TAX TAKE: Do Proposals To Improve Tax Enforcement Score?

Tax Alert
05.24.2021

Among the revenue offsets contained in the Made In America Tax Plan to fund infrastructure efforts is a proposal to invest in tax enforcement against corporations. The proposal would "provide the IRS with resources to pursue large corporations who do not meet their tax obligations, reversing a trend toward fewer corporate audits" and is estimated to raise $700 billion. The plan notes that "[b]y ramping up the IRS's enforcement budget, a well-resourced team of revenue agents can be hired and trained to identify when corporations—and the wealthy individuals who own them—underpay."

Last week, the Administration released The American Families Plan Tax Compliance Agenda, which contains additional details regarding the specific proposals in the Administration's enforcement plan. The main component of the plan is an $80 billion increase in IRS spending to hire new specialized enforcement staff, modernize antiquated information technology, and invest in taxpayer services. The question policymakers are considering is whether such increased spending, and presumably the increased tax receipts resulting from enhanced enforcement, generates revenue that can be used to offset the cost of the Administration's infrastructure plan. As detailed in a joint report by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released in 2016, changes to IRS appropriations – without substantive changes to the Internal Revenue Code – do not "score" under the Balanced Budget Act of 1997. Specifically, "Rule 14" provides that "[n]o increase in receipts or decrease in direct spending will be scored as a result of provisions of a law that provides direct spending for administrative or program management activities." The report notes that CBO and JCT may provide Congress with an estimate of the "nonscorable" revenue resulting from an increase in IRS appropriations.

In a reconciliation legislative posture, the inability to "count" revenue from the enforcement proposal for scorekeeping purposes would presumably result in the need for additional tax increases to fund the Administration's infrastructure plan, so as not to increase the deficit outside of the budget window. Alternatively, there could be an effort to amend the budget rules to enable the "scoring" of the enforcement proposal. Absent an amendment to the budget rules, Democrats might still take the position that the "nonscorable" revenue can help pay for the plan, but the impact of such a position may be irrelevant if the official scoring rules don't allow it. If Democrats are able to obtain bipartisan support for the bill, amendment to the budget rules will not be required, but the applicability of Rule 14 will come into play with regard to concerns surrounding increased deficit spending. In either scenario, it's important to track this issue, as its resolution will have a direct impact on the fate of the infrastructure plan and the tax revenue increase components of that plan. #TaxTake

Upcoming Speaking Engagements and Events

On May 25, Loren and Jorge will present Current Tax Issues Impacting the Pharmaceutical Industry, a Miller & Chevalier virtual roundtable discussion.

In the News

Miller & Chevalier's Tax Policy and Government Affairs team once again received a Band 1 ranking and remains the only firm ranked in the category of Government Relations: Specialist Tax Firms in the 2021 edition of Chambers USA

Jorge was quoted in InvestmentNews on the significance of possible additional funding for the IRS: "I haven't ever seen the president of the United States have this kind of interest in increasing the level of IRS funding." 

Jorge commented in both Politico Morning Tax and Financial Planning on the possible details of President Biden's tax plan in the upcoming Greenbook.   


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