House Lawmakers Again Target IRS Funding, Adding Pay Restrictions

With investigations continuing into alleged politicization at the Internal Revenue Service, a House Appropriations subpanel on Wednesday moved a bill to cut the tax agency’s budget to below fiscal 2008 levels while adding management provisions including restrictions on employee bonuses and conference spending.

The initial version of the fiscal 2015 Financial Services and General Government Appropriations bill, which sets the Treasury Department’s spending levels, would provide $10.95 billion for the IRS -- a cut of $341 million below last year’s final level and $1.5 billion below President Obama’s budget request. “This will bring the agency’s budget below the sequester level and below the level that was in place in fiscal year 2008,” the panel’s staff wrote. “This funding level is sufficient for the IRS to perform its core duties, including taxpayer services and the proper collection of funds, but will require the agency to streamline and make better use of its budget.”

Rep. Hal Rogers, R-Ky., chairman of the full Appropriations Committee, cited the bill’s common-sense” approach. “In order to make these investments and to be good stewards of each and every tax dollar, the bill focuses cuts on lower-priority or poor-performing agencies – such as the scandal-plagued and inefficient Internal Revenue Service,” he said.

In language unusual for a spending bill, the House subpanel included a series of provisions designed to crack down on IRS employees making political judgments and misusing funds. They are:

• A prohibition on a proposed regulation related to political activities and the tax-exempt status of 501(c)(4) organizations;
• A prohibition on funds for bonuses or awards unless employee conduct and tax compliance is given consideration;
• A prohibition on funds for the IRS to target groups for regulatory scrutiny based on their ideological beliefs;
• A prohibition on funds for the IRS to target individuals for exercising their First Amendment rights;
• A prohibition on funding for the production of inappropriate videos and conferences;
• A prohibition on funding for the White House to order the IRS to determine the tax-exempt status of an organization;
• A requirement for extensive reporting on IRS spending.

Colleen Kelley, president of the National Treasury Employees Union, issued a statement expressing disappointment with the House bill. “Millions of individual taxpayers and businesses will bear the brunt of the severe impacts of these cuts for an agency which already has lost 10,000 employees from reduced funding over the past four years,” she said. “Due to a lack of resources and staffing, many more taxpayer phone calls will go unanswered, even more than the 20 million that went unanswered in 2013. Telephone wait times for those who can get through will lengthen beyond the 20 minute average experienced during the 2014 filing season. In-person service -- including services for the elderly, low-income taxpayers and those with disabilities -- will be cut even further.”

Kelley told Government Executive she expects the Senate version, which hasn’t cleared committee, to offer higher spending levels.

Treasury Secretary Jack Lew on April 30 testified to the Senate Appropriations Committee on why the IRS budget should be increased by $1.2 billion, rather than cut.

“This proposed cap adjustment funds strategic investments that will help close the tax gap and will return $6 for every $1 invested, once fully implemented,” he said. “The proposed cap adjustment will yield $2.1 billion in additional enforcement revenue in 2017 and is projected to reduce the deficit by $35 billion over the next 10 years.”

Lew noted that the request includes $452 million for initiatives related to IRS implementation of the 2010 Affordable Care Act.