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IRS Business Code

Certain IRS payments subject to 6.2% sequestration reduction rate for fiscal year 2019

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

Certain payments made by IRS in fiscal year (FY) 2019—i.e., Oct. 1, 2018 through Sept. 30, 2019—will be subject to a 6.2% sequestration rate, including whistleblower awards and Code Sec. 45R refund payments.

Background—sequestration. Under sequestration, “automatic” across-the-board spending cuts are made to deal with the government’s budget deficit. This includes cuts to IRS spending.

Sequestration reduction for 2019. The reduction for FY 2019 is 6.2%—down from 6.6% for FY 2018, which in turn was down from 6.9% for FY 2017.

IRS items subject to sequestration include:

  • . . . the refundable AMT credit for corporations (see here);
  • . . . refund payments issued to, and refund offset transactions for, certain state and local government filers claiming refundable credits under Code Sec. 6431 applicable to certain qualified bonds (e.g., Qualified Zone Academy Bonds, Build America Bonds)  (see here);
  • . . . whistleblower award payments issued under Code Sec. 7623 (see here); and
  • . . . refund payments issued to certain small tax-exempt employers claiming the refundable portion of the Small Business Health Care Tax Credit under Code Sec. 45R (see here).

The Office of Management and Budget (OMB), in its annual report to Congress on the sequestration reductions (available here), also states that the 6.2% reduction applies to “IRS miscellaneous retained fees” and its “private collection agent program.”

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