 RELEASE: KHANNA INTRODUCES THE STOP CHEATERS ACT, MAKING ULTRA-RICH PAY THEIR FAIR SHARE February 17, 2021Press Release Legislation will revive tax enforcement on the ultra-rich & wealthy corporations Washington, DC – Following the colossal Robinhood/GameStop fiscal chaos, Rep. Ro Khanna (CA-17), Deputy Whip of the Congressional Progressive Caucus & Member of the House Committee on Oversight, has introduced the Stop Corporations and Higher Earners from Avoiding Taxes and Enforce Rules Strictly (CHEATERS) Act to bring back tax enforcement on the ultra-rich. “We know our tax system is broken, and it’s long past time we start fixing it,” said Rep. Ro Khanna. “Today’s hearing is just one example among thousands of the ways in which the ultra-wealthy play by different rules than the rest of us. Wall Street has been able to act like high rolling gamblers with almost zero consequences for far too long. Right now, the wealthiest one percent are responsible for roughly 70 percent of the ‘tax gap’—the difference between taxes owed and taxes paid. It’s time every American pay their fair share.” Without raising taxes on anyone, the Stop CHEATERS Act would raise an estimated $1.2 trillion in revenue over 10 years, by investing $100 billion into the IRS over the next decade while imposing auditing and reporting requirements to prevent tax cheating from the wealthiest corporations and individuals. This proposal was recently laid out in a proposal in Tax Notes by Dr. Natasha Sarin, University of Pennsylvania Law Professor, Dr. Lawrence Summers, former Treasury Secretary, and Charles Rossotti, former IRS Commissioner. Over the last 25 years, IRS enforcement resources have been cut 28 percent, while individual returns have increased 31 percent and business returns have increased 80 percent. Khanna’s bill would provide the IRS the funding it needs with strings attached, to ensure that additional money goes toward enforcement and audits of the ultra-wealthy and the wealthiest corporations in America. The bill does not add any burdensome new requirements on small business owners, who would continue to prepare and pay their taxes like normal. Individuals with business income, or who own S-corporations or Partnerships, and who have total income in the top 3 percent of taxpayers will receive a new 1099 Form to prepare a more accurate tax return and ensure that business income for the wealthy isn’t hidden from the IRS. "Thanks to over a decade of underfunding, the IRS in its current state is no match for the amount of criminal tax evasion being committed by the top 1%,” said Morris Pearl, Chair of Patriotic Millionaires. “We've almost reached the point where the rich and powerful can simply decide not to pay their taxes and face no consequences for their misbehavior. By giving the IRS the tools it needs to properly tackle wealthy criminal tax evasion, the Stop CHEATERS Act will finally hold millionaires and billionaires to the same standard as normal, hardworking taxpayers." “IRS budget cuts have decimated the agency’s ability to ensure that wealthy individuals and large corporations are paying the taxes they owe, stacking the deck even more in favor of the wealthy and powerful and draining hundreds of billions of dollars in revenue,” said Seth Hanlon, Senior Fellow at the Center for American Progress. “Representative Khanna’s Stop CHEATERS Act provides additional resources and tools to crack down on tax dodging by millionaires and large corporations and enable the agency to better serve ordinary, honest taxpayers. It is an important step toward economic, social, and racial justice, and an economy that works for all Americans.” "After years of Republican budget cuts and skewed priorities, the IRS now audits those who make $20,000 at about the same rate as the top 1%, even though the vast majority of unpaid taxes are attributable to wealthy tax cheats,” said Frank Clemente, Executive Director of Americans for Tax Fairness. “Rep. Khanna's bill would go a long way towards making things right. It mandates minimum audit levels for the wealthy and large corporations and gives the IRS the funding it needs to help make sure that those at the top are paying their fair share of taxes." The Stop CHEATERS Act will unrig America’s tax system by giving the IRS the resources it needs to put an end to runaway tax evasion by the ultra-rich and largest corporations in the US. Specifically, it would: Provide $100B in additional funding to the IRS over 10 years, generating $1.2 Trillion in revenue. $70B would go toward enforcement, $20B toward taxpayer services, and $10B toward IT and operations support. Every $1 spent would generate more than $11 in greater tax collection. Most of this funding would go toward hiring and training specialized enforcement professionals who will be focused on tax compliance of those with gross income of $1 million or more. Improve IRS Technology by using $10B of the total $100B to upgrade decades-old systems. Pilot projects have suggested the return on investment from revenue gained could be as high as 50:1. Require IRS Audits of the Wealthiest Corporations and Individuals, including 95% of corporations with more than $20B in assets, 50% of individual tax returns with income over $10 million/year, and 20% of individual tax returns with income between $1-10 million/year. Prevent the ultra-Rich from hiding their income by requiring additional reporting for their “pass-through” businesses. Individuals whose taxable income is above $400,000 (top 3% of AGI) AND who have received additional income from sources not previously disclosed to the IRS would have to disclose their income on a new 1099 report. They would use this info to prepare an accurate tax return that discloses all of their income, much as other taxpayers use 1099’s and W-2’s. Mandate Regular Reporting to Congress to Enhance Oversight. IRS would be required to submit regular reports to Congress on its progress to recruit and retain auditors with the skills to audit high-income earners and report on revenue loss grouped by income levels and from offshore tax evasion. Require IRS Audits of the Wealthiest Corporations and Individuals, including 95% of corporations with more than $20B in assets, 50% of individual tax returns with income over $10 million/year, 20% of individual tax returns with income between $1-5 million/year, and 33% of individual tax returns with income between $5-10 million/year. Increased Penalties on Tax Fraud for Millionaires Cheating on their Taxes. Millionaires who falsify their tax returns would pay an additional penalty of 20-40% of the underpayment depending on their income. A section-by-section summary of the legislation can be found here, and the full bill text can be found here. Rep. Khanna – Stop CHEATERS ActStop Corporations and High Earners from Avoiding Taxes and Enforce Rules Strictly Act Section by Section Section 1. Short Title. The bill may be cited as the Stop Corporations and High Earners from Avoiding Taxes and Enforce Rules Strictly Act, or Stop CHEATERS Act Section 2. Policy of Congress. States that it is the policy of Congress that the IRS should be given resources to increase audits and enforcement of tax compliance of high-income individuals to reduce the tax gap, with the emphasis on the auditing and enforcement of tax compliance by individuals with gross income of not less than $1 million and of large corporations, and to modernize its technology in order to better serve taxpayers and enforce tax laws. Supports other related policy goals. Section 3. Additional Appropriations for the IRS a) Enforcement: Provides additional enforcement funding for the IRS for the purpose of hiring staff who can carry out audits on individuals making more than $1 million in total income. The IRS would be required to use this funding to meet the following audit targets: A) 50% of individuals making more than $10 million in total income B) 33% of individuals making $5 million-$10 million in total income C) 20% of individuals making $1 million-$5 million in total income D) 95% of corporations with more than $20B in assets E) 40% of returns with estates larger than $10 million F) 1.2% of returns reflecting taxes related to gifts G) .22% of tax returns filed by an employer with respect to employee compensation Enforcement Funding: The IRS would receive $70B spread out over the course of FY22-31, with $2B for FY22 and then increased levels of investment as the program is scaled up and the absorption capacity of the IRS increases. After the first four years of establishing this program of targeting audits on high-income individuals and wealthy corporations, the IRS would receive $8.5B each year from FY26-31. b) Taxpayer Services: Provides $20B in funding for taxpayer services, spread out over 10 years, with $1B for FY21 and then increased levels of investment as the program is scaled up and absorption capacity of the IRS increases. After the first four years of establishing this program, the IRS would receive $2.5B each year from FY26-31. c) Operations Support: Provides $10B in funding for operations support spread out over the course of FY22-31 to upgrade the decades-old IT systems at the IRS to improve the capacity of the IRS to detect fraud related to income from a trade or business. The IRS would receive $1B each year from FY26-31. Section 4: Returns Related to Certain Business Transactions This section would prevent tax filers in the top 3% of annual gross income from hiding their business income generated by “pass-through” businesses, by: Requiring individuals whose taxable income is above $400,000 AND who have received additional income from sources not previously disclosed to the IRS would have to disclose their business income on a new 1099 report. The report would also be required for all “pass-through” entities who had an ownership interest held by the individual taxpayers above $400,000 in annual gross income. Background: Most US businesses are not subject to the corporate income tax; rather, their profits “pass-through” to owners or members and are taxed under the individual income tax. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S-corporations. Pass-through businesses are responsible  1 for a significant share of the tax gap. About 41% of the tax gap from 2008-2010, or $190 billion, was due to pass-throughs underreporting income and thus paying too little income tax. Process: The IRS would be responsible for determining which taxpayers (individual filers and pass-through entities would be covered by the new 1099 reporting requirement. Taxpayers required to file the new 1099 would need to use the information return in the same way as all other taxpayers using 1099’s to assist in filing an accurate return. They would be required to include with their return reconciling the 1099’s with their return. The IRS would analyze all the individual and pass-through returns filed in the previous tax year, determining which returns qualified for the information reporting based on the $400,000 AGI limit and presence of low visibility income and ownership interest in pass-through entities Treasury regulations would specify the types of amounts and financial institutions covered by the reporting requirement. o Once a year, the covered financial institutions would provide the IRS a file containing a complete list of the specified types of accounts with corresponding taxpayer ID numbers. No financial information would be provided. o  By matching this universal account file with its selected set of returns, the IRS would then provide the financial institutions a list of accounts for which the 1099 new information return should be provided o The financial institutions would provide the designated taxpayers and the IRS a new 1099 for all the identified accounts the following year in the same manner as for all other 1099’s. Section 5: IRS Reports to Congress Requires an IRS report to Congress 1 year after enactment and every 2 years thereafter on: a comprehensive description of the IRS plan and its progress toward shift more of the auditing and enforcement assets of the IRS toward high-income tax filers and recruit and retain auditors with the skills necessary to audit high-income individuals. an estimate of revenue loss from offshore tax evasion information with respect to revenue loss due to such tax evasion, organized by groups of taxpayers arranged by the true income level of such taxpayers, as determined by the Secretary Section 6: IRS Enforcement Penalties Increased for Certain Taxpayers This section would ensure that millionaires who falsify their tax returns to pay less than is legally owed would face an additional fine of a percentage of the underpayment (the amount legally owed). That percentage would be tiered by income: A) taxpayers with a taxable income of $1-2 million would be fined an additional 20% of the underpayment B) taxpayers with a taxable income in $2-5 million would be fined an additional 30% of the underpayment C) taxpayers with a taxable income greater than $5 million would be fined an additional 40% of the underpayment Effective date: Section 6 would apply to returns with a due date that is after December 31, 2022.          2

Khanna Announces Bill to Strengthen IRS Enforcement

Khanna Announces Bill to Strengthen IRS Enforcement

U.S. House of Representatives

Rep. Ro Khanna, D-Calif., in a February 17 release announced legislation that would provide $100 billion in funding to the IRS over 10 years to increase enforcement and other operations, and would require audits of high-income individuals to ensure all taxpayers face equal consequences regardless of income level.

Rep. Ro Khanna, D-Calif., in a February 17 release announced legislation that would provide $100 billion in funding to the IRS over 10 years to increase enforcement and other operations, and would require audits of high-income individuals to ensure all taxpayers face equal consequences regardless of income level.

Rep. Ro Khanna, D-Calif., in a February 17 release announced <a href="/lr/resolve//2zdyy">legislation</a> that would provide $100 billion in funding to the IRS over 10 years to increase enforcement and other operations, and would require audits of high-income individuals to ensure all taxpayers face equal consequences regardless of income level.