A House panel on June 29 approved a bill calling for an additional $149 million cut to the IRS budget. The proposal would also limit the agency's oversight of conservation easements, tax-exempt organizations, and estate taxes.
The bill protects "the rights and privacy of taxpayers" and "ensures that the IRS is using its funds appropriately," Rep. Rodney Frelinghuysen (R-N.J.), chairman of the House Appropriations Committee, said at the Financial Services and General Government Subcommittee markup.
The subcommittee approved the bill by a voice vote. The full appropriations panel is expected to take up the legislation when Congress returns from its July 4th break.
Under the bill, the Internal Revenue Service would receive $11.1 billion for fiscal year 2018, which is $111 million above the Trump administration's budget request, but still below current levels. It also calls for an increase in funds to strengthen cybersecurity and information technology, while requiring the agency to provide extensive reporting of its spending and information technology.
The spending bill would prohibit the use of funds to finalize, implement, or enforce amendments to the controversial estate tax rules under tax code Section 2704, "or any substantially similar amendments to such regulations." The rules (REG-163113-02), proposed last August, would change the valuation of interests in family-owned businesses for estate, gift, and generation-skipping transfer tax purposes. The regulation's opponents say the regulations are too broad and prevent family businesses from applying discounts to transferred assets for legitimate purposes such as lack of marketability and lack of control.
One new item in the appropriations bill would add specific restrictions on the ability of the IRS to curb political activity by churches. Any IRS action to enforce the longstanding legal prohibition against a church or other religious institution spending money to influence elections would have to be reviewed by the IRS commissioner and reported to congressional tax-writing committees under the bill.
The bill would continue to restrict the agency's rulemaking on 501(c)(4) organizations' political activities because such regulation "could jeopardize the tax-exempt status of many nonprofit organizations and inhibit citizens from exercising their right to freedom of speech," according to a committee statement.