Bipartisan tax legislation that died late last year amid the legislative paralysis surrounding the government shutdown is set for a resurrection this month.
House Ways and Means Committee Chairman Richard Neal and ranking member Kevin Brady announced legislation to revamp the IRS administration Thursday, with Senate Finance Committee Chairman Chuck Grassley and ranking member Ron Wyden following shortly after. The Ways and Means Committee is set to hold a markup on the IRS bill and a separate measure offering tax breaks for retirement accounts—the first tax legislation this Congress—Tuesday.
“The fact that you have a four-corners agreement means that you now have a bipartisan track that is in place at the same time,” Wyden told reporters last week. “In the last Congress, there were different bills at different times and different considerations and the like.”
Indeed, the House passed several versions of the IRS overhaul by large margins three times last year, with lawmakers passing the retirement language as well. But the bills never made it to the president’s desk, first because of policy differences between the House and Senate, and then because Congress ground to a halt as the year closed out with a government-funding fight.
Now, with House passage again likely, their fate could be in the hands of Senate Majority Leader Mitch McConnell, who will decide whether they see a floor vote in that chamber.
Rohit Kumar, a principal at PwC and a former aide to McConnell, said the bills will likely have two hurdles to clear before they get to the Senate floor.
First, the heads of both tax-writing committees—Grassley and Wyden in the Senate, Neal and Brady in the House—would need to have a pre-negotiated agreement in place, one that would prevent the legislation from getting stuck in a conference committee.
Sens. Rob Portman and Ben Cardin would also need to be involved, Kumar said.
Portman and Cardin introduced their own IRS-overhaul legislation last year that would restructure the agency’s appeals process, among other changes. Portman’s office said in an email that the senator supports the new overhaul bill because it includes provisions similar to his legislation. Cardin’s office said in an email that he was reviewing the bill.
Getting top tax writers on board may not be hard, as there’s broad agreement on how to restructure the IRS, but the second hurdle could be more complicated, Kumar said, noting that McConnell could require a consent agreement to govern the Senate consideration of the bill, limiting debate time or the scope of any amendments.
“I would not advise him to take a bill to the floor that allows people to relitigate the [2017 tax law] or allow Democrats to push presidential campaign proposals,” Kumar said.
McConnell spokesman David Popp told National Journal in an email that there are no guidance or announcements on the bill ahead of committee action.
The IRS-overhaul bill is likely to move out of the Finance Committee with Grassley and Wyden backing the legislation. That’s in part thanks to a compromise on a provision limiting the powers of private tax-debt collections contracted by the IRS.
“I understand some of my colleagues, particularly on the House Ways and Means Committee, have been concerned that the program has been too heavily focused on lower-income taxpayers,” Grassley said on the Senate floor last Thursday. “We listened to these concerns, and we worked to develop a sensible compromise, while yet strengthening the long-term viability of this program.”
In part, the Senate and House versions would exempt taxpayers at or below 200 percent of the poverty line from being referred to private collectors for tax debt. Grassley, whose home state of Iowa houses one of the four collectors the IRS contracts, has pushed for a lower income threshold, allowing more taxpayers to have their debt handled by the private firms.
“I’d like to have it at 150, but I’ll settle for 200,” Grassley said.
That 200 percent figure is a throwback to a compromise hashed out last year. The House version of the IRS-overhaul bill passed in April 2018 set the threshold at 250 percent of the poverty line, while two other versions passed by the House in December lowered the threshold to 200 percent.
Senate Minority Leader Chuck Schumer has defended the program, which he said has driven hiring at two debt-collection contractors in New York state.
The IRS bill would also limit the agency's power to seize bank accounts when it suspects taxpayers have structured cash deposits to avoid reporting requirements. The IRS would have to show probable cause that money was obtained illegally. The bill would also increase protections for whistle-blowers reporting tax crimes and increase assistance for victims of identity theft, among other provisions.
Neal and Brady on Friday introduced the retirement legislation, which would create a $500 credit for employers who automatically enroll their employees in retirement accounts and repeal the maximum age at which Americans can contribute to an individual retirement account, among other changes.
But absent from the package set for a markup Tuesday is another set of unfinished tax business—a series of expired tax breaks collectively known as extenders. The 30-odd breaks are regularly renewed by Congress, but have been expired since the end of 2017. Kumar said he can see why House Democrats may not want their first tax bill this Congress to include unpaid-for tax breaks for businesses.
The Senate Finance Committee has already proposed a bipartisan extension of the tax breaks, and Rep. Bill Pascrell, a Ways and Means member, told reporters Thursday to expect a House extenders bill soon.
“I would not be surprised if somewhere within the next two weeks of action that extenders bill came up,” Pascrell said.