Budget

Congress proceeds with $20B cut to IRS modernization fund in FY 2024 spending deal

Lawmakers plan to cut $10 billion in funds the IRS got in the Inflation Reduction Act, in a spending deal for the rest of fiscal 2024.

Jory Heckman@jheckmanWFED

March 21, 2024 2:27 pm

6 min read

Congress is looking to make good on its promise to cut to the Internal Revenue Service’s multi-year modernization funds — as part of a bipartisan deal made last year.

Lawmakers, in the second and final round of government spending bills for the rest of fiscal 2024, plan to cut $20 billion in funds the IRS got in the Inflation Reduction Act to rebuild its workforce and modernize its legacy IT. The agency still has roughly $60 billion to meet its modernization goals.

The Biden administration agreed to these IRS cuts, as part of a deal with congressional Republicans last year to raise the debt ceiling and avoid an unprecedented default on the federal government’s debts.

Rather than spread the cuts to IRS modernization funds, as lawmakers originally agreed to, the 2024 spending bill includes the full $20 billion reduction.

Despite approving this deal, the Biden administration is asking Congress to reverse the $20 billion cut to IRS funding, as part of its 2025 budget request.

Congress plans to keep the IRS at current funding levels for the rest of the year with a $12.3 billion annual budget for its day-to-day operations. The Biden administration also proposed keeping the IRS annual budget flat in its 2025 spending proposal.

Sen. Chris Van Hollen (D-Md.) said in a press release Thursday that the spending deal gives the IRS the funding it needs to keep improving customer service, replace outdated computer systems and crack down on tax cheats.

“This bipartisan legislation invests in these critical priorities for our nation and more,” Van Hollen said.

The IRS has used its Inflation Reduction Act funding to grow its workforce to 90,000 employees for the first time in a decade.

Reuters recently reported the agency plans on reaching a 100,000-employee workforce within the next three years.

Lawmakers in the 2024 spending deal are directing the IRS to prioritize hiring that’ll provide “sufficient and effective 1–800 helpline service for taxpayers.”

“The [IRS] Commissioner shall continue to make improvements to the Internal Revenue Service 1–800 help line service a priority and allocate resources necessary to enhance the response time to taxpayer communications, particularly with regard to victims of tax-related crimes,” the spending bill states.

The legislation also gives the Treasury Department direct hire authority to fill positions to process backlogged tax returns and correspondence.

The spending bill, however, bars the IRS from using its funding “to make a payment to any employee under a bonus, award, or recognition program,” or rehire former IRS employees who are delinquent on their tax obligations.

Congress is also requiring IRS to maintain an employee training program that covers “taxpayers’ rights, dealing courteously with taxpayers, cross-cultural relations, ethics, and the impartial application of tax law.”

The spending bill requires the IRS to give the House and Senate appropriations committees and the Government Accountability Office quarterly updates on its major information technology investments.

Congress wary on USPS network changes, seeks updates on mail theft

Congress is also prohibiting the mostly self-funded Postal Service from closing or consolidating small or rural post offices as part of its ongoing network modernization plans.

Lawmakers are sending a cautionary message to USPS in the appropriations bill, as the agency continues a major shakeup of its delivery network.

That shakeup includes USPS opening more Sorting & Delivery Centers across the country later this year. S&DCs are large facilities that consolidate the operations of letter carriers and mail handlers under one roof.

USPS already stated last year that plans to modernize its mail processing and delivery facilities won’t result in layoffs or post office closures.

As part of a 10-year reform plan, USPS is spending $40 billion to upgrade and improve its processing, transportation and delivery networks.

“As the USPS makes these investments, it should consider the needs of its employees and customers, as well as its commitment to provide prompt and reliable postal services to the nation,” lawmakers wrote.

The spending bill gives USPS $50 million to meet its legal obligation to deliver certain mailed materials for free to people who are blind or visually impaired.

Congress in the spending deal also “expresses concern about mail theft and the “adverse impact it is having on postal customers, including extended disruptions of regular service and theft of personally identifiable information.”

The spending bill gives USPS 60 days to brief lawmakers on actions taken to combat a rise in mail theft, as well as efforts to prevent mail theft.

The Postal Inspection Service (USPIS), in its latest annual report to Congress, said it made 1,258 mail-theft arrests in fiscal 2022, and that 1,188 of those cases resulted in convictions

USPIS has seen a 49% decrease in mail theft arrests between 2018 and 2022, and a 43% decrease in mail theft convictions over the same period.

House lawmakers recently introduced the Protect Our Letter Carriers Act, which would give USPS $1.4 billion annually from fiscal 2025 through 2029 to install more high-security blue collection boxes, and replace the universal mail key, also known as an “arrow key,” with electronic versions.

The bipartisan bill would also impose stiffer penalties on individuals convicted of robbing or assaulting letter carriers. The bill has the support of all postal unions.

More funding for new FBI headquarters

Lawmakers are also putting more funding behind the Biden administration’s plans to build a new, suburban headquarters for the FBI in Greenbelt, Maryland.

The General Services Administration selected Greenbelt from a list of three final sites last November, but agency watchdogs are reviewing the decision, at the urging of Virginia lawmakers and FBI Director Chris Wray.

The Biden administration expects the FBI headquarters in Greenbelt will accommodate at least 7,500 FBI employees.

GSA and the FBI are looking for a federally owned site in D.C. to accommodate an additional 750-1,000 FBI personnel who would support day-to-day FBI engagement with the Justice Department, Congress and the White House.

Congress already gave $645 million in prior year appropriations to support the construction of a new, suburban FBI headquarters.

The Biden administration, in its 2025 budget request, is asking for $3.5 billion to complete funding for the new FBI headquarters.

As part of its request, the White House proposes setting up a Federal Capital Revolving Fund.

Under this proposal, Congress would appropriate the total amount of money needed for the project upfront. GSA would then repay the revolving fund, over the course of 15 years, by taking out about $233 million each year from the Federal Buildings Fund.

The White House says the FBI’s current headquarters, the J. Edgar Hoover building in downtown D.C., “can no longer support the long-term mission of the FBI.”

“Major building systems are near end-of-life and structural issues continue to mount, making the current building unsustainable,” the 2025 budget proposal states.

Data analytics for pandemic watchdogs

The spending bill also gives the Pandemic Response Accountability Committee $2.85 million to “further develop” its data analytics capabilities. Of that funding, $850,000 would go to improvements for Oversight.gov.

The PRAC, an intergovernmental council of agency inspectors general, is looking for a permanent home for the data analytics tools it created to root out fraud in COVID-19 emergency spending, before it disbands in September 2025.

Current and former agency watchdogs lamented the loss of data analytics tools created by the Recovery Accountability and Transparency Board, a predecessor group of IGs that oversaw stimulus spending following the 2008 Great Recession. The board never received funding from Congress to transfer its data analytics capabilities to another agency, before it disbanded in 2015.