Policy Backgrounders

IRS Modernization Funding

April 04, 2024

Trusted Insights for What’s Ahead™

Since enactment of the Inflation Reduction Act (IRA) in 2022, the Internal Revenue Service has begun using nearly $80 billion in additional funding provided in that Act to focus on modernizing the agency, including its data operations, taxpayer support, and enforcement efforts. However, the opposition of some Republicans to this additional funding led to rescission of approximately $20 billion of the funding as part of the recent budget agreement to prevent a government shutdown.

• The IRA originally provided an additional $79.6 billion to the IRS—primarily for expanded audit activity and enforcement on taxpayers with complex tax filings and for technology, data, and analytics improvements—that can be obligated through 2031.
• The Congressional Budget Office (CBO) estimates the new rescission of IRS funding will result in additional deficits of $23.6 billion through 2034 because of decreased revenue collections, including those attributable to reduced auditing activity.
• CBO also estimates that total IRS revenue collections will decrease by $43.6 billion through 2034, hampering the IRS’s modernization efforts.