The budget passed by Congress over the weekend officially rescinds $20 billion in long-term spending for the IRS, a move that the Congressional Budget Office (CBO) said will reduce federal revenues and increase the cumulative deficit.

The Further Consolidated Appropriations Act, 2024 , P.L. 118-47, which avoided a federal government shutdown, includes the previously agreed-upon but not codified cut of $20.2 billion from the $80 billion allocated for Congress over 10 years in the Inflation Reduction Act of 2022, P.L. 117-169. It also provides $12.3 billion as a base budget for fiscal year 2024, the same as in fiscal year 2023.

The $12.3 billion includes $2.8 billion for taxpayer services, $5.4 billion for enforcement, and $4.1 billion for operations support.

In its report released in February, the CBO said a $20 billion rescission "would reduce outlays in 2030 and 2031 and lower revenues from 2030 to 2034 by a total of $43.6 billion." It also would add a total of $23.6 billion to deficits over the period of 2024–2034, the report said.

Former IRS Commissioner Charles Rettig noted that the entire $20 billion is being taken from the approximately $45 billion appropriated for compliance efforts, which "has been significantly underfunded for decades." Rettig, now a shareholder at Chamberlain Hrdlicka, said he remained hopeful, however, that improved technology will aid IRS compliance work.

The cut "is significant, but the IRS will continue to modernize, staff up, and improve every facet of the overall operation," he said in an email.

The budget agreement also prohibits any transfer of funds to enforcement, although such transfers are allowed in other circumstances.

The IRS has used Inflation Reduction Act enforcement dollars to focus on high-income groups by serving notices to 125,000 people who have not filed a federal income tax return since 2017, including 25,000 with incomes over $1 million; conducting audits focused on the use of corporate jets; and collecting $520 million since mid-2023 in taxes owed by millionaires.

John Kelshaw, an enrolled agent who worked at the IRS for 40 years and was director of tax compliance at Jackson Hewitt, said $60 billion is "a great amount of money … It's just not as good as $80 [billion]."

A Treasury spokeswoman declined comment Monday, instead referring to previous comments. In a statement released in early February, Treasury said that even with the rescission, "the IRS would still be able to ramp up enforcement against big corporations and wealthy taxpayers who do not pay what they owe in the next several years."

Doreen Greenwald, president of the National Treasury Employees Union, which represents federal employees in the IRS and other agencies, said in an email the $20 billion rescission was disappointing "but was expected because of last year's debt limit deal."

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.