House passes bill to modernize IRS

The House on Tuesday passed legislation aimed at modernizing the IRS, the latest step forward for a bill that has bipartisan support from lawmakers in both chambers of Congress.

The bill passed easily by voice vote.

The vote comes less than a week before the April 15 tax filing deadline. It also comes one week after the House Ways and Means Committee advanced the bill, also by voice vote.

“The bill will improve the Internal Revenue Service and help our taxpayers,” said Rep. John Lewis (D-Ga.), the author of the measure.

The legislation would make targeted reforms to the IRS in a number of areas, including taxpayer services, taxpayer rights during the enforcement process, identity theft protection, information technology and electronic systems.

{mosads}But despite the bipartisan support for the bill, it has not been free from controversy.

A provision in the bill codifies the IRS’s partnership with tax preparation companies to allow them to offer free filing software for low- and middle-income taxpayers. But it has drawn criticism from stakeholders who say it bars the IRS from providing its own free electronic tax filing system.

Companies providing tax preparation services, including H&R Block and Intuit — the maker of TurboTax — have long lobbied to prevent the IRS from offering its own free filing system, according to ProPublica.

Some freshman Democrats spoke out against that provision during House floor debate even though they ultimately supported the underlying bill.

Freshman Rep. Katie Hill (D-Calif.) blamed the “corporate tax lobby” for pushing to prevent the IRS from creating its own online tax filing system.

“In this freshman class, I and many of my colleagues were sent to reject corporate influence and stand up for people. This puts us in a difficult spot,” Hill said. “But the rest of this bill is too important.”

Hill said she would introduce unspecified legislation “to address the problems that have been inserted by special interests.”

“We have to continue the fight to get big money out of politics,” she said.

Rep. Alexandria Ocasio-Cortez (D-N.Y.) cited a Vox article that said “it is a huge scandal that Congress has not yet instructed the IRS to automatically prepare taxes for the vast majority of Americans.”

“With this bill, I would like to again commend the advancements that we have made for working-class people. But long term, we should be looking at a solution where everyday people do not necessarily have to spend hours every year preparing tax returns when the majority of Americans have relatively simple and straightforward returns,” Ocasio-Cortez said.

But Senate Finance Committee Chairman Chuck Grassley (R-Iowa) on Tuesday evening pushed back on those claims, saying the bill “would continue the IRS Free File Program.”

“Nothing in the legislation would prevent the IRS from continuing to provide online assistance to taxpayers or develop new online options to help taxpayers,” Grassley said in a statement. “Arguments to the contrary aren’t based in fact and rely on either misunderstandings or misleading special interests.

“It certainly doesn’t ban IRS from helping taxpayers file their taxes. That’s just false,” he added.

Other provisions in the bill include measures to create an independent IRS appeals office, permanently authorize grants for a program in which the IRS partners with nonprofits to provide free tax-filing assistance to low-income people, exempt low-income people from the IRS’s private-debt collection program and create a single point of contact in the IRS for tax-related identity-theft victims.

The legislation also would increase the penalty for failing to file a tax return in order to offset the cost of other provisions in the legislation, particularly the changes to the private debt collection program.

The House passed similar legislation last year, but it was not taken up by the Senate then.

Lawmakers and outside groups are hopeful that this is the year IRS reform legislation will be enacted since the bill the House passed Tuesday has also been introduced in the Senate by the top Republican and Democrat on the Senate Finance Committee.

It’s unclear exactly if and when the bill will be considered by the Senate.

Updated at 6:17 p.m.