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The Senate Finance Committee recently advanced bipartisan legislation that would make significant changes to taxpayer and IRS interactions, as well as a number of tweaks to Tax Court operations, including authorizing the court to hear suits for refunds or credits that plaintiffs believe they are owed.
The bill, the Taxpayer Assistance and Services (TAS) Act (S.3931), introduced by Finance Committee Chair Mike Crapo, R-Idaho, and co-authored by top committee Democrat, Sen. Ron Wyden, D-Ore., advanced by a 26-1 vote on July 30.
The committee vote tees the bill up for consideration by the full Senate, if or when leadership decides to schedule it. That appears more likely to occur during a lame-duck session after the November midterms.
House Ways and Means Committee Chair Jason Smith, R-Mo., has taken the approach throughout this Congress of bringing up more narrow, individual bills on tax administration, many of which align with provisions of the Crapo-Wyden package and have passed the full House.
The TAS Act originally was expected to be debated and amended by the panel in June but was delayed after committee Democrats signaled plans to introduce an amendment blocking at least one element of President Donald Trump’s settlement of a lawsuit he filed against the IRS over a contractor’s unlawful disclosure of his tax returns.
The settlement included an agreement to exempt Trump and his family from IRS audits and enforcement actions for returns filed before the settlement date, and it established a $1.776 billion fund at the Department of Justice (DOJ) to pay individual claimants alleging they were targeted by “Lawfare and/or Weaponization,” according to the settlement text.
Democrats, and some Republicans, objected to the settlement, which also has been a high-profile subject of scrutiny during the confirmation process for Todd Blanche to be attorney general. After Blanche said he issued orders rescinding the DOJ fund and clarifying the audit-immunity language, Sens. John Cornyn, R-Texas, and Thom Tillis, R-N.C., who sit on both the Finance and Judiciary Committees, dropped their objections. During the Finance markup, a Democratic amendment prohibiting a portion of the settlement not addressed by Blanche’s order, relating to the IRS’s ability to audit the Trump family, failed on a 13-14 party-line vote.
The following are some of the changes the bill would make if it were to become law, among a number of other administrative reforms:
- Mandate that the IRS digitize individual returns
- Require the IRS to establish a taxpayer dashboard for real-time information on backlogs and more electronic information related to return and refund processing status
- Allow the Tax Court to hear lawsuits over refunds and credits
Reconciliation 3.0
The Senate left Washington for its summer recess after passing stopgap appropriations that includes IRS funding (see below), but without advancing a budget resolution focused on spending for defense, agriculture and incentives for states to change their election laws. That package — referred to as “reconciliation 3.0” due to its structure around a procedure known as budget reconciliation that allows for revenue and spending legislation to bypass the traditional 60-vote threshold in the Senate — was passed by the House before it recessed, authorizing approximately $95 billion in spending with no revenue offsets.
Sen. Ron Johnson, R-Wis., the chair of the Senate Budget Committee, offered a resolution similar to the House one — with $10 billion more in total spending, but the Senate punted a vote on the resolution until after its August recess.
Senate Republicans have been attempting to craft their own version of the budget resolution, but the chances of passage look slimmer than with the larger One Big Beautiful Bill Act (“reconciliation 1.0”), as there is significant GOP resistance to a third package and no clear agreement on what it should include. At least one senator, Sen. Bill Cassidy, R-La., also has said he will not support another reconciliation package without spending offsets.
House Republican leaders rallied reluctant budget hawks to support their unpaid-for package by offering the prospect of a fourth reconciliation bill before year-end that they say would include revenue-raising fraud-prevention measures. However, chances of such a package passing are extraordinarily slim, even if the third bill succeeds.
IRS funding
In a bipartisan 90-6 vote on Aug. 8, the Senate passed a continuing resolution meant to fund the government until December. Notably, the legislation would spare the IRS from an $11.6 billion rescission of operational support funds from the Inflation Reduction Act. If passed and signed into law, the funding bill also keeps IRS funding at current levels through Dec. 11, after which negotiators may have arrived at a longer-term government funding plan.
The House of Representatives passed its own version of a continuing resolution on July 21, by a near-party-line 220-205 vote and without the rescission prevention, so the two bills will need to be reconciled before the stopgap can be enacted. Without new funding legislation the government would run out of appropriations on Oct. 1.
The House will return from its summer recess on Aug. 31.
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