Congress has reclaimed approximately 25% of the $80 billion allocated to the IRS through the Inflation Reduction Act.
President Biden has made a significant concession regarding the Internal Revenue Service in the recent debt limit deal.
Biden’s Agreement Redirects IRS Surplus for Other Priorities
As part of the agreement, Biden has agreed to redirect $10 billion of the IRS’s surplus in 2024 and an additional $10 billion in 2025 toward other spending priorities.
Furthermore, an additional $1.4 billion has been cut, resulting in the Internal Revenue Service receiving a total of nearly $59 billion over a ten-year period for enforcement, modernization, and related purposes, instead of the initially proposed $80 billion.
The consequences of this funding adjustment on the future activities of the IRS remain uncertain. While a Treasury official stated that this decrease in funding will not fundamentally alter the IRS’s plans in the upcoming years, it could necessitate the agency returning to Congress in the future to request additional funds, possibly in about six years.
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Unanticipated Agreement
Concern has also been raised about conceivable future cuts to IRS funding that Republican lawmakers have proposed. After the law’s passage in August 2022, Republicans in the House and Senate have protested the IRS’s increased funding.
The first bill passed by the House after the GOP regained control in January aimed to repeal a significant portion of the IRS’s $80 billion surplus but did not progress in the Senate. It is expected that Republicans will continue their efforts to curtail IRS funding as it resonates with their constituents.
Moreover, there is speculation about future administrations, including President Biden or any subsequent president, potentially making more concessions on IRS funding.
Many tax experts initially did not anticipate Biden agreeing to touch Internal Revenue Service funding in the debt limit deal, but they were proven wrong.
While the Internal Revenue Service is expected to remain on its current trajectory for now, only time will reveal the true impact of these developments.
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