H. R. 6076
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
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.
This Act may be cited as the
IRS Enhancement and Tax Gap Reduction Act of 2020.
Congress finds the following:
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.
Recent studies project that the tax gap will be a cumulative $7,500,000,000,000 between 2020 and 2029.
Individual income taxes are the largest group of uncollected taxes before audits, representing about $314,000,000,000.
Estimates suggest that at least 70 percent of the tax gap comes from underpayment by the top 1 percent.
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.
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.
Individuals are about half as likely to be audited now compared to 2010.
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.
Over the course of the past decade, the number of income tax returns has increased by roughly nine percent.
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.
Audit rates for the largest corporations in 2011 were more than 90 percent. Now, they are closer to 50 percent.
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.
In 2010, corporate taxes accounted for 9 percent of Federal revenue.
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.
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.
According to the Congressional Budget Office, the IRS’s budget is roughly 20 percent below its peak 2010 inflation-adjusted budget.
According to the IRS, the agency has lost nearly 30,000 full-time positions since 2010.
According to the IRS, 31 percent of its workers will retire within the next five years.
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.
Studies have shown that investing in enforcement and tightening rules could generate more than $1,000,000,000,000 over a decade.
The Federal Government estimates that each additional dollar spent on tax enforcement could yield more than $4 in revenue.
IRS data demonstrates that an extra auditor-hour spent auditing returns for those earning $5,000,000 or more raises nearly $5,000.
In fiscal year 2018, the IRS collected nearly $3,500,000,000,000 on a budget of about $11,430,000,000.
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.
Improving resources available to the Internal Revenue Service to reduce the tax gap
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—
for the salaries and expenses of additional staff to increase audits to not less than the minimum levels described in paragraph (2); and
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.
The minimum levels described in this paragraph are as follows:
Fifty percent of individuals or joint returns with gross income of not less than $100,000,000.
Thirty-five percent of individuals or joint returns with gross income of not less than $10,000,000 and less than $100,000,000.
Twenty percent of individuals or joint returns with gross income of not less than $5,000,000 and less than $10,000,000.
Ten percent of individuals or joint returns with gross income of not less than $1,000,000 and less than $5,000,000.
Ninety percent of corporations with gross income of not less than $20,000,000,000.
Fifty percent of corporations with gross income of more than $1,000,000,000 and less than $20,000,000,000.
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—
$3,800,000,000 for an additional amount for the
Department of the Treasury—Internal Revenue Service—Operations Support account; and
$500,000,000 for an additional amount for the
Department of the Treasury—Internal Revenue Service—Business Systems Modernization account.
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.