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Hatch, Wyden Caution Against IRS Budget Cuts – Tax & Accounting Blog

The Senate Finance Committee (SFC) held its second hearing on February 14, which examined President Trump’s fiscal year (FY) 2019 budget request for the IRS. Acting IRS Commissioner David Kautter testified.

Additional cuts to IRS funding, as proposed in Trump’s FY 2019 budget, would be a mistake, SFC Chairman Orrin G. Hatch, R-Utah, said during opening statements. He cautioned against any budget cuts that would hinder the implementation of the new tax code.

“The administration, in its budget, has proposed additional cuts to funding for the IRS. I think that is a mistake,” Hatch said. “[D]irectly after passage of a major overhaul of the tax system, is not a great time to further reduce the taxpayer services budget of the agency that will do most of the work in implementing the updated tax code,” he added.

Likewise, SFC ranking member Ron Wyden, D-Ore., criticized Trump’s FY 2019 budget request for failing to adequately fund the implementation of tax law changes under the Tax Cuts and Jobs Act (P.L. 115-97). “Now they’re giving short shrift to the IRS, which is the agency that actually has to implement those changes and provide service to American families and businesses based on the new rules,” Wyden said. “Denying the IRS the resources it needs to be an effective agency impedes its ability to serve the American people, and the Trump administration knows it,” he added.

IRS Operations

Kautter noted that Trump’s budget request included $4.16 billion for operations support programs, which include IT services. “Within that total, $2.29 billion is allocated for information services, which is $217.8 million, or 10.5 percent, above the FY 2018 Annualized Continuing Resolution level,” Kautter told lawmakers.

According to Kautter, the enhancement of the IRS’s IT systems is central to operations, as over fifty percent of its hardware is outdated. “At the end of FY 2017, more than 59 percent of IRS hardware was past its useful life compared to 64 percent at the end of FY 2016, and 32 percent of software was two or more releases behind the most current commercially-available version,” he reported. Within Trump’s FY 2019 budget request, however, funding is available to provide a much needed refresher of IRS hardware and software, according to Kautter.

As for the modernization of IRS business systems, however, Trump’s FY 2019 budget request suggests $178 million below the FY 2018 Continuing Resolution level, Kautter noted.

Tax Reform Implementation

The IRS has established a Tax Reform Implementation Office to ensure proper implementation of the Tax Cuts and Jobs Act (P.L. 115-97), Kautter testified. Additional funding for FY 2018 will be needed, however. Kautter told lawmakers that an addition $397 million is needed to implement tax reform. “This funding is needed immediately to ensure that the IRS can start critical implementation activities on time,” he said. According to Kautter, the additional funding would resource updating IT systems, taxpayer services, as well as creating and revising tax forms.

Moving Forward

The 2018 filing season began as scheduled on January 29 and is “going well so far,” according to Kautter. Additionally, IRS guidance on pass-through entities under the new tax code will be issued as soon as possible, Kautter said, stating that such guidance is a significant priority.

By Jessica Jeane, Wolters Kluwer News Staff

SFC Press Release: Hatch Opening Statement at Finance Hearing on Administration’s IRS Budget Request

SFC Press Release: Wyden Statement at Finance Committee Hearing on IRS Fiscal Year 2019 Budget

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