The acting IRS commissioner said Wednesday the agency is going to need nearly $400 million in additional money to properly implement the new tax cut law, with the money needed to reprogram dozens of operating systems and revise hundreds of tax forms.
Acting IRS Commissioner David Kautter confirmed a recent estimate that the agency is going to need $397 million over the next two years for implementation of the $1.5 trillion tax law, calling the money “critical” for initiatives like major technology upgrades.
“This funding is needed immediately to ensure that the IRS can start critical implementation activities on time,” Mr. Kautter told members of the Senate Finance Committee.
He said the agency has to reprogram some 140 return processing systems and create or revise 450 tax forms, all the while trying to provide the public with assistance and outreach.
Of the total, the vast majority — $291 million — would go toward updating information technology systems.
Mr. Kautter said that as of last year, 59 percent of the agency’s hardware was past its useful life and about a third of its software was two or more releases behind the latest commercially available programs.
“We do need the additional funds — the $397 million is critical,” he said.
The IRS has been a perennial target for anti-tax Republicans, particularly in the wake of the tea party targeting scandal where the agency improperly scrutinized applications from largely conservative groups seeking nonprofit status.
But committee Republicans — while acknowledging those missteps — said the agency should get all the funding it needs now that one of its prime tasks is implementing the GOP’s tax cut bill.
The IRS is going to “bear the brunt of the burden” in implementing the new tax code and should get the resources it needs to carry it through, said committee Chairman Orrin G. Hatch.
“Now, directly 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,” said the Utah Republican.
The president’s 2019 budget request calls for $11.1 billion in base funding for the agency, which includes $23.7 million in “savings and reductions.”
Mr. Kautter said call response rates have actually hovered around 75 percent the past few years, but that the rate would go down under the president’s budget.
“I do think that the IRS is under-resourced,” said Sen. Rob Portman, Ohio Republican. “I think you needed it with the old tax law, and certainly with the new tax law it would be helpful to have resources.”
The National Taxpayer Advocate, an office within the IRS, estimated last month that agency funding has gone down 20 percent since 2010 when adjusted for inflation.
But Mr. Portman said funding also needs to be coupled with reforms, pointing to the tea party targeting as one issue that has made it difficult in recent years for people to justify pushing for more money for the agency.
Mr. Kautter agreed.
“I think we could make some changes that could facilitate taxpayer service and efficiency within the IRS if we were to take a step back and take a disciplined, thoughtful look a how the IRS is structured and how it operates,” he said.
Though the agency’s overall budget next year is cut under the president’s plan, the White House does call for $15 billion over the next 10 years for increased enforcement provisions, saying that move would result in a net savings of $29 billion over the time period.
But Sen. Ron Wyden, the committee’s ranking Democrat, said the enforcement language is a “fake reference,” since congressional appropriators are unlikely to follow through and actually provide the new money.
“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 said.