To require the Internal Revenue Service to issue a report on the tax gap, to establish a fellowship program within the Internal Revenue Service to recruit mid-career tax professionals to create and participate in an audit task force, and for other purposes.
Bill: H.R.5206 | Sponsor: Rep. Brady, Kevin (R-TX)
Policy area: Taxation

Summary:
This bill requires the Internal Revenue Service (IRS) to report to Congress on projections of the estimated tax gap (i.e., the difference between tax liabilities owed to the IRS and those liabilities that the IRS actually collects). The IRS may use artificial intelligence and related data analysis tools to calculate a tax gap projection. The bill also requires the Joint Committee on Taxation to issue periodic reports to the congressional tax committees on the tax gap projection.
The bill restricts IRS funding to FY2021 levels for audits and enforcement until it publishes an updated tax gap projection. Funding is also restricted for certain purposes, including (1) targeting U.S. citizens who exercise their First Amendment rights, (2) targeting a group for regulatory scrutiny based on its ideological beliefs, and (3) auditing individual taxpayers with an adjusted gross income of less than $400,000.
The bill directs the IRS to establish a fellowship program to recruit private sector tax experts to join the IRS to create and participate in the audit task force. The purposes of the tax force include performing audit case selection, educating IRS employees on emerging issues, auditing selected taxpayers, addressing offshore tax evasion, and identifying, mentoring, and training IRS junior employees with respect to audits.

To require the Internal Revenue Service to issue a report on the tax 
  gap, to establish a fellowship program within the Internal Revenue 
     Service to recruit mid-career tax professionals to create and 
      participate in an audit task force, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. TAX GAP PROJECTION.

    (a) In General.--Not later than 180 days after the date of the 
enactment of this section, and no later than July 31 annually 
thereafter, the Commissioner of Internal Revenue shall submit to 
Congress a projection detailing the tax gap estimate for the most 
recent taxable year as is practicable using the most recently available 
data, and including identification and detailed descriptions of the 
data used for such projection and clear identification of the amount of 
the projected tax gap associated with nonfiling, underreporting, and 
underpayment (including identifying the amount subject to collection 
actions).
    (b) Use of Artificial Intelligence.--To the extent practicable, for 
purposes of reducing the burden on taxpayers subject to National 
Research Program audits, the Commissioner shall use artificial 
intelligence, including neural machine learning, and other available 
data analysis tools, including commercial analytic data providers, to 
calculate a projection described in subsection (a).
    (c) National Research Program Audits.--The Commissioner of Internal 
Revenue shall not undertake more National Research Program audits than 
in Fiscal Year 2021 to calculate a projection described in subsection 
(a).
    (d) Tax Gap.--For purposes of this section, the term ``tax gap'' 
means the difference between tax liabilities owed to the Internal 
Revenue Service and those liabilities actually collected by such 
Service.

SEC. 2. JCT REPORT.

    (a) In General.--Not later than 180 days after the submission of 
the first tax gap projection to Congress under section 1, and not later 
than 90 days after the submission of each successive submission, the 
Chief of Staff of the Joint Committee on Taxation shall submit to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate a report analyzing such projection, 
including--
            (1) identification of methodologies used,
            (2) any statistical or methodological uncertainties,
            (3) the effect of outdated data, if any, on the accuracy of 
        such projection, and
            (4) such additional information as the Joint Committee on 
        Taxation determines is useful for Congress to use to assess and 
        analyze the tax gap projections provided by the Commissioner of 
        Internal Revenue.
    (b) Release of Information.--For purposes of facilitating the 
report described in subsection (a), the Secretary of the Treasury 
shall, in a timely manner, provide to the Joint Committee on Taxation 
such information as such committee requests.

SEC. 3. RESTRICTION ON INCREASED ENFORCEMENT FUNDS.

    (a) In General.--Notwithstanding any other provision of law, no 
funds appropriated to the Department of the Treasury for audit and 
enforcement purposes in excess of the levels appropriated for such 
purposes in fiscal year 2021 may be expended for such purposes, 
including for salaries, expenses, and enforcement activities, until 180 
days after the Internal Revenue Service publishes an updated tax gap 
projection pursuant to, and compliant with, section 1.
    (b) Sunset.--The provisions of subsection (a) shall not apply after 
the date which is one year after the date of the enactment of this 
section.

SEC. 4. RESTRICTION ON INCREASED FUNDING FOR OTHER SPECIFIED PURPOSES.

    (a) In General.--Notwithstanding any other provision of law, no 
funds appropriated to the Department of the Treasury in excess of the 
levels appropriated for specified purposes in fiscal year 2021 may be 
expended for specified purposes.
    (b) Specified Purposes.--For purposes of subsection (a), the term 
``specified purposes'' means--
            (1) the implementation of new information reporting 
        requirements on flows of deposits and withdrawals in individual 
        and small business banking accounts and other financial 
        accounts,
            (2) the targeting of United States citizens in response to 
        the exercise by such citizens of any legally protected or 
        recognized right guaranteed under the First Amendment to the 
        United States Constitution,
            (3) the targeting of a group for regulatory scrutiny based 
        on the ideological beliefs of such group,
            (4) the auditing of individual taxpayers with an adjusted 
        gross income of less than $400,000, and
            (5) the hiring under an agreement pursuant to the 
        Intragovernmental Personnel Act of 1970 (5 U.S.C. 3371-3376) or 
        any other authority of an authorized researcher who is not a 
        full-time Federal employee to access data subject to privacy 
        protections afforded by section 6103 of the Internal Revenue 
        Code of 1986.

SEC. 5. EFFICIENT USE OF EXISTING IRS RESOURCES.

    For purposes of increasing enforcement actions in areas of high 
noncompliance and reducing the corporate audit no-change rate of the 
Internal Revenue Service to below 20 percent by 2023--
            (1) the Secretary (or the Secretary's delegate) shall, not 
        later than 180 days after the date of the enactment of this 
        section--
                    (A) update the methodology that is used for the 
                selection of corporate returns for audit, and
                    (B) reassign resources of the Internal Revenue 
                Service such that the majority of high-income nonfilers 
                are subject to enforcement actions, and
            (2) the Comptroller general of the United States shall, 
        within one year after the date of the enactment of this 
        section, issue a comprehensive report to Congress on 
        information returns and data collected by the Internal Revenue 
        Service that could be deployed for compliance activities but 
        that are not currently used for such activities.

SEC. 6. IRS FELLOWSHIP PROGRAM.

    (a) Establishment.--Not later than September 30, 2022, the 
Commissioner of Internal Revenue (hereinafter known as the 
``Commissioner'') after consultation with the Chief Counsel of the 
Internal Revenue Service (hereinafter known as the ``Chief Counsel''), 
shall establish within the Internal Revenue Service a fellowship 
program (hereinafter known as the ``program'') to recruit private 
sector tax experts to join the Internal Revenue Service to create and 
participate in the audit task force established under subsection (e).
    (b) Objective.--The Commissioner, after consultation with the Chief 
Counsel, shall design the program in a manner such that the program--
            (1) addresses such tax cases handled by the Internal 
        Revenue Service as the Commissioner determines--
                    (A) are the most complex, or
                    (B) include new and emerging issues, and
            (2) recruits and retains outstanding and qualified tax 
        experts.
    (c) Advertisement of Program.--The Commissioner shall advertise the 
program in such a way as to attract mid-career tax professionals, 
including certified public accountants, tax attorneys, and such other 
tax professionals as the Commissioner determines are appropriately 
qualified to handle the most complex tax cases.
    (d) Structure.--
            (1) In general.--The program shall be staffed by not fewer 
        than 30 fellows at the discretion of the Commissioner based on 
        needs of the Internal Revenue Service and the availability of 
        qualified candidates.
            (2) Term of service.--
                    (A) In general.--Each fellow shall each be hired 
                for a 2-, 3-, or 4-year term of service.
                    (B) Extensions.--
                            (i) In general.--A fellow may apply for, 
                        and the Commissioner may grant, a 1-year 
                        extension of the fellowship.
                            (ii) No limit on number of extensions.--
                        There shall be no limit on the number of 
                        extensions under paragraph (1).
            (3) Fellowship vacancies.--The Commissioner, after 
        consultation with the Chief Counsel, shall fill vacant 
        fellowships--
                    (A) in such a manner as to ensure that the program 
                is staffed with no fewer than 15 fellows, and
                    (B) as soon as practicable after the vacancy 
                arises.
            (4) Hiring authority.--The Commissioner shall have 
        authority to permanently hire a fellow at the end of the term 
        of service for such fellow.
    (e) Task Force.--Not later than the date on which the first 
fellowship is awarded under this section, the Commissioner shall 
establish a task force within the Internal Revenue Service and the 
office of the Chief Counsel in both national and regional office 
placements that includes the fellows hired pursuant to subsection (d), 
the purpose of which is to--
            (1) perform audit case selection,
            (2) educate Internal Revenue Service employees on emerging 
        issues,
            (3) audit selected taxpayers,
            (4) address offshore tax evasion and issues implicating the 
        Foreign Account Tax Compliance Act, and
            (5) identify, mentor, and train junior employees from the 
        Internal Revenue Service with respect to audits.
    (f) Composition.--The task force established under subsection (e) 
may be composed of with both--
            (1) fellows, and
            (2) permanent employees of the Internal Revenue Service.
    (g) Pay of Fellows.--
            (1) In general.--The Secretary of the Treasury (or the 
        Secretary's delegate) shall determine, subject to the 
        provisions of this subsection, the pay of fellows recruited 
        under subsection (a).
            (2) Pay scale.--For purposes of paragraph (1), the pay of a 
        fellow shall not be less than the minimum rate payable for GS-
        15 of the General Schedule and shall not exceed the amount of 
        annual compensation (excluding expenses) specified in section 
        102 of title 3.
    (h) Administration of Program.--The Secretary may appoint a lead 
program officer to administer and advertise the program.
    (i) Annual Review and Report.--Not later than 1 year after the date 
on which the first fellowship is awarded under this section, and 
annually thereafter, the Commissioner shall submit to Congress a report 
containing--
            (1) an analysis of the effects of the program,
            (2) an analysis of the return on investment of the program, 
        including calculations of all costs incurred and all tax 
        revenue and penalties collected due to the work of the task 
        force,
            (3) a description of the total number of fellows who apply 
        each year, and
            (4) recommendations for changes to the program, if any.
    (j) Rules and Regulations.--The Commissioner, with the approval of 
the Secretary of the Treasury (or the Secretary's delegate), shall 
promulgate such rules and regulations as may be necessary for the 
efficient administration of the program.
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