Bill Summary
The "IRS Enhancement and Tax Gap Reduction Act of 2020" is a proposed legislation that aims to address the issue of the tax gap, which is the difference between the amount of taxes owed to the Internal Revenue Service (IRS) and the amount actually collected. The bill proposes to increase audits, improve technology infrastructure, and hire more staff for the IRS in order to reduce the tax gap and improve tax enforcement.
The bill cites various findings, including the average annual tax gap of $381 billion, projections of a cumulative tax gap of $7.5 trillion between 2020 and 2029, and the fact that individual income taxes make up the largest group of uncollected taxes. It also notes that a majority of the tax gap comes from underpayment by the top 1 percent of earners.
The legislation highlights the decline in IRS tax enforcement in recent years, with a decrease in audit rates and budget cuts leading to a loss of staff. It also points out the low audit rates for large corporations and the fact that many profitable companies pay $0 in income taxes.
To address these issues, the bill proposes to appropriate $5 billion each year for 10 years to hire additional staff and increase audits for individuals and corporations. It also allocates funds for modernizing the IRS's technology infrastructure and improving taxpayer services. The legislation cites studies that have shown investing in enforcement and tightening rules could generate significant revenue, and notes that increasing IRS funding by $20 billion over 10 years could result in an additional $55 billion in revenue.
Overall, the "IRS Enhancement and Tax Gap Reduction Act of 2020" aims to increase tax enforcement and reduce the tax gap through increased audits, improved technology, and enhanced taxpayer services.
Possible Impacts
1. Increased audits: This legislation could lead to increased audits for individuals and businesses, potentially causing stress and financial strain for those who are audited. It could also result in individuals and businesses having to hire additional help to navigate the audit process.
2. Improved technology infrastructure: The funding allocated for improving technology infrastructure could result in improved efficiency and accuracy for the IRS, but it could also mean potential job losses for employees who currently handle these tasks manually.
3. Increased staff: The hiring of additional staff could potentially create job opportunities and boost the economy, but it could also result in higher taxes for individuals and businesses to cover the cost of these new hires.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6076 Introduced in House (IH)]
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116th CONGRESS
2d Session
H. R. 6076
To provide for increased audits, improved technology infrastructure,
and increased staff for the Internal Revenue Service for the purpose of
reducing the tax gap, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 4, 2020
Mr. DeFazio (for himself, Ms. Schakowsky, and Ms. Norton) introduced
the following bill; which was referred to the Committee on
Appropriations
_______________________________________________________________________
A BILL
To provide for increased audits, improved technology infrastructure,
and increased staff for the Internal Revenue Service for the purpose of
reducing the tax gap, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``IRS Enhancement and Tax Gap
Reduction Act of 2020''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) According to the Office of the Taxpayer Advocate, the
difference between tax liabilities owed to the Internal Revenue
Service and those liabilities actually collected by the IRS,
known as the ``tax gap'', averaged roughly $381,000,000,000
annually in unpaid taxes from 2011 to 2013.
(2) Recent studies project that the tax gap will be a
cumulative $7,500,000,000,000 between 2020 and 2029.
(3) Individual income taxes are the largest group of
uncollected taxes before audits, representing about
$314,000,000,000.
(4) Estimates suggest that at least 70 percent of the tax
gap comes from underpayment by the top 1 percent.
(5) In 2011, more than 12 percent of individuals making
$1,000,000 or more annually were audited. In 2018, only 3.2
percent of such individuals were audited.
(6) For the eighth year in a row, IRS tax enforcement
declined. The IRS audited 0.45 percent of personal income-tax
returns, the lowest level in at least four decades.
(7) Individuals are about half as likely to be audited now
compared to 2010.
(8) Audit rates for those making $10,000,000 or more have
fallen from more than 14 percent in 2017 to roughly 6.5 percent
in 2018.
(9) Over the course of the past decade, the number of
income tax returns has increased by roughly nine percent.
(10) Businesses are being audited at a rate of 1.6 percent,
a near record low. The IRS had set a target of 2.2 percent.
(11) Audit rates for the largest corporations in 2011 were
more than 90 percent. Now, they are closer to 50 percent.
(12) Business taxes in 2019 are on track to be the lowest
portion of Federal revenue on record, accounting for 3.5
percent of all Federal tax revenue through the third quarter of
2019.
(13) In 2010, corporate taxes accounted for 9 percent of
Federal revenue.
(14) The Tax Cuts and Jobs Act has pushed business taxes to
record lows, and, according to the Institute on Taxation and
Economic Policy, 91 of the Fortune 500 companies paid $0 in
income tax in 2018 despite turning a profit.
(15) According to a new report from the Office of the
Taxpayer Advocate, the average United States household is
paying an annual surtax of more than $3,000 to subsidize
taxpayers who aren't paying all that they owe.
(16) According to the Congressional Budget Office, the
IRS's budget is roughly 20 percent below its peak 2010
inflation-adjusted budget.
(17) According to the IRS, the agency has lost nearly
30,000 full-time positions since 2010.
(18) According to the IRS, 31 percent of its workers will
retire within the next five years.
(19) Despite this, the agency has also seen increased
workload due to the implementation of the Affordable Care Act
and the Tax Cuts and Jobs Act.
(20) Studies have shown that investing in enforcement and
tightening rules could generate more than $1,000,000,000,000
over a decade.
(21) The Federal Government estimates that each additional
dollar spent on tax enforcement could yield more than $4 in
revenue.
(22) IRS data demonstrates that an extra auditor-hour spent
auditing returns for those earning $5,000,000 or more raises
nearly $5,000.
(23) In fiscal year 2018, the IRS collected nearly
$3,500,000,000,000 on a budget of about $11,430,000,000.
(24) According to a 2018 study by the Congressional Budget
Offce, increasing IRS funding by a total of $20,000,000,000
over 10 years could increase revenue by a total of
$55,000,000,000.
SEC. 3. IMPROVING RESOURCES AVAILABLE TO THE INTERNAL REVENUE SERVICE
TO REDUCE THE TAX GAP.
(a) Improving Audits.--
(1) In general.--There is appropriated $5,000,000,000 for
an additional amount for the ``Department of the Treasury--
Internal Revenue Service--Enforcement'' account, for each of
fiscal years 2021 through 2030--
(A) for the salaries and expenses of additional
staff to increase audits to not less than the minimum
levels described in paragraph (2); and
(B) for necessary expenses for tax enforcement
activities in order to determine and collect owed
taxes, to conduct criminal investigations, and to
enforce criminal statutes related to violations of
internal revenue laws and other financial crimes.
(2) Auditing levels.--The minimum levels described in this
paragraph are as follows:
(A) Fifty percent of individuals or joint returns
with gross income of not less than $100,000,000.
(B) Thirty-five percent of individuals or joint
returns with gross income of not less than $10,000,000
and less than $100,000,000.
(C) Twenty percent of individuals or joint returns
with gross income of not less than $5,000,000 and less
than $10,000,000.
(D) Ten percent of individuals or joint returns
with gross income of not less than $1,000,000 and less
than $5,000,000.
(E) Ninety percent of corporations with gross
income of not less than $20,000,000,000.
(F) Fifty percent of corporations with gross income
of more than $1,000,000,000 and less than
$20,000,000,000.
(b) Improving Technology Infrastructure.--There is appropriated for
each of fiscal years 2021 through 2030, for efforts collecting and
protecting taxpayer information, reducing tax-related theft and fraud,
and modernizing the technology infrastructure of the Internal Revenue
Service--
(1) $3,800,000,000 for an additional amount for the
``Department of the Treasury--Internal Revenue Service--
Operations Support'' account; and
(2) $500,000,000 for an additional amount for the
``Department of the Treasury--Internal Revenue Service--
Business Systems Modernization'' account.
(c) Enhancing Taxpayer Services.--There is appropriated
$2,500,000,000 for an additional amount for the ``Department of the
Treasury--Internal Revenue Service--Taxpayer Services'' account, for
each of fiscal years 2021 through 2030, for the salaries and expenses
of additional staff to achieve adequate staffing levels to provide
taxpayer services, including pre-filing assistance and education as
well as filing and account services.
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