[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1116 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 1116
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 18, 2021
Mr. DeFazio (for himself, Ms. Schakowsky, Mr. Smith of Washington, Ms.
Norton, Ms. Tlaib, Ms. Bonamici, Ms. Omar, Mr. Vela, Ms. Jayapal, Mr.
Beyer, Ms. Ocasio-Cortez, Mr. Garamendi, Mr. Johnson of Georgia, Mr.
Doggett, Mrs. Napolitano, Mr. Hastings, Ms. Scanlon, Mr. Jones, Mr.
McGovern, Mr. Garcia of Illinois, Mr. Carson, Mr. Cooper, Mr. Cohen,
Mr. Raskin, and Mr. Khanna) introduced the following bill; which was
referred to the Committee on Appropriations
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``IRS Enhancement and Tax Gap
Reduction Act of 2021''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) 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.
(2) Recent studies project that the tax gap will be a
cumulative $7,500,000,000,000 between 2020 and 2029.
(3) Between 2010 and 2018, the share of individual income
tax returns it examined fell by 46 percent, and the share of
corporate income tax returns it examined fell by 37 percent.
(4) Individual income taxes are the largest group of
uncollected taxes before audits, representing about
$314,000,000,000.
(5) Estimates suggest that at least 70 percent of the tax
gap comes from underpayment by the top 1 percent.
(6) In 2020, the Treasury's Inspector General for Tax
Administration announced that roughly 880,000 high-income
individuals who didn't file tax returns between 2014-2016
failed to pay more than $45 billion in owed liabilities. Of
those 880,000 cases, more than 325,000 were closed without ever
being entered into the Internal Revenue Service's (IRS)
enforcement system, more than 40,000 cases were entered but
were then subsequently closed without ever being worked on, and
the remaining 500,000 cases are ``sitting in one of the
collection function's inventory streams and will likely not be
pursued as resources decline''.
(7) 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.
(8) For 8 years in a row, IRS tax enforcement has declined.
The IRS audited 0.45 percent of personal income-tax returns in
fiscal year 2019, the lowest level in at least 4 decades.
(9) Individuals are about half as likely to be audited now
compared to 2010.
(10) Audit rates for those making $10,000,000 or more fell
from more than 14 percent in 2017 to roughly 6.5 percent in
2018.
(11) Over the course of the past decade, the number of
income tax returns has increased by roughly 9 percent.
(12) Audit rates for the largest corporations in 2011 were
more than 90 percent. Now, they are closer to 50 percent.
(13) The corporate share of Federal tax revenue has dropped
by more than two-thirds in the past 65 years.
(14) In 2010, corporate taxes accounted for 9 percent of
Federal revenue.
(15) 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.
(16) According to a 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.
(17) According to the Congressional Budget Office, the
IRS's budget is roughly 20 percent below its peak 2010
inflation-adjusted budget.
(18) According to the IRS, the agency has lost roughly
30,000 full-time positions since 2010, more than 20 percent of
its staff.
(19) The amount of IRS funding and staff allocated to
enforcement activities has declined by about 30 percent since
2010.
(20) According to the IRS, roughly 30 percent of its
workers will retire within the next 5 years.
(21) Despite this, the agency has also seen increased
workload due to the implementation of the Affordable Care Act,
the Tax Cuts and Jobs Act, and the COVID-19 pandemic.
(22) Studies have shown that investing in enforcement and
tightening rules could generate more than $1,000,000,000,000
over a decade.
(23) The Federal Government estimates that each additional
dollar spent on tax enforcement could yield more than $4 in
revenue.
(24) IRS data demonstrates that an extra auditor-hour spent
auditing returns for those earning $5,000,000 or more raises
nearly $5,000.
(25) In fiscal year 2018, the IRS collected nearly
$3,500,000,000,000 on a budget of about $11,430,000,000.
(26) The Congressional Budget Office estimates that
increasing the IRS's funding for examinations and collections
by $20,000,000,000 over 10 years would increase revenues by
$61,000,000,000, and that increasing such funding by
$40,000,000,000 over 10 years would increase revenues by
$103,000,000,000.
SEC. 3. IMPROVING RESOURCES AVAILABLE TO THE INTERNAL REVENUE SERVICE
TO REDUCE THE TAX GAP.
(a) Improving Audits.--
(1) In general.--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 2022 through 2031--
(A) for the salaries and expenses of additional
staff to increase audits to not less than the minimum
levels described in paragraph (2); and
(B) 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.
(2) Auditing levels.--The minimum levels described in this
paragraph are as follows:
(A) Fifty percent of individuals or joint returns
with gross income of not less than $100,000,000.
(B) Thirty-five percent of individuals or joint
returns with gross income of not less than $10,000,000
and less than $100,000,000.
(C) Twenty percent of individuals or joint returns
with gross income of not less than $5,000,000 and less
than $10,000,000.
(D) Ten percent of individuals or joint returns
with gross income of not less than $1,000,000 and less
than $5,000,000.
(E) Ninety percent of corporations with gross
income of not less than $20,000,000,000.
(F) Fifty percent of corporations with gross income
of more than $1,000,000,000 and less than
$20,000,000,000.
(b) Improving Technology Infrastructure.--There is appropriated for
each of fiscal years 2022 through 2031, for efforts collecting and
protecting taxpayer information, reducing tax-related theft and fraud,
and modernizing the technology infrastructure of the Internal Revenue
Service--
(1) $3,800,000,000 for an additional amount for the
``Department of the Treasury--Internal Revenue Service--
Operations Support'' account; and
(2) $500,000,000 for an additional amount for the
``Department of the Treasury--Internal Revenue Service--
Business Systems Modernization'' account.
(c) 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 2022 through 2031, 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.
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