper payments, as estimated by TIGTA or GAO, that would be avoided through implementation of each recommendation.

TAXPAYER SERVICES

Appropriations, 2020

$2,511,554,000

Budget estimate, 2021

2,562,554,000

Committee recommendation

2,511,554,000

PROGRAM DESCRIPTION

The Taxpayer Services appropriation provides for taxpayer services, including forms and publications; processing tax returns and related documents; filing and account services; taxpayer advocacy services; and assisting taxpayers to understand their tax obligations, correctly file their returns, and pay taxes due in a timely manner.

COMMITTEE RECOMMENDATION

The Committee recommends $2,511,554,000 for Taxpayer Services. Bill language is included providing not less than $11,000,000 for the Tax Counseling for the Elderly Program, not less than $12,000,000 for low-income taxpayer clinic grants, not less than $30,000,000, to be available for 2 years, for the Community Volunteer Income Tax Assistance [VITA] Matching Grants Program for tax return preparation assistance, and not less than $210,000,000 for the Taxpayer Advocate Service.

Rural Service Delivery Issues. — The IRS has been plagued by significant wait times and deteriorating rate of response for assistance provided through the national toll-free line. It is more imperative than ever that the IRS offers personal and local assistance to American taxpayers. The Committee notes with concern that both the overall number of Taxpayer Assistance Center [TACs] has declined and the number of TACs currently staffed with only one employee has increased in recent years, often resulting in the effective closures of the sites. While the IRS has created virtual customer service sites in some locations, the technical and financial requirements of these sites have not been made widely available. The Committee is concerned that the actions taken by the IRS and the proposed "Future State" of service leave rural taxpayers reliant on paid preparers or unable to obtain timely and accurate assistance with pre- and post-filing questions. The Committee continues to believe that the IRS must do more to address the needs of rural taxpayers by ensuring that they have the ability to reach local taxpayer assistance services.

Taxpayer Services in Alaska and Hawaii. — Given the remote distance of Alaska and Hawaii from the U.S. mainland and the difficulty experienced by Alaska and Hawaii taxpayers in receiving needed tax assistance by the national toll-free line, it is imperative that Taxpayer Assistance Centers [TACs] and offices of the Tax-payer Advocate Service [TAS] in these States are appropriately staffed and capable of resolving taxpayer problems of the most complex nature. The Committee directs the IRS to continue to staff each TAS office in each of these States with a Collection Technical Advisor and an Examination Technical Advisor in addition to the current complement of office staff. The Committee further directs the IRS to report, within 180 days of enactment of this act, on the current face-to-face taxpayer services offered in Alaska and Hawaii, and the feasibility and cost of various options to improve service availability, including an evaluation of opening at least one additional TAC in both Alaska and Hawaii. The Committee agrees with the National Taxpayer Advocate that the elimination of a regular walk-in option for taxpayers raises significant concerns about access to IRS services, and the report should also consider the delivery service benefits of appointment versus walk-in service, including an evaluation of the costs and benefits of reinstituting walk-in services at least 2 days a week at existing TACs nationwide.

Identity Protection Personal Identification Number [IP PIN] Expansion. — In 2018, the IRS received 199,000 reports of identity theft. Taxpayers who have their refunds hijacked by fraudsters often have to wait years to get the refunds to which they are legally entitled. In preparation for the 2019 Filing Season, the IRS issued 3,600,000 IP PINs to taxpayers, up from 759,000 in 2013. According to the IRS, as of February 28, 2019, it had rejected approximately 3,741 fraudulent tax returns and prevented the issuance of $16,700,000 in fraudulent tax refunds related to identity theft. The Committee recognizes that the IP PIN pilot program is an important tool for saving taxpayer money and commends the IRS for continuing to expand the pilot program to additional states, and encourages further expansion as soon as possible.

Low Income Tax Clinic. — The Committee is concerned that several states lack a Low Income Tax Clinic [LITC] grantee. Specifically, there are no grantees in Hawaii, Nevada, North Dakota, Puerto Rico, West Virginia, or Wyoming. Within 120 days of enactment of this act, the Committee directs the IRS to conduct outreach in those states to assess why there are no successful grantees, the IRS should report to the Committee with recommendations on how to enable new grant applicants in those states.

ENFORCEMENT

Appropriations, 2020

$5,010,000,000

Budget estimate, 2021

5,071,260,000

Committee recommendation

5,010,000,000

PROGRAM DESCRIPTION

The Enforcement appropriation provides for the examination of tax returns, both domestic and international; the administrative and judicial settlement of taxpayer appeals of examination findings; technical rulings; monitoring employee pension plans; determining qualifications of organizations seeking tax-exempt status; examining tax returns of exempt organizations; enforcing statutes relating to detection and investigation of criminal violations of the 31 internal revenue laws; identifying underreporting of tax obligations; securing unfiled tax returns; and collecting unpaid accounts.

COMMITTEE RECOMMENDATION

The Committee recommends $5,010,000,000 for enforcement activities for fiscal year 2021.

Enforcement Efforts and Money Laundering Investigations. — The Committee recognizes that tax crimes and money laundering are closely related. As such, the Committee urges the IRS to increase the number of Special Agents in the Criminal Investigations unit responsible for investigating money laundering, violations of the Bank Secrecy Act and criminal violations of the tax code, in order to provide the necessary law enforcement personnel to solidify U.S. efforts to combat money laundering and ensure that offenders are prosecuted to the fullest extent, in conjunction with the Financial Crimes Enforcement Network and the Department of Justice.

Facilitating Small Appeals. — The Taxpayer First Act of 2020 (Public Law 116–25) introduced critical reforms to protect taxpayers and improve customer service, including codification of the IRS Independent Office of Appeals. The Committee encourages the IRS to further improve the taxpayer experience by allowing for appeals to be submitted and processed online through web-based digital interaction, rather than through "snail mail" or after extended holds on the phone.

Refund Fraud Involving Decedents. — The IRS relies on weekly receipt of the Social Security Administration's Death Master File [DMF] to prevent identity theft tax return filings using the Taxpayer Identification Number of a deceased individual. Using this information, as of May 2017 IRS had "locked" approximately 33.9 million tax accounts of deceased individuals. However, in December 2018, TIGTA observed that the IRS's efforts to detect and prevent tax-related identity theft using deceased individuals' identities may be ineffective as a result of incomplete DMF data (TIGTA Report No. 2020–40–012). TIGTA's analysis of tax returns filed in processing years 2015 through 2018 found millions of dollars in refunds paid to decedents. The Committee directs the IRS to consult with the Social Security Administration on all potential data limitations in the DMF.

Processing of Applications for Tax-Exempt Status. — The Committee strongly believes that meaningful, transparent, and sustained corrective action is warranted to restore any erosion of public trust in the IRS, strengthen the agency, and prevent any recurrence of the circumstances that led to the use of inappropriate case screening criteria in the handling of applications for certain tax-exempt groups based on their political beliefs. In March 2015, TIGTA assessed the IRS's actions in response to its 2013 recommendations to improve the identification and processing of applications for tax-exempt status involving political campaign intervention. TIGTA's report found that the IRS implemented significant changes to the process for reviewing applications for tax-exempt status. The Committee notes language was included in the Consolidated Appropriations Act, 2020 (Public Law 116–6) restricting the use of Federal funds to develop new IRS regulations covering section 501(c)(4) and that the same language is continued in this act.

Preventing Misclassification of Contractors. — The Committee believes that the IRS SS–8 Program is critical to ensuring that workers are classified correctly, identifying leads for employment tax exams and criminal investigations, and combating the under-reporting of employment taxes that contributes significantly to the tax gap. The Committee believes it is crucial that the IRS maintain sufficient staffing at all SS–8 processing locations. The Committee directs the IRS to notify the House Appropriations Committee, the Senate Appropriations Committee, the House Ways and Means Committee, and the Senate Finance Committee prior to making any staffing reductions or reallocations within the SS–8 processing program.

Enforcement Efforts and Money Laundering Investigations. — While tax crimes are considered predicate offenses to money laundering in many countries, they are not specified unlawful activities under U.S. money laundering law. However, the Committee recognizes that tax crimes and money laundering are closely related. As such, the Committee urges the IRS to increase the number of special agents in the Criminal Investigations unit responsible for investigating money laundering, violations of the Bank Secrecy Act, and criminal violations of the tax code, to provide the necessary law enforcement personnel to solidify U.S. efforts to combat money laundering.

Criminal Investigation Division. — IRS Criminal Investigation [IRS–CI] is the criminal law enforcement arm of the IRS, and is charged with investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. According to its Annual Report 2018, IRS–CI employs 2,019 special agents — a decline of almost 40 percent from the historical high. The Committee continues to strongly support the mission of IRS–CI, and recognizes the significant "return on investment" of every dollar dedicated to the division.

OPERATIONS SUPPORT

Appropriations, 2020

$3,808,500,000

Budget estimate, 2021

4,104,689,000

Committee recommendation

3,808,500,000

PROGRAM DESCRIPTION

The Operations Support appropriation provides resources for overall planning, direction, operations, and critical infrastructure activities for the IRS. These activities include IT and cybersecurity that keep tax systems running and protect taxpayer data, the financial management activities that ensure effective stewardship of the Nation's revenues, and the physical infrastructure and security that help IRS employees serve customers in office, campus, and Taxpayer Assistance Center sites. Telecommunications, human resource, and communications infrastructure are also critical components of this appropriation and are vital to maintaining adequate levels of customer service and the post-filing processes necessary for the tax system to function.

COMMITTEE RECOMMENDATION

The Committee recommends $3,808,500,000 for Operations Support for fiscal year 2021.

Information Technology Reports. — The Committee directs the IRS to submit quarterly reports on particular major project activities to the Committees on Appropriations and the GAO, no later than 30 days following the end of each calendar quarter in fiscal year 2021. The Committee expects the reports to include detailed, plain English explanations of the cumulative expenditures and schedule performance to date, specified by fiscal year; the costs and schedules for the previous 3 months; the anticipated costs and schedules for the upcoming 3 months; and the total expected costs to complete the major information technology project activities. In addition, the quarterly report should clearly explain when the project was started; the expected date of completion; the percentage of work completed as compared to planned work; the current and expected state of functionality; any changes in schedule; and current risks unrelated to funding amounts and mitigation strategies. The Committee directs the Department of the Treasury to conduct a semiannual review of the IRS's IT investments to ensure the cost, schedule, and scope goals of the projects are transparent. The Committee further directs GAO to review and provide an annual report to the Committees evaluating the cost and schedule of all major IRS information technology projects for the year, with particular focus on those projects regarding which the IRS is submitting quarterly reports to the Committee.

Taxpayer Correspondence. — The Committee is pleased that the IRS has taken the initial steps to implement a taxpayer correspondence delivery tracking system, and encourages the IRS to continue its efforts to fully implement such a system.

Federal Contractor Tax Check System. — Since fiscal year 2015, the Financial Services and General Government appropriations acts have included a government-wide provision prohibiting Federal agencies from using appropriated funds to enter into contracts with entities that have qualifying Federal tax debts unless certain circumstances are met. This provision effectuates the straight-forward proposition that contractors that ignore their Federal tax liabilities should not be allowed to enrich themselves with taxpayer dollars. Unfortunately, the Committee has serious concerns about agencies' compliance with this provision. In an April 2020 study, GAO reported widespread noncompliance, and potential violations of the Antideficiency Act, at some of the largest Federal agencies (GAO–19–243).

In order to better effectuate the government-wide provision, the Consolidated Appropriations Act of 2020 (Public Law 116–93) provided the IRS $10,000,000 for the development of a vendor tax check application capable of producing an authenticated electronic certification stating that the entity does or does not have a tax debt (1) which has been assessed; (2) which is greater than $52,000 and (3) with respect to which a notice of lien has been filed pursuant to section 6323 and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or a levy is made pursuant to section 6331. However, the Committee remains gravely concerned that the IRS has not taken meaningful steps to implement this initiative. The IRS is directed to provide the Committee a quarterly update on the status of the tax check application. In addition, the Committee recommendation again includes $10,000,000 dedicated to this initiative to ensure that the IRS does not face any resource constraints.

BUSINESS SYSTEMS MODERNIZATION

Appropriations, 2020

$180,000,000

Budget estimate, 2021

300,000,000

Committee recommendation

180,000,000

PROGRAM DESCRIPTION

The Business Systems Modernization appropriation provides resources for the planning and capital asset acquisition of information technology to modernize the IRS business systems.

COMMITTEE RECOMMENDATION

The Committee recommends $180,000,000 for Business Systems Modernization for fiscal year 2021. This amount is equal to the fiscal year 2020 enacted level.

The Committee expects the IRS to continue to submit quarterly reports to the Committees and GAO during fiscal year 2021, no later than 30 days following the end of each calendar quarter. These reports should include detailed, plain English explanations of the cumulative expenditures and schedule performance to date, specified by fiscal year; the costs and schedules for the previous 3 months; the anticipated costs and schedules for the upcoming 3 months; and the total expected costs to complete major IT investments. In addition, the quarterly report should clearly explain when the project was started; the expected date of completion; the percentage of work completed as compared to planned work; the current and expected state of functionality; any changes in schedule; and current risks unrelated to funding amounts and mitigation strategies. The Committee directs the Department of the Treasury to conduct a semi-annual review of major IT investments to ensure the cost, schedule, and scope goals of the projects are transparent. The Committee further directs GAO to review and provide an annual report to the Committee evaluating the cost and schedule of major IT investments for the year, as well as an assessment of the functionality achieved.

ADMINISTRATIVE PROVISIONS — INTERNAL REVENUE SERVICE
(INCLUDING TRANSFER OF FUNDS)

The Committee includes 10 administrative provisions as follows: Section 101 continues a provision allowing the IRS to transfer certain percentages of appropriations made available to the agency in fiscal year 2020 to any other IRS appropriation, upon the advance approval of the Committees on Appropriations.

Section 102 continues a provision maintaining a training program in taxpayers' rights and cross-cultural relations.

Section 103 continues a provision requiring the IRS to institute and enforce policies and procedures, which will safeguard the confidentiality of taxpayer information and protect taxpayers against identity theft.

Section 104 continues a provision directing that funds shall be available for improved facilities and increased staffing to support sufficient and effective 1–800 help line services for taxpayers including enhanced response time to taxpayer communications, particularly for victims of tax-related crimes.

Section 105 continues a provision requiring the IRS to issue notices to employers of any address change request and to give special consideration to offers in compromise for taxpayers who have been victims of payroll tax preparer fraud.

Section 106 continues a provision that prohibits the use of funds by the IRS to target United States citizens for exercising any right guaranteed under the First Amendment to the Constitution.

Section 107 continues a provision that prohibits the use of funds by the IRS to target groups for regulatory scrutiny based on their ideological beliefs.

Section 108 continues a provision that requires the IRS to comply with procedures on conference spending as recommended by the Treasury Inspector General for Tax Administration.

Section 109 continues provision that prohibits the use of funds to give bonuses or hire former employees without consideration of conduct and compliance with Federal tax laws.

Section 110 continues a provision that prohibits the use of funds to violate the confidentiality of tax returns.

ADMINISTRATIVE PROVISIONS — DEPARTMENT OF THE TREASURY
(INCLUDING TRANSFERS OF FUNDS)

The Committee includes 16 administrative provisions, as follows: Section 111 authorizes certain basic services within the Treasury Department in fiscal year 2021, including purchase of uniforms; maintenance, repairs, and cleaning; purchase of insurance for official motor vehicles operated in foreign countries; and contracting with the Department of State for health and medical services to employees and their dependents serving in foreign countries.

Section 112 authorizes transfers, up to 2 percent, between Departmental Offices, Office of Terrorism and Financial Intelligence, Office of Inspector General, Special Inspector General for the Troubled Asset Relief Program, Financial Crimes Enforcement Network, Bureau of the Fiscal Service, and Alcohol and Tobacco Tax and Trade Bureau, appropriations under certain circumstances.

Section 113 authorizes transfers, up to 2 percent, between the Internal Revenue Service and the Treasury Inspector General for Tax Administration under certain circumstances.

Section 114 prohibits the Department of the Treasury and the Bureau of Engraving and Printing from redesigning the $1 Federal Reserve Note.

Section 115 authorizes the Secretary of the Treasury to transfer funds from Salaries and Expenses, Bureau of the Fiscal Service, to the Debt Collection Fund as necessary to cover the costs of debt collection. Such amounts shall be reimbursed to the Salaries and Expenses account from debt collections received in the Debt Collection Fund.

Section 116 requires prior approval for the construction and operation of a museum by the United States Mint.

Section 117 prohibits the merger of the United States Mint and the Bureau of Engraving and Printing without prior approval of the committees of jurisdiction.

Section 118 authorizes the Department's intelligence activities.

Section 119 permits the Bureau of Engraving and Printing to use not to exceed $5,000 from the Industrial Revolving Fund for reception and representation expenses.

Section 120 requires the Secretary of the Treasury to develop an annual Capital Investment Plan.

Section 121 continues a provision that requires a report on the Department's Franchise Fund.

Section 122 continues a provision which prohibits the Department from finalizing any regulation related to the standards used to determine the tax-exempt status of a 501(c)(4) organization.

Section 123 continues a provision that requires quarterly reports of the Office of Financial Research and Office of Financial Stability.

Section 124 continues a provision that provides funding for the digitization of unclaimed U.S. savings bonds.

Section 125 is a new provision to increase information sharing between the Treasury Department and States relating to unclaimed U.S. savings bonds.

Section 126 is a new provision that allows the Treasury Department to access the Death Master File for improper payment purposes.

DOCUMENT ATTRIBUTES
  • Institutional Authors
    U.S. Senate
    U.S. Senate Appropriations Committee
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2020-44256
  • Tax Analysts Electronic Citation
    2020 TNTF 218-15
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