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Excerpts Available of Obama Budget Appendix on IRS Funding

FEB. 9, 2016

Excerpts Available of Obama Budget Appendix on IRS Funding

DATED FEB. 9, 2016
DOCUMENT ATTRIBUTES

 

INTERNAL REVENUE SERVICE

 

 

The Internal Revenue Service (IRS) collects the revenue that funds the Government and administers the Nation's tax laws. During 2015, the IRS processed 201 million tax returns and collected $3.3 trillion in taxes (gross receipts before tax refunds), totaling 93 percent of Federal Government receipts. The IRS taxpayer service program assists millions of taxpayers in understanding and meeting their tax obligations. The IRS tax enforcement and compliance program deters taxpayers inclined to evade their responsibilities while pursuing those who violate tax laws.

The 2017 Budget provides $12,280 million for the IRS to implement key strategic priorities.

Enforcement Program. -- The Budget includes an Enforcement account increase to implement enacted legislation; protect revenue by identifying fraud and preventing issuance of questionable refunds including those related to identity theft; increase compliance by addressing offshore tax evasion; strengthen examination and collection programs, including return preparer; and address compliance issues in the tax-exempt sector. This increase includes a program integrity cap adjustment totaling $515 million, which supports the Enforcement ($231 million) and the Operations Support accounts ($283 million), including a $5 million to transfer to the Alcohol and Tobacco Tax and Trade Bureau (TTB) for high return on investment (ROI) tax enforcement activities. The Budget proposes an amendment to section 251 of the Balanced Budget and Emergency Deficit Control Act (BBEDCA) of 1985, as amended, to provide a statutory change that will allow adjustments to the discretionary caps for additional IRS approprations. To ensure full funding of the cost increases, this cap adjustment is permissible in 2017 only if the base level for the IRS Enforcement, Operations Support, and TTB accounts are funded at or above $8,854 million. The new 2017 enforcement initiatives funded out of this cap adjustment will generate more than $2.6 billion in additional annual enforcement revenue once the new hires reach full potential in 2019. At full performance, these resources are expected to generate an ROI of nearly $6-to-$1, not including the indirect revenue effect of the deterrence value of these enforcement investments, which is estimated to be at least three times the direct revenue impact. In addition to the new enforcement initiatives for 2017, the Budget also proposes new tax enforcement and compliance initiatives for the IRS and TTB funded via cap adjustments through 2021 and sustained with additional adjustments through 2026. In total, the proposal entails 10 years of cap adjustments costing $18 billion while generating $64 billion, for a net savings of $46 billion. See additional discussion in the Budget Process chapter in the Analytical Perspectives volume.

Taxpayer Service Program. -- The Budget includes a significant investment in Taxpayer Services that will allow the IRS to further improve customer service to meet taxpayer demand and continue delivering services to taxpayers using a variety of in-person, telephone, and web-based methods. These tools will help taxpayers understand their obligations, correctly file their returns, and pay taxes due in a timely manner. The IRS is committed to increasing the service options available through the IRS website and mobile application, allowing more taxpayers to reach the IRS through the Internet. Notably, in 2015, there were more than 493 million visits to www.IRS.gov, and taxpayers checked their refund status more than 234 million times by accessing Where's My Refund? on the IRS website in English or Spanish. Taxpayers can also use automated features on the IRS toll-free phone system. Additionally, the IRS2Go mobile application had over 3.8 million active users in 2015. While the IRS works to move taxpayer interactions to more efficient web-based channels, the 2017 Budget provides enough resources to increase the telephone level of service to 70 percent.

Modernization Program. -- IRS modernization efforts focus on building and deploying advanced information technology systems, processes, and tools to improve efficiency and enhance productivity. Since 2012, the IRS has processed individual taxpayer returns on a daily processing cycle that has enhanced IRS tax administration and improved customer service by allowing faster refunds for more taxpayers, more timely account updates, and faster issuance of taxpayer notices. The Budget provides new investments in the Business Systems Modernization (BSM) Program to expand the capabilities of the Customer Account Data Engine (CADE) 2 relational database and address IRS's financial material weakness, enhance the taxpayer's online experience and provide secure digital communications; complete the design, development, and testing of various estate and gift tax forms for electronic acceptance; and increase fraud detection, resolution, and prevention through use of the Return Review Program (RRP). Using leading-edge technologies that promote speed and enhance data analytics, RRP will advance IRS effectiveness in detecting, addressing, and preventing tax refund fraud and in protecting the Nation's revenue stream. RRP will eventually replace the legacy Electronic Fraud Detection System built in the mid-1990s. The IRS is expanding its web-based customer service channel by building on existing capabilities to simplify and improve the taxpayer's online experience, provide secure digital communications, and add more interactive capabilities to existing web self-service products.

 

Federal Funds

 

 

TAXPAYER SERVICES

 

 

For necessary expenses of the Internal Revenue Service to provide taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer advocacy services, and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, [ $2,156,554,000 ] $2,406,318,000, of which not less than $6,500,000 shall be for the Tax Counseling for the Elderly Program, of which not less than $12,000,000 shall be available for low-income taxpayer clinic grants, [ and ] of which not less than [ $15,000,000, to ] $191,822,000 shall remain available until September 30,[ 2017, shall be available for a Community Volunteer Income Tax Assistance matching grants program for tax return preparation assistance ] 2018, and of which not less than $206,000,000 shall be available for operating expenses of the Taxpayer Advocate Service: Provided, That of the amounts made available for the Taxpayer Advocate Service, not less than $5,000,000 shall be for identity theft casework: Provided further, That, of the amounts made available until September 30, 2018, not less than $15,000,000 shall be available for a Community Volunteer Income Tax Assistance matching grants program for tax return preparation assistance. (Department of the Treasury Appropriations Act, 2016.)

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 2.]

 

 

This appropriation provides resources for taxpayer service programs, which help taxpayers understand their tax obligations, correctly file their returns, and pay taxes due in a timely manner. It also supports a number of other activities, including forms and publications; processing of tax returns and related documents; filing and account services; and taxpayer advocacy services.

 

ENFORCEMENT

 

 

For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles (31 U.S.C. 1343(b)), and to provide other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, [ $4,860,000,000 ] $5,216,263,000, of which not to exceed [ $50,000,000 ] $54,936,000 shall remain available until September 30,[ 2017 ] 2018, and of which not less than $60,257,000 shall be for the Interagency Crime and Drug Enforcement program: Provided, That, of the amounts provided under this heading, not less than $231,344,000, of which $5,000,000 shall be transferred to the Alcohol and Tobacco Tax and Trade Bureau, shall be for an additional appropriation for tax activities, including tax compliance to address the Federal tax gap, as specified for purposes of section 251(b)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. (Department of the Treasury Appropriations Act, 2016.)

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 3.]

 

 

This appropriation provides resources for the examination of tax returns, both domestic and international; the administrative and judicial settlement of taxpayer appeals of examination findings; technical rulings; monitoring employee pension plans; determining qualifications of organizations seeking tax-exempt status; examining the tax returns of exempt organizations; enforcing statutes relating to detection and investigation of criminal violations of the internal revenue laws and other financial crimes; identifying underreporting of tax obligations; securing unfiled tax returns; and collecting unpaid accounts. Further, the 2017 Budget protects revenue by identifying fraud and preventing the issuance of erroneous refund payments, including tax-related identity theft. A portion of the appropriation ($231 million) is requested as part of the $515 million program integrity cap adjustment that will reduce the deficit through above-base funding for high return on investment tax enforcement and compliance initiatives, including $5 million to transfer to the Alcohol and Tobacco Tax and Trade Bureau. In conjunction with specified funds provided to the IRS Operations Support account, this increment will support tax compliance initiatives expected to generate over $2.6 billion in additional annual enforcement revenue once the new hires reach full potential in 2019. Language presented in this account, the Operations Support account, and section 126 of the Department of the Treasury's Administrative Provisions is provided to effectuate the cap adjustment in conjunction with an amendment to section 251 of the Balanced Budget and Emergency Deficit Control Act (BBEDCA) of 1985, as amended.

 

Object Classification

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 4.]

 

 

OPERATIONS SUPPORT

 

 

For necessary expenses of the Internal Revenue Service to support taxpayer services and enforcement programs, including rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administration activities; research and statistics of income; telecommunications; information technology development, enhancement, operations, maintenance, and security; the hire of passenger motor vehicles (31 U.S.C. 1343(b)); the operations of the Internal Revenue Service Oversight Board; and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner; [ $3,638,446,000 ] $4,314,099,000, of which not to exceed [ $50,000,000 ] $158,242,000 shall remain available until September 30, [ 2017 ]2018; of which not to exceed $10,000,000 shall remain available until expended for acquisition of equipment and construction, repair and renovation of facilities; of which not to exceed $1,000,000 shall remain available until September 30, [ 2018 ]2019, for research; of which not to exceed [ $20,000 ] $25,000 shall be for official reception and representation expenses: Provided, That not later than 30 days after the end of each quarter, the Internal Revenue Service shall submit a report to the Committees on Appropriations of the House of Representatives and the Senate and the Comptroller General of the United States detailing the cost and schedule performance for its major information technology investments, including the purpose and life-cycle stages of the investments; the reasons for any cost and schedule variances; the risks of such investments and strategies the Internal Revenue Service is using to mitigate such risks; and the expected developmental milestones to be achieved and costs to be incurred in the next quarter: Provided further, That the Internal Revenue Service shall include, in its budget justification for fiscal year [ 2017 ]2018, a summary of cost and schedule performance information for its major information technology systems: Provided further, That, of the amounts provided under this heading, such sums as are necessary shall be available to fully support tax enforcement and compliance activities, including not less than $283,404,000, for an additional appropriation for tax activities, including tax compliance to address the Federal tax gap, as specified for purposes of Section 251(b)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. (Department of the Treasury Appropriations Act, 2016.)

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 4.]

 

 

This appropriation provides resources for support functions that are essential to the successful operation of IRS programs. These functions include: overall planning and direction of the IRS; shared service support related to facilities maintenance, rent payments, printing, postage, and security; resources for headquarters management activities such as communications and liaison, finance, human resources, equity, diversity and inclusion; research and statistics of income; protection of sensitive information and the privacy of taxpayers and employees; and necessary expenses for telecommunications support and the development and maintenance of IRS operational information systems. This appropriation also includes specific funds to support multi-year facility and real estate planning to improve the IRS investment process, as well as funds needed to implement an array of significant new tax legislation. A portion of the appropriation ($283 million) is requested as part of the $515 million program integrity cap adjustment that will reduce the deficit through above-base funding for high return on investment tax enforcement and compliance programs. In conjunction with specified funds provided to the IRS Enforcement account, this increment will support new tax compliance initiatives that are expected to generate high returns on investment in the form of increased tax revenues. In total, the proposal entails 10 years of adjustments costing $18 billion while generating $64 billion, for a net savings of $46 billion.

 

Object Classification

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 5.]

 

 

BUSINESS SYSTEMS MODERNIZATION

 

 

For necessary expenses of the Internal Revenue Service's business systems modernization program, [ $290,000,000 ] $343,415,000, to remain available until September 30, [ 2018 ] 2019, for the capital asset acquisition of information technology systems, including management and related contractual costs of said acquisitions, including related Internal Revenue Service labor costs, and contractual costs associated with operations authorized by 5 U.S.C. 3109: Provided, That not later than 30 days after the end of each quarter, the Internal Revenue Service shall submit a report to the Committees on Appropriations of the House of Representatives and the Senate and the Comptroller General of the United States detailing the cost and schedule performance for CADE 2 and Modernized e-File information technology investments, including the purposes and life-cycle stages of the investments; the reasons for any cost and schedule variances; the risks of such investments and the strategies the Internal Revenue Service is using to mitigate such risks; and the expected developmental milestones to be achieved and costs to be incurred in the next quarter. (Department of the Treasury Appropriations Act, 2016.)

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 5.]

 

 

This appropriation provides resources for the planning and capital asset acquisition of information technology to modernize the IRS business systems, including labor and related contractual costs. The Government Accountability Office regularly reviews the status of key Business Systems Modernization (BSM) investments and the IRS submits quarterly information technology reports to the House and Senate Committees on Appropriations.

The projects within the BSM program represent investments to ensure that the IRS continues to move forward and use technologies to improve performance. The Budget provides investments to modernize core tax systems and fundamentally change how taxpayers interact with the IRS, including the creation of online tax filing status and payment options.

 

Object Classification

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 5.]

 

 

BUILD AMERICA BOND PAYMENTS, RECOVERY ACT

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 6.]

 

 

The American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1531, allows state and local governments to issue Build America Bonds through December 31, 2010. These tax credit bonds, which include Recovery Zone Bonds, differ from tax-exempt governmental obligation bonds in two principal ways: (1) interest paid on tax credit bonds is taxable; and (2) a portion of the interest paid on tax credit bonds takes the form of a Federal tax credit. The bond issuer may elect to receive a direct payment in the amount of the tax credit for obligations issued before January 1, 2011. This account reflects the continuing interest payments over time.

 

AMERICA FAST FORWARD BONDS

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 6.]

 

 

The Budget proposes a new permanent America Fast Forward Bond program that will be an optional alternative to traditional tax-exempt bonds. This program will be similar to the expired Build America Bond program. The America Fast Forward Bonds will be conventional taxable bonds issued by state and local governments in which the Federal Government makes direct subsidy payments to state and local governmental issuers (refundable tax credits). Eligible uses would include financing of governmental capital projects, current refunding or refinancing of prior capital project financings, short-term governmental working capital financings for governmental operating expenses, and financing for the types of projects and programs that can be financed with qualified private activity bonds, subject to applicable state bond volume caps. The subsidy rate for the America Fast Forward Bonds is proposed at 28 percent, which is revenue neutral relative to the estimated future Federal tax expenditure for tax-exempt bonds. The American Fast Forward Bond program will be effective for bonds issued after the date of enactment.

 

PAYMENT WHERE EARNED INCOME CREDIT EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 6.]

 

 

As provided by law, there are instances where the earned income tax credit (EITC) exceeds the amount of tax liability owed through the individual income tax system, resulting in an additional payment to the taxpayer. Congress originally authorized the EITC in the Tax Reduction Act of 1975 (P.L. 94-12) and made it permanent in the Revenue Adjustment Act of 1978 (P.L. 95-600). The Tax Reform Act of 1986 and the Omnibus Budget Reconciliation Acts of 1990 and 1993 increased the credit amount and expanded eligibility for the EITC.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (P.L. 107-16) increased the income level at which the credit begins to phase out for married taxpayers filing joint returns, and made other changes to simplify the credit and improve compliance.

The American Recovery and Reinvestment Act of 2009 (ARRA) (P.L. 111-5), section 1002, temporarily increased the EITC for working families with three or more children, and increased the threshold for the phase-out range for all married couples filing a joint return for 2009 and 2010 tax returns. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), section 103(c), extended the EGTRRA and ARRA benefits through tax year 2012.

The American Taxpayer Relief Act of 2012 (P.L. 112-240), section 103(c), extended the EGTRRA and ARRA benefits through tax year 2017 (a five-year extension). The Protecting Americans From Tax Hikes Act of 2015 (P.L. 114-113, permanently extended the EGTRRA and ARRA benefits.

 

PAYMENT WHERE EARNED INCOME CREDIT EXCEEDS LIABILITY FOR TAX

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 7.]

 

 

The Administration proposes to expand the EITC for workers without qualifying children.

 

PAYMENT WHERE CHILD TAX CREDIT EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 7.]

 

 

As provided by law, there are instances where the child tax credit exceeds the amount of tax liability owed through the individual income tax system, resulting in an additional payment to the taxpayer.

The Congress originally authorized the child tax credit in the Taxpayer Relief Act of 1997 (P.L. 105-34). The credit amount and extent to which the credit is refundable were increased by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (P.L. 107-16). The American Recovery and Reinvestment Act of 2009 (ARRA) (P.L. 111-5), section 1003, further expanded the extent to which the credit is refundable. The credit was refundable to the extent of 15 percent of an individual's earned income in excess of $3,000 for 2010 and 2011. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), section 103(b), extended this temporary benefit for 2011 and 2012. The American Taxpayer Relief Act of 2012 (P.L. 112-240), section 103(b), extended the ARRA benefits through tax year 2017 (a five-year extension). The Protecting Americans From Tax Hikes Act of 2015 (P.L. 114-113), permanently extended the EGTRRRA and ARRA benefits.

 

PAYMENT WHERE CHILD TAX CREDIT EXCEEDS LIABILITY FOR TAX

 

 

(Legislative proposal, subject to PAYGO)

 

 

The account reflects the interaction effect with the proposals to reform child care tax incentives, to provide a second earner tax credit, and to provide for automatic enrollment in individual retirement accounts.

 

PAYMENT WHERE HEALTH COVERAGE TAX CREDIT EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 7.]

 

 

The Trade Act of 2002 established the Health Coverage Tax Credit (HCTC), a refundable tax credit for a portion of the cost of qualified insurance, which may be paid in advance. This credit is available to certain recipients of Trade Adjustment Assistance (TAA) and Pension Benefit Guaranty Corporation pension beneficiaries who are aged 55-64.

The Congress expanded the HCTC program in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), sections 1899A-1899J. These increased benefits for certain HCTC eligible individuals include payment of 80 percent (up from 65 percent) of health insurance premiums, up to 24 months of coverage for qualified family members, and extension of COBRA benefits. The Omnibus Trade Act of 2010 (P.L. 111-344), sections 111-118, extended these benefits until February 13, 2011. The bill to extend the Generalization System of Preference (P.L. 112-040), section 241, extended the credit through December 31, 2013, and reduced the credit percentage to 72.5 percent, and eliminated the credit entirely as of January 1, 2014.

The Trade Preferences Extension Act of 2015 (P.L. 114-27), section 407, retroactively reinstated the HCTC to January 1, 2014, through December 31, 2019. The Act also provided that an eligible individual could not claim both the HCTC and the premium tax credit provided under the Affordable Care Act (ACA) for the same coverage for the same month and that individual health insurance coverage purchased through the Health Insurance Marketplace is qualified coverage for coverage months in 2014 and 2015. Lastly, the Act reinstated the advance payment of the HCTC, effective not later than June 28, 2016 (one year after date of enactment).

 

PAYMENT WHERE SMALL BUSINESS HEALTH INSURANCE TAX CREDIT EXCEEDS

 

LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 8.]

 

 

The Patient Protection and Affordable Care Act (PPACA) of 2010 (P.L. 111-148), section 1421, allows certain small employers (including small tax-exempt employers) to claim a credit when they pay at least half of the health care premiums for single health insurance coverage for their employees. Small employers can claim the credit for 2010 through 2013 and for two years after that. Generally, employers that have fewer than 25 full-time equivalent employees and pay wages averaging less than $50,000 per employee per year may qualify for the credit. The Budget proposes to expand the credit by increasing the maximum employer size, modifying the interaction of the employer size and wage phaseouts, and simplifying eligibility requirements.

 

PAYMENT WHERE SMALL BUSINESS HEALTH INSURANCE

 

TAX CREDIT EXCEEDS LIABILITY FOR TAX

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 8.]

 

 

The Budget proposes to expand and simplify the tax credit provided to qualified small employers for non-elective contributions to employee health insurance. The proposal would expand the credit to employers with up to 50 (rather than 25) full-time equivalent employees (FTEs) and begin the phaseout of the maximum credit at 20 FTEs (the credit would be reduced on a sliding scale between 20 and 50, rather than between 10 and 25, FTEs). In addition, there would be a change to the coordination of the phaseouts of the credit that apply as the number of FTEs and average wages increase (using a formula that is multiplicative rather than additive) so as to provide a more gradual combined phaseout and to ensure that employers with fewer than 50 FTEs and an average wage less than $50,000 may be eligible for the credit, even if they are nearing the end of both phaseouts. The Budget also proposes to reduce taxpayer complexity by eliminating the requirement that an employer make a uniform contribution on behalf of each employee (although applicable non-discrimination laws will still apply), and eliminating the reduction in the qualifying contribution for premiums that exceed the average premium in the rating area. The proposal would be effective for taxable years beginning after December 31, 2015.

 

PAYMENT WHERE ALTERNATIVE MINIMUM TAX CREDIT

 

EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 9.]

 

 

The Tax Relief and Health Care Act of 2006 (P.L. 109-432) allowed certain taxpayers to claim a refundable credit for a portion of their unused long-term alternative minimum tax (AMT) credits each year. The Emergency Economic Stabilization Act of 2008 (P.L. 110-343), Division C, section 103, increased the AMT refundable credit portion from 20 percent to 50 percent of unused long-term minimum tax credits for the taxable year in question. This provision was effective for any taxable year beginning before January 1, 2013, and has now expired. However, outlays are expected from this account through 2017 as reconciliations occur.

 

PAYMENT WHERE CERTAIN TAX CREDITS EXCEED

 

LIABILITY FOR CORPORATE TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 9.]

 

 

The Housing and Economic Recovery Act of 2008 (P.L. 110-289), section 3081, allowed certain businesses to accelerate the recognition of a portion of their unused pre-2006 alternative minimum tax (AMT) or research and development (R&D) credits in lieu of taking bonus depreciation. The maximum increase amount is capped at the lesser of $30 million or 6 percent of eligible AMT and R&D credits. The accelerated credit amount is refundable. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1201(b), extended this temporary benefit through 2009. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), section 401(c), extended this temporary benefit through the end of 2012, but only with respect to AMT credits. The American Taxpayer Relief Act of 2012 (P.L. 112-240), section 331(c), extended this temporary benefit through 2013 only with respect to AMT credits. The Tax Increase Prevention Act, Title I -- Certain Expiring Provisions (P.L. 113-295), section 125(c), extended this temporary benefit through 2014 only with respect to AMT credits. However, outlays are expected from this account through 2017 as reconciliations occur.

 

PAYMENT IN LIEU OF TAX CREDITS FOR PROMISE ZONES

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 9.]

 

 

The Administration proposes to provide two tax incentives to the 20 designated Promise Zones. First, an employment credit would be provided to businesses that employ zone residents that would apply to the first $15,000 of qualifying wages annually. The credit rate would be 20 percent for zone residents who are employed within the zone and 10 percent for zone residents employed outside of the zone. Second, qualifying property placed in service within the zone would be eligible for additional first-year depreciation of 100 percent of the adjusted basis of the property. Qualifying property would generally consist of depreciable property with a recovery period of 20 years or less. Zone designations for the purpose of the tax incentives would be in effect from January 1, 2017, through December 31, 2026.

 

PAYMENT WHERE SPECIFIED ENERGY PROPERTY

 

CREDIT EXCEEDS LIABILITY FOR TAX

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 10.]

 

 

The Budget proposes to permanently extend the renewable electricity production tax credit at current credit rates (adjusted annually for inflation), make it refundable, and make it available to otherwise eligible renewable electricity consumed directly by the producer rather than sold to an unrelated third party to the extent that its production can be independently verified. Solar facilities that qualify for the investment tax credit would be eligible for the renewable electricity production tax credit for construction that begins after December 31, 2016.

 

PAYMENT WHERE AMERICAN OPPORTUNITY CREDIT EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 10.]

 

 

The American Recovery and Reinvestment Act (ARRA) of 2009 (P.L. 111-5), section 1004, allowed certain taxpayers to claim a refundable American Opportunity Tax Credit (AOTC) for qualifying higher education expenses, for tax years 2009 and 2010. Up to 40 percent of the credit is refundable. The credit applies dollar-for-dollar to the first $2,000 of qualified tuition, fees and course materials paid by the taxpayer, and applies at a rate of 25 percent to the next $2,000 in qualified tuition, fees and course materials for a total credit of up to $2,500. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), section 103(a), extended this credit to tax years 2011 and 2012. The American Taxpayer Relief Act of 2012 (P.L. 112-240), section 103(a), extended the credit through tax year 2017 (a five-year extension). The Protecting Americans From Tax Hikes Act of 2015 (P.L. 114-113), permanently extended the ARRA benefits.

 

PAYMENT WHERE AMERICAN OPPORTUNITY CREDIT EXCEEDS LIABILITY FOR TAX

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 10.]

 

 

The Administration proposes to expand and modify the American Opportunity Tax Credit. The account also reflects the interaction effect with the proposals to provide IRS with greater flexibility to address correctable errors, to modify Form 1098-T for reporting tuition expenses, to make Pell Grants excludable from gross income, to repeal the student loan interest deduction and provide exclusion for certain debt relief and scholarships.

 

PROVIDE A CARBON DIOXIDE INVESTMENT AND SEQUESTRATION CREDIT

 

 

(Legislative proposal, subject to PAYGO)

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 10.]

 

 

The Budget proposes to allocate $2 billion as a new refundable investment tax credit for projects at new and retrofitted electric generating units that capture and permanently sequester carbon dioxide (CO ). A minimum of 70 percent of the credits would be required to flow to projects fueled by greater than 75 percent coal. The Budget also proposes a new refundable sequestration tax credit for qualified investments at a rate of (1) $50 per metric ton of CO2 permanently sequestered and not beneficially reused (e.g., in an enhanced oil recovery operation) and (2) $10 per metric ton for CO2 that is permanently sequestered and beneficially reused. The credit would be indexed for inflation and would be allowed for a maximum of 20 years of production.

 

PAYMENT TO ISSUER OF QUALIFIED ENERGY CONSERVATION BONDS

 

 

Programs and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 11.]

 

 

The Emergency Economic Stabilization Act of 2008 (P.L. 110-343), section 301, created Qualified Energy Conservation Bonds; and the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1112, increased the limitation on issuance of qualified energy conservation bonds from $800,000,000 to $3,200,000,000.

The Hiring Incentives to Restore Employment Act (P.L. 111-147), section 301, amended section 6431 of the Internal Revenue Code of 1986 by allowing issuers of Qualified Energy Conservation Bonds to irrevocably elect to issue the bonds as specified tax credit bonds with a direct-pay subsidy. The issuer of such qualifying bonds receives a direct interest payment subsidy from the Federal Government. Bondholders receive a taxable interest payment from the issuer in lieu of a tax credit.

 

PAYMENT TO ISSUER OF NEW CLEAN RENEWABLE ENERGY BONDS

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 11.]

 

 

The Emergency Economic Stabilization Act of 2008 (P.L. 110-343), section 107, created New Clean Renewable Energy Bonds, and the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1111, increased the limitation on issuance of New Clean Renewable Energy Bonds to a total limitation of $2,400,000,000.

The Hiring Incentives to Restore Employment Act (P.L. 111-147), section 301, amended section 6431 of the Internal Revenue Code of 1986 by adding a new subsection (f) allowing issuers of New Clean Renewable Energy Bonds to irrevocably elect to issue the bonds as specified tax credit bonds with a direct-pay subsidy. The issuer of such qualifying bonds receives a direct interest payment subsidy from the Federal Government. Bondholders receive a taxable interest payment from the issuer in lieu of a tax credit.

 

PAYMENT TO ISSUER OF QUALIFIED SCHOOL CONSTRUCTION BONDS

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 11.]

 

 

The American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1521, created Qualified School Construction Bonds with a calendar year limitation of $11,000,000,000 for 2009 and 2010 and zero after 2010.

The Hiring Incentives to Restore Employment Act (P.L. 111-147), section 301, amended section 6431 of the Internal Revenue Code of 1986 by adding a new subsection (f) allowing issuers of Qualified School Construction Bonds to irrevocably elect to issue the bonds as specified tax credit bonds with a direct-pay subsidy. The issuer of such qualifying bonds receives a direct interest payment subsidy from the Federal Government. Bondholders receive a taxable interest payment from the issuer in lieu of a tax credit.

 

PAYMENT TO ISSUER OF QUALIFIED ZONE ACADEMY BONDS

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 12.]

 

 

The American Recovery and Reinvestment Act of 2009 (P.L. 111-5), section 1522, extended and expanded the calendar year limitation for Qualified Zone Academy Bonds to $1,400,000,000 for 2009 and 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), section 758, extended the Qualified Zone Academy Bonds for 2011 and reduced the calendar year limitation to $400,000,000. The American Taxpayer Relief Act of 2012 (P.L. 112-240), section 310, extended the calendar year limitation of $400,000,000 through tax year 2013 (a two-year extension). The Tax Increase Prevention Act, Title I -- Certain Expiring Provisions (P.L. 113-295), section 120, extended the calendar year limitation of $400,000,000 through tax year 2014 (a one-year extension). The Protecting Americans From Tax Hikes Act of 2015 (P.L. 114-113), extended the calendar year limitation of $400,000,000 through tax year 2016 (a two-year extension).

The Hiring Incentives to Restore Employment Act (P.L. 111-147), section 301, amends section 6431 of the Internal Revenue Code of 1986 by adding a new subsection (f) allowing issuers of Qualified Zone Academy Bonds to irrevocably elect to issue the bonds as specified tax credit bonds with a direct-pay subsidy. The issuer of such qualifying bonds receives a direct interest payment subsidy from the Federal Government. Bondholders receive a taxable interest payment from the issuer in lieu of a tax credit.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (P.L. 111-312) amended section 6431(f)(3)(A)(iii) to provide that direct pay treatment for Qualified Zone Academy Bonds is not available for Qualified Zone Academy Bond allocations from the 2011 national limitation or any carry forward of the 2011 allocation.

 

PAYMENT WHERE ADOPTION CREDIT EXCEEDS LIABILITY FOR TAX

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 12.]

 

 

The Patient Protection and Affordable Care Act of 2010 (P.L. 111-148), section 10909, modified the existing adoption credit to make it a refundable credit for two years (2010 and 2011). The refundability provision has expired and the adoption credit is again limited to tax liability. However, outlays are expected from this account through 2016 as reconciliations occur.

 

REFUNDING INTERNAL REVENUE COLLECTIONS, INTEREST

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 12.]

 

 

Under certain circumstances, as provided in 26 U.S.C. 6611, interest is paid on Internal Revenue collections that must be refunded. The Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) provides for daily compounding of interest. Under the Tax Reform Act of 1986 (P.L. 99-514), interest paid on Internal Revenue collections will equal the Federal short-term rate plus two percentage points, with such rate to be adjusted quarterly.

 

REFUNDABLE PREMIUM TAX CREDIT AND COST SHARING REDUCTIONS

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 12.]

 

 

The Patient Protection and Affordable Care Act (PPACA) of 2010 (P.L. 111-148) established the Refundable Premium Tax Credit. This credit is an advanceable, refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange, beginning in 2014. The credit can be paid in advance to the taxpayer's insurance company to lower the monthly premiums, or it can be claimed when a taxpayer files their income tax return for the year. If the credit is paid in advance, the taxpayer must reconcile the advance credit payments with the actual credit computed on the tax return, subject to certain caps.

Section 1402 of PPACA provides for reductions in cost sharing for eligible individuals enrolled in qualified health plans purchased on the Exchanges. The reduction in cost sharing will first be achieved by reducing applicable out-of-pocket limits under section 1302 of PPACA. An additional reduction will be allowed for lower income insured individuals and special rules will apply for American Indians and Alaska Natives.

Section 1131 of PPACA provides for the establishment of a Basic Health Program, under which a state may offer standard health plans to eligible individuals in lieu of offering such individuals coverage through an Exchange. Eligible individuals include state residents without access to affordable, minimum essential coverage (including those not eligible to enroll in the state's Medicaid program) who meet certain income, residency, and age requirements.

Section 1412 of PPACA provides for advance payments of the premium tax credit and cost-sharing reductions.

The premium assistance tax credit has outlay effects (in millions of dollars) of: 2015 $20,925; 2016 $30,718; 2017 $47,837; 2018 $68,343; 2019 $86,732; 2020 $94,583; 2021 $100,106; 2022 $106,132; 2023 $110,949; 2024 $116,077; 2025 $121,436; 2026 $126,721.

The premium assistance tax credit has income tax effects (in millions of dollars) [a (-) indicates reduced receipts] of: 2015 -$2,316; 2016 -$2,152; 2017 -$3,452; 2018 -$4,503; 2019 -$6,274; 2020 -$7,498; 2021 -$7,743; 2022 -$8,131; 2023 -$8,441; 2024 -$8,820; 2025 -$9,134; 2026 -$9,471.

 

REFUNDABLE PREMIUM TAX CREDIT AND COST SHARING REDUCTIONS

 

 

(Legislative proposal, subject to PAYGO)

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 13.]

 

 

This schedule reflects the impact of the Administration's proposals to extend the Children's Health Insurance Program, create a state option to provide 12-month continuous Medicaid eligibility for adults, and standardize the definition of American Indian and Alaska Native in PPACA.

 

IRS MISCELLANEOUS RETAINED FEES

 

 

Special and Trust Fund Receipts

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 13.]

 

 

As provided by law (26 U.S.C. 7801), the Secretary of the Treasury may establish new fees or raise existing fees for services provided by the IRS to increase receipts, where such fees are authorized by another law, and may spend the new or increased fee receipts to supplement appropriations made available to the IRS appropriations accounts. Funds in this account are transferred to other IRS appropriations accounts for expenditure.

 

GIFTS TO THE UNITED STATES FOR REDUCTION OF THE PUBLIC DEBT

 

 

Special and Trust Fund Receipts

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 14.]

 

 

As provided by law (31 U.S.C. 3113), the Secretary of the Treasury is authorized to accept conditional gifts to the United States for the purpose of reducing the public debt.

 

PRIVATE COLLECTION AGENT PROGRAM

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 14.]

 

 

The American Jobs Creation Act of 2004 (P.L. 108-357) allowed the IRS to use private collection contractors to supplement its own collection staff efforts to ensure that all taxpayers pay what they owe. The IRS used this authority to contract with several private debt collection agencies starting in 2006. In March 2009, the IRS allowed its private debt collection contracts to expire, thereby administratively terminating the program.

Section 32102(a) of the Fixing America's Surface Transportation Act of 2015 (P.L. 114-94), amended section 6306 of the Internal Revenue Code (IRC) and requires the Secretary of the Treasury to enter into one or more qualified tax collection contracts for the collection of all outstanding inactive tax receivables. These agreements are applicable to tax receivables as identified by the Secretary after December 4, 2015. Section 6306 of the IRC prohibits the payment of fees for all services in excess of 25 percent of the amount collected under a tax collection contract. In addition, up to 25 percent of the amount collected may be used for IRS collection enforcement activities.

Inactive tax receivables are defined as any tax receivable (1) removed from the active inventory for lack of resources or inability to locate the taxpayer, (2) for which more than 1/3 of the applicable limitations period has lapsed and no IRS employee has been assigned to collect the receivable; or (3) for which a receivable has been assigned for collection but more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection. Tax receivables are defined as any outstanding assessment that the IRS includes in potentially collectible inventory.

 

INFORMANT PAYMENTS

 

 

Special and Trust Fund Receipts

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 14.]

 

 

As provided by law (26 U.S.C. 7623), the Secretary of the Treasury may make payments to individuals who provide information that leads to the collection of Internal Revenue taxes. The Taxpayer Bill of Rights of 1996 (P.L. 104-168) provides for payments of such sums to individuals from the proceeds of amounts collected by reason of the information provided, and any amount collected shall be available for such payments. This information must lead to the detection of underpayments of taxes, or detection and bringing to trial and punishment of persons guilty of violating the Internal Revenue laws. This provision was further amended by the Tax Relief and Health Care Act of 2006 (P.L. 109-432) to provide for mandatory payments in certain circumstances and to encourage use of the program. A reward payment typically ranges between 15 and 30 percent of the collected proceeds for cases where the amount of collected proceeds exceeds $2,000,000. Lower payments are allowed in certain circumstances, including cases in which information is provided that was already available from another source.

 

FEDERAL TAX LIEN REVOLVING FUND

 

 

Program and Financing

 

 

[ Editor's Note: For a searchable version of the table,

 

see , p. 15.]

 

 

This revolving fund was established pursuant to section 112(a) of the Federal Tax Lien Act of 1966, to serve as the source of financing the redemption of real property by the United States. During the process of collecting unpaid taxes, the Government places a tax lien on real estate in order to protect the Government's interest. Situations arise where property of this nature is collateral for other indebtedness and the tax lien is subordinate to the original indebtedness. In this circumstance, it is often in the Government's interest to purchase the property during the foreclosure sale. The advantage arises when the property is worth substantially more than the first lien-holder's equity but is being sold for an amount that barely covers that equity, thereby leaving no proceeds to apply against delinquent taxes. Under these circumstances, if the Government buys the property and subsequently puts it up for sale under more advantageous conditions, it is possible to realize sufficient profit on the transaction to fully or partially collect the amount of taxes due. The revolving fund is reimbursed from the proceeds of the sale in an amount equal to the amount expended from the fund for the redemption. The balance of the proceeds is applied against the amount of the tax, interest, penalties, and additions thereto, and for the costs of sale. The remainder, if any, would revert to the parties legally entitled to it.

 

INTERNAL REVENUE SERVICE OVERSIGHT BOARD

 

 

The Internal Revenue Service Restructuring and Reform Act of 1998 (Section 7802(d) 26 U.S.C.) directs the IRS Oversight Board to provide an annual budget request for the IRS. The Oversight Board's request shall be submitted to the President by the Secretary without revision, and the President shall submit the request, without revision, to Congress together with the President's Budget request for the IRS. The Board did not make a recommendation for 2017 as it currently lacks a quorum. The Board will reconvene once it has enough Senate-confirmed members to make a quorum.

 

ADMINISTRATIVE PROVISIONS -- INTERNAL REVENUE SERVICE

 

 

(INCLUDING TRANSFER OF FUNDS)

 

 

SEC. 101. Not to exceed 5 percent of any appropriation made available in this Act to the Internal Revenue Service may be transferred to any other Internal Revenue Service appropriation upon the advance [ approval ] notification of the Committees on Appropriations.

SEC. 102. The Internal Revenue Service shall maintain an employee training program, which shall include the following topics: taxpayers' rights, dealing courteously with taxpayers, cross-cultural relations, ethics, and the impartial application of tax law.

SEC. 103. The Internal Revenue Service shall institute and enforce policies and procedures that will safeguard the confidentiality of taxpayer information and protect taxpayers against identity theft.

SEC. 104. Funds made available by this or any other Act to the Internal Revenue Service shall be available for improved facilities and increased staffing to provide sufficient and effective 1-800 help line service for taxpayers. The 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.

[ SEC. 105. None of the funds made available to the Internal Revenue Service by this Act may be used to make a video unless the Service-Wide Video Editorial Board determines in advance that making the video is appropriate, taking into account the cost, topic, tone, and purpose of the video. ]

SEC. [ 106 ]105. The Internal Revenue Service shall issue a notice of confirmation of any address change relating to an employer making employment tax payments, and such notice shall be sent to both the employer's former and new address and an officer or employee of the Internal Revenue Service shall give special consideration to an offer-in-compromise from a taxpayer who has been the victim of fraud by a third party payroll tax preparer.

[ SEC. 107. None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States. ]

[ SEC. 108. None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs. ]

[ SEC. 109. None of funds made available by this Act to the Internal Revenue Service shall be obligated or expended on conferences that do not adhere to the procedures, verification processes, documentation requirements, and policies issued by the Chief Financial Officer, Human Capital Office, and Agency-Wide Shared Services as a result of the recommendations in the report published on May 31, 2013, by the Treasury Inspector General for Tax Administration entitled "Review of the August 2010 Small Business/Self-Employed Division's Conference in Anaheim, California" (Reference Number 2013-10-037). ]

[ SEC. 110. None of the funds made available in this Act to the Internal Revenue Service may be obligated or expended --

 

(1) to make a payment to any employee under a bonus, award, or recognition program; or

(2) under any hiring or personnel selection process with respect to re-hiring a former employee,

unless such program or process takes into account the conduct and Federal tax compliance of such employee or former employee. ]

 

[ SEC. 111. None of the funds made available by this Act may be used in contravention of section 6103 of the Internal Revenue Code of 1986 (relating to confidentiality and disclosure of returns and return information). ]

[ SEC. 112. Except to the extent provided in section 6014, 6020, or 6201(d) of the Internal Revenue Code of 1986, no funds in this or any other Act shall be available to the Secretary of the Treasury to provide to any person a proposed final return or statement for use by such person to satisfy a filing or reporting requirement under such Code. ]

[ SEC. 113. In addition to the amounts otherwise made available in this Act for the Internal Revenue Service, $290,000,000, to be available until September 30, 2017, shall be transferred by the Commissioner to the "Taxpayer Services", "Enforcement", or "Operations Support" accounts of the Internal Revenue Service for an additional amount to be used solely for measurable improvements in the customer service representative level of service rate, to improve the identification and prevention of refund fraud and identity theft, and to enhance cybersecurity to safeguard taxpayer data: Provided, That such funds shall supplement, not supplant any other amounts made available by the Internal Revenue Service for such purpose: Provided further, That such funds shall not be available until the Commissioner submits to the Committees on Appropriations of the House of Representatives and the Senate a spending plan for such funds: Provided further, That such funds shall not be used to support any provision of Public Law 111-148, Public Law 111-152, or any amendment made by either such Public Law. ]

SEC. 106. Section 9503(a) of title 5, United States Code, is amended by striking the clause "before September 30, 2013" and inserting "before September 30, 2021".

SEC. 107. Section 9503(a)(5) of title 5, United States Code, is amended by inserting before the semicolon the following: "renewable for an additional two years, based on a critical organizational need".

SEC. 108. Section 1344(b)(6) of title 31, United States Code, is amended by adding a comma before "the Administrator of the Drug Enforcement Administration", by striking "and" after "Drug Enforcement Administration", and by inserting ", and the Commissioner of Internal Revenue" after "National Aeronautics and Space Administration". (Department of the Treasury Appropriations Act, 2016.)

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