Key Takeaways
- The House of Representatives overwhelmingly passed several tax measures this week, some aimed at improving taxpayer services.
- The changes include new mandates for scanning technology and expanding online accounts for taxpayers.
- The Senate is working on similar measures, but in a different form.
- GOP resurrects tax cut proposal for pass-throughs.
- Judge looks for DOJ independence in Trump/IRS tax case.
Partisanship on Capitol Hill may have never been higher than today, but that doesn’t mean there aren’t moments of bipartisan movement. Even if it’s only in small pieces.
The House of Representatives on Monday passed several measures with unanimous or near-unanimous support, all with tweaks to the Internal Revenue Code. They range in subject from ensuring the deductibility of personal casualty losses from federal disasters to the rules for allowing clergy and Christian Science practitioners to opt out of Social Security and Medicare. But the bulk of the legislation concerns Internal Revenue Code administration, with many of the provisions aiming to improve the taxpayer experience, increase transparency and expand taxpayer rights.
One of the bills, H.R. 7971 or the Taxpayer Experience Improvement Act, will expand online accounts for taxpayers so they can see their returns once filed, and check on the status of potential refunds. The bill would also require the agency to post expected wait times and call volume, along with other information, about all of its public telephone lines—giving taxpayers a better idea for when to call for help.
Another bill, H.R. 6956 or the BARCODE Efficiency Act, will require that tax returns which are filled out online but printed and mailed in include a scannable barcode allowing the agency to upload the return’s information. The bill also requires the agency to use optical character recognition technology to scan all paper returns, as well as physical correspondence. These new directives come after years of concern about the IRS’s backlog of paper returns, even as most taxpayers have switched to electronically submitted returns.
Even while these measures easily passed the House, they face an uncertain future in the Senate. The Senate Finance Committee has been crafting a larger bill to address similar concerns, and may ultimately produce new legislation, which the chambers would need to work out to send a bill to the White House to sign.
These changes come as the IRS has seen its budget cut in recent years by Congress, and faces potential new cuts for the next fiscal year. Administration officials have defended the reduced funding, claiming that new technology and better management allow for tax enforcement and administration with fewer employees.
Recent Tax Pieces:
Republican Taxwriters Call for 23 Percent Passthrough Deduction – Katie Lobosco, Tax Notes ($):
Many of the provisions in Kustoff’s bill were included in the first House-passed version of the One Big Beautiful Bill Act (P.L. 119-21) but were left out of the final package. Instead, the law made section 199A permanent at 20 percent.
Judge Asks Justice Department: Will You Oppose Trump? – Andrew Duehren, The New York Times:
That has left the federal judge overseeing the case, Kathleen Williams, an appointee of President Barack Obama in the Southern District of Florida, wondering whether the Justice Department even disagrees with Mr. Trump’s claims in the suit.
Trump’s Retirement Expansion Rests on Treasury, Congress Actions – Brett Samuels, Bloomberg Tax:
Trump on Thursday signed an order that directed Treasury to create a website by Jan. 1, 2027, that offers workers without access to an employer-sponsored retirement plan a portal featuring information about low-cost individual retirement accounts. Certain low-income individuals who opt to contribute to an IRA would be eligible for a government match of up to $1,000.
Trump’s order is an incremental but meaningful attempt to reach the estimated 56 million workers who don’t have an employer-sponsored retirement plan, benefits attorneys and retirement advocates said.
U.S. Senators Move to Curb Ownership Disclosure Rules – Amanda Athanasiou, Tax Notes ($):
The CTA was enacted in January 2021 to combat tax fraud, terrorism financing, and money laundering, requiring corporations, limited liability companies, and similar entities to disclose information about beneficial owners to FinCEN. Final regs issued by FinCEN in September 2022 estimated that there would be 32.6 million reporting companies in the first year of implementation.
Tax Reform Is Dead. Long Live Tax Reform. – Joseph J. Thorndike, Tax Notes ($):
That definition, hammered out in the decades immediately after World War II, has the virtue of clarity. But it also cloaks a particular policy agenda in apparently neutral and technocratic terms. Tax preferences, in this frame, look like departures from a natural and nonideological baseline; closing these preferences looks less like a political program and more like a restoration.
