IRS Enhancement and Tax Gap Reduction Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 6076 To provide for increased audits, improved technology infrastructure, and in- creased 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 infra- structure, 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘IRS Enhancement and 4 Tax Gap Reduction Act of 2020’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 6076 IH (1) According to the Office of the Taxpayer Ad- 1 vocate, the difference between tax liabilities owed to 2 the Internal Revenue Service and those liabilities ac- 3 tually collected by the IRS, known as the ‘‘tax gap’’, 4 averaged roughly $381,000,000,000 annually in un- 5 paid taxes from 2011 to 2013. 6 (2) Recent studies project that the tax gap will 7 be a cumulative $7,500,000,000,000 between 2020 8 and 2029. 9 (3) Individual income taxes are the largest 10 group of uncollected taxes before audits, represent- 11 ing about $314,000,000,000. 12 (4) Estimates suggest that at least 70 percent 13 of the tax gap comes from underpayment by the top 14 1 percent. 15 (5) In 2011, more than 12 percent of individ- 16 uals making $1,000,000 or more annually were au- 17 dited. In 2018, only 3.2 percent of such individuals 18 were audited. 19 (6) For the eighth year in a row, IRS tax en- 20 forcement declined. The IRS audited 0.45 percent of 21 personal income-tax returns, the lowest level in at 22 least four decades. 23 (7) Individuals are about half as likely to be au- 24 dited now compared to 2010. 25 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 6076 IH (8) Audit rates for those making $10,000,000 1 or more have fallen from more than 14 percent in 2 2017 to roughly 6.5 percent in 2018. 3 (9) Over the course of the past decade, the 4 number of income tax returns has increased by 5 roughly nine percent. 6 (10) Businesses are being audited at a rate of 7 1.6 percent, a near record low. The IRS had set a 8 target of 2.2 percent. 9 (11) Audit rates for the largest corporations in 10 2011 were more than 90 percent. Now, they are 11 closer to 50 percent. 12 (12) Business taxes in 2019 are on track to be 13 the lowest portion of Federal revenue on record, ac- 14 counting for 3.5 percent of all Federal tax revenue 15 through the third quarter of 2019. 16 (13) In 2010, corporate taxes accounted for 9 17 percent of Federal revenue. 18 (14) The Tax Cuts and Jobs Act has pushed 19 business taxes to record lows, and, according to the 20 Institute on Taxation and Economic Policy, 91 of 21 the Fortune 500 companies paid $0 in income tax 22 in 2018 despite turning a profit. 23 (15) According to a new report from the Office 24 of the Taxpayer Advocate, the average United States 25 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 6076 IH household is paying an annual surtax of more than 1 $3,000 to subsidize taxpayers who aren’t paying all 2 that they owe. 3 (16) According to the Congressional Budget Of- 4 fice, the IRS’s budget is roughly 20 percent below 5 its peak 2010 inflation-adjusted budget. 6 (17) According to the IRS, the agency has lost 7 nearly 30,000 full-time positions since 2010. 8 (18) According to the IRS, 31 percent of its 9 workers will retire within the next five years. 10 (19) Despite this, the agency has also seen in- 11 creased workload due to the implementation of the 12 Affordable Care Act and the Tax Cuts and Jobs Act. 13 (20) Studies have shown that investing in en- 14 forcement and tightening rules could generate more 15 than $1,000,000,000,000 over a decade. 16 (21) The Federal Government estimates that 17 each additional dollar spent on tax enforcement 18 could yield more than $4 in revenue. 19 (22) IRS data demonstrates that an extra audi- 20 tor-hour spent auditing returns for those earning 21 $5,000,000 or more raises nearly $5,000. 22 (23) In fiscal year 2018, the IRS collected 23 nearly $3,500,000,000,000 on a budget of about 24 $11,430,000,000. 25 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 6076 IH (24) According to a 2018 study by the Congres- 1 sional Budget Offce, increasing IRS funding by a 2 total of $20,000,000,000 over 10 years could in- 3 crease revenue by a total of $55,000,000,000. 4 SEC. 3. IMPROVING RESOURCES AVAILABLE TO THE INTER- 5 NAL REVENUE SERVICE TO REDUCE THE TAX 6 GAP. 7 (a) IMPROVING AUDITS.— 8 (1) IN GENERAL.—There is appropriated 9 $5,000,000,000 for an additional amount for the 10 ‘‘Department of the Treasury—Internal Revenue 11 Service—Enforcement’’ account, for each of fiscal 12 years 2021 through 2030— 13 (A) for the salaries and expenses of addi- 14 tional staff to increase audits to not less than 15 the minimum levels described in paragraph (2); 16 and 17 (B) for necessary expenses for tax enforce- 18 ment activities in order to determine and collect 19 owed taxes, to conduct criminal investigations, 20 and to enforce criminal statutes related to viola- 21 tions of internal revenue laws and other finan- 22 cial crimes. 23 (2) AUDITING LEVELS.—The minimum levels 24 described in this paragraph are as follows: 25 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 6076 IH (A) Fifty percent of individuals or joint re- 1 turns with gross income of not less than 2 $100,000,000. 3 (B) Thirty-five percent of individuals or 4 joint returns with gross income of not less than 5 $10,000,000 and less than $100,000,000. 6 (C) Twenty percent of individuals or joint 7 returns with gross income of not less than 8 $5,000,000 and less than $10,000,000. 9 (D) Ten percent of individuals or joint re- 10 turns with gross income of not less than 11 $1,000,000 and less than $5,000,000. 12 (E) Ninety percent of corporations with 13 gross income of not less than $20,000,000,000. 14 (F) Fifty percent of corporations with 15 gross income of more than $1,000,000,000 and 16 less than $20,000,000,000. 17 (b) IMPROVING TECHNOLOGY INFRASTRUCTURE.— 18 There is appropriated for each of fiscal years 2021 19 through 2030, for efforts collecting and protecting tax- 20 payer information, reducing tax-related theft and fraud, 21 and modernizing the technology infrastructure of the In- 22 ternal Revenue Service— 23 VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 6076 IH (1) $3,800,000,000 for an additional amount 1 for the ‘‘Department of the Treasury—Internal Rev- 2 enue Service—Operations Support’’ account; and 3 (2) $500,000,000 for an additional amount for 4 the ‘‘Department of the Treasury—Internal Revenue 5 Service—Business Systems Modernization’’ account. 6 (c) ENHANCING TAXPAYER SERVICES.—There is ap- 7 propriated $2,500,000,000 for an additional amount for 8 the ‘‘Department of the Treasury—Internal Revenue 9 Service—Taxpayer Services’’ account, for each of fiscal 10 years 2021 through 2030, for the salaries and expenses 11 of additional staff to achieve adequate staffing levels to 12 provide taxpayer services, including pre-filing assistance 13 and education as well as filing and account services. 14 Æ VerDate Sep 11 2014 23:43 Mar 06, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\H6076.IH H6076 pamtmann on DSKBC07HB2PROD with BILLS