FY 2018 Appropriations Bill and the IRS

Last Thursday, the House passed an appropriations bill by a vote of 211 to 198. At this point, it’s anybody’s guess how much of the appropriations bill will survive the Senate, but, just in case, it’s worth taking a look at it. And, it turns out, the House really wants to use the appropriations bill to regulate the IRS. Some of the provisions strike me as warranted. Some innocuous. Some strike me as bizarre, payback, perhaps, for long-held grudges. And some strike me as downright insidious. In this post I’m going to focus on the last two categories because frankly, they’re more fun to write about.

The provisions that regulate IRS behavior can be found in sections 101-116 of the appropriations bill. And what provisions are bizarre payback or downright insidious?

Bizarre Payback

Section 105. In section 105, the House prohibits the IRS from  making videos without jumping through certain administrative hoops. And what’s up with this?

I assume it’s in response to the scandal over IRS parody videos. Apparently, for a training, the IRS made a couple videos that parodied TV shows, including Star Trek and Gilligan’s Island.

The videos apparently cost $60,000 to make, but, according to the IRS, training employees by video saved about $1.5 million in comparison to what it would have cost to train the employees in person. Rumor has it they were pretty terrible, though. (I wouldn’t know—I never bothered watching them.)

So maybe the House wanted to prevent poor parody videos, ones with significant price tags, even if they provided a net savings. And how fresh is this so-called scandal?

Um, news of the videos broke in 2013. And the videos themselves were shown in 2010. So clearly a pressing issue.

Sections 107 and 108. These two sections prohibit the IRS from targeting citizens for exercising their First Amendment rights and from targeting groups for regulatory scrutiny based on the groups’ ideologies. I have to assume this is the result of the Tea Party scandal, another scandal that broke in 2013.

Whether or not you agree that the Tea Party scandal was scandalous, it’s worth noting that, again, it was more than four years ago, and there’s plenty of reason to believe that the reaction has caused the IRS to be too gun-shy to even do the level of scrutiny that it should be doing, much less target groups based on their ideologies.

Section 111. This section prevents the IRS from using appropriated money to … disclose confidential tax return information in contravention of section 6103 of the Code? Because the up to $5,000 fine and/or up to 5 years in prison aren’t enough?

I actually don’t have any idea what’s going on here. Is it to prevent the possible leak of Trump’s tax returns? Is it something else? I really don’t know.

Downright Insidious

Section 112. The House is trying to use the appropriations bill as a back door to undercut the Affordable Care Act. Under section 112, the IRS would not be allowed to use appropriated money to enforce section 5000A of the Code. Section 5000A is the penalty for insufficient coverage; it’s the primary motivation for younger and healthier individuals to maintain coverage. Congress already failed to repeal the ACA; they’re trying to use the appropriations bill to do it anyway.

Section 116. The president promised to do away with the so-called Johnson Amendment, at least as it relates to churches. And the House is trying to back-door that, too. The appropriations bill wouldn’t eliminate the prohibition on churches endorsing or opposing candidates for office. It would, however, make it virtually impossible for the IRS to enforce. To make a determination that a church had violated the campaigning prohibition, the Commissioner would have to consent to the determination, within 30 days of the determination, the Commissioner would have to notify the Ways and Means Committee and the Senate Finance Committee, and the determination could not be effective less than 90 days after informing the Congressional committees. (And note that this is all on top of the already-significant church audit procedures.)

Now frankly, the IRS doesn’t enforce this against churches anyway. So why is formalizing the lack of enforcement insidious? Because there are churches, at least along the margins, that probably follow the law because they’re risk-averse and don’t want to lose their exemptions. But if it passed, these cost-benefit analyses would change—the risk of a church losing its exemption would shift from virtually zero to even more virtually zero. And that shift would be accompanied with what essentially amounts to a Congressional blessing on campaigning by churches. I can’t imagine that wouldn’t increase church participation in political campaigns.

2 thoughts on “FY 2018 Appropriations Bill and the IRS

  1. Any idea how a “not enforce” rule works in practice? Is there any history or experience with something like the Section 112 rule related to 5000A?
    For example, on the 1040 for 2016, line 61 calls for a check box (qualified coverage or exemption) or a number. I assume that most people choosing to evade the penalty will check the box (a lie). But then enforcement may look at perjury, false filing, and return preparer penalties, without direct reference to 5000A. Or don’t check the box but enter a $0 dollar amount. Same problem, especially where computer matching will pop the error.

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    1. That’s a really good question, Chris. I doubt the House has actually thought about it (or looked at a 1040); I guess the IRS could follow the “not enforce” rule by taking line 61 off of the return, or by not investigating whether the check in the box is accurate or not.

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