09.15.21

Rounds, Crapo, Colleagues Introduce Bill to Protect Taxpayer Rights and Privacy

WASHINGTON—U.S. Senator Mike Rounds (R-S.D.) joined U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and Senate and U.S. House of Representatives colleagues to introduce the Tax Gap Reform and Internal Revenue Service (IRS) Enforcement Act.

“I have heard from thousands of South Dakotans concerned about the proposed expansion of the IRS and the impacts it has on Americans’ financial privacy—I share their concerns,” said Rounds. “Rather than seeking massive funding increases and unprecedented access to taxpayer bank accounts, the IRS should focus on improving its internal policies to close the tax gap. The Tax Gap Reform and IRS Enforcement Act establishes critical safeguards to help prevent IRS abuses and protect taxpayer privacy.”

Background:

Under the guise of closing the “tax gap,” Democrats are seeking to increase IRS funding by a massive $80 billion over the next 10 years to expand “enforcement and compliance activities” at the IRS, and to create a “comprehensive financial account information reporting regime,” under which gross inflows and outflows of taxpayers’ financial accounts are reported by banks and other financial intermediaries to the IRS, effectively forcing them to act as IRS agents.

In addition to Rounds, other original Senate cosponsors include John Barrasso (R-Wyo.), Mike Braun (R-Ind.), John Boozman (R-Ark.), Bill Cassidy (R-La.), Kevin Cramer (R-N.D.), James Lankford (R-Okla.), Lisa Murkowski (R-Alaska), Marco Rubio (R-Fla.), Thom Tillis (R-N.C.) and Todd Young (R-Ind.).

Key provisions of the Tax Gap Reform and IRS Enforcement Act:

  • Tax Gap Reform: Requires timely, annually-updated information on tax gap estimates in coordination with the Joint Committee on Taxation.
  • Taxpayer Protection: Prevents the IRS from targeting Americans for their political and ideological beliefs, codifies President Biden’s pledge to not increase audits of taxpayers making less than $400,000 per year, and prohibits the establishment of new bank reporting requirements.
  • Smarter Enforcement: Requires the IRS to use existing data and tools to improve its corporate audit selection process and increase enforcement against high-income non-filers.
  • Closes the Expertise Gap: Creates an IRS enforcement fellowship pilot program to assist with the agency’s most complex audits and case selection decisions.  Before hiring thousands of new agents, Congress should test the effectiveness of increasing expertise in a targeted way.

The legislation is supported by the National Taxpayers Union, Americans for Tax Reform and the Center for a Free Economy.

“This legislation is a strong alternative to recent proposals that would write an $80 billion check to the IRS with too little forethought,” said Pete Sepp, President of the National Taxpayers Union.  “If lawmakers move forward with an Internal Revenue Service (IRS) budget boost anyway, these reforms and more should be considered prerequisites for any major proposed increase in the IRS budget, and would both safeguard taxpayers’ rights and support taxpayers’ interest in an effective, modern, and agile IRS.”

“Democrats want to give the IRS $80 billion and hire 87,000 new agents so they can harass and audit taxpayers and create a new reporting regime that targets any bank account, Venmo account, or financial account exceeding $600 in gross inflows and outflows,” said Grover Norquist, President of Americans for Tax Reform.  “This should be alarming given the IRS has a long history of failing to do its job and targeting taxpayers based on their political beliefs. The Tax Gap Reform and IRS Enforcement Act…takes steps towards protecting taxpayers by implementing important safeguards against potential new IRS targeting and abuse.”

“Congressional Democrats' answer to Americans' frustrations with the IRS is to hire more tax bureaucrats to audit them,” said Ryan Ellis, President of the Center for a Free Economy.  “This bill provides a welcome reform-based alternative. People are fed up with being told they are tax cheats by academics and bureaucrats who have never signed the front of a paycheck, and that they must become the subject of fishing expedition audits in service to a fabricated ‘tax gap.’  Reining in the tax gap estimation and audit process gives taxpayers a fair shake if the tax man comes knocking. Congress should focus on getting the IRS to answer phone calls and correspondence in a timely manner, not on new audits.”

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