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Business Tax

House Moves to Pass Omnibus Spending Bill with IRS Funding

Jeff Carlson  

Jeff Carlson  

House leadership late on March 9 hoped to get final approval of a $1.5 trillion omnibus spending bill designed to keep federal agencies open through September. The measure does not include a tax title and pares down IRS funding from an earlier 14% proposed increase.

The final budget bill saw the IRS budget cut to a 6% increase, providing $12.6 billion to the IRS, but still an increase of $675 million above the FY 2021 enacted level and the largest increase since 2001. Taxpayer services saw the biggest boost, a 9% increase or $225 million, following months of lawmakers’ complaints about poor response time by the agency. IRS enforcement received $5.4 billion, an increase of $225 million above the FY 2021 enacted level. Enforcement was also directed to dedicate $75 million of those funds to address its backlog of paper returns. Operations support was allocated $4.1 billion, an increase of $173 million, including the program integrity allocation adjustment. The fourth category, business systems modernization to modernize IRS legacy systems and improve IRS Web applications, received $275 million, an increase of $52 million above the FY 2021 enacted level.

The vote was initially delayed Wednesday by some House Democrats over President Joe Biden’s $15 billion coronavirus relief package which would have taken unused covid relief cash from State coffers. House leadership eventually pulled the covid relief from the bill in order to assuage their concerns.

No tax extenders. There was speculation prior to the release of the bill that lawmakers might insert a tax extenders bill and possibly a package of retirement provisions which has received bipartisan support. One tax lobbyist stated that it was too soon to consider an extenders package.

He noted that there had been hope from the business community for a Code Sec. 174 fix since reversing the R&D capitalization requirement is considered time-sensitive—both for Q1 financial statement and quarterly corporate estimated tax payment purposes. However, Democrats were against putting business tax relief before individual tax relief—namely, the renewal of the enhanced child tax credit. There are a few other tax issues being pushed for earlier consideration, he said, such as the retroactive restoration of the employee retention tax credit for Q4 of 2021 (that was terminated early at the end of Q3 by the bipartisan infrastructure bill).

Continuing resolution. The House was also expected to approve a four-day continuing resolution to continue funding at 2021 levels in order to give the Senate more time to debate the bill before final approval. The current continuing resolution expires on March 11.

 

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