The Trump administration released a budget proposal on Feb. 12 that offered little in the way of new tax proposals, but would gut IRS funding just as it prepares to implement tax reform.
In the wake of a major tax code overhaul, the budget proposes a handful of additional tax legislative changes, including:
- Allowing Medicare enrollees to use HSAs
- Enhancing and expanding private activity bonds
- Expanding IRS math-error authority
- Giving the IRS authority to regulate return preparers
- Requiring Social Security numbers for both the earned income and the child tax credits
- Extending the Oil Spill Liability Trust Fund tax
- Providing a tax exemption for loan repayments and certain health scholarships for specific health services
The administration instead appears more focused on making the individual aspects of the Tax Cuts and Jobs Act permanent. Although the budget doesn’t address the issue, National Economic Council Director Gary Cohn said the president is hoping to extend the tax cuts after the midterm elections in November this year.
The IRS, meanwhile, is already struggling with massive demand for guidance to implement the tax changes as enacted. Despite the strain on resources, the president’s budget would only provide $11.1 billion in based funding for the IRS, a high cut from the over $12 billion the IRS actually received in the last fiscal year. The budget also proposes a separate special allocation of enforcement funding that could provide the IRS as much as $15 billion over the next 10 years. The request is not enough for acting IRS Commissioner David Kautter, who is asking for an additional $400 million.
Presidential budgets do not carry the force of law, and are merely recommendations. They are better viewed as policy statements and often do not translate into legislation on either the spending or tax side. Congress will ultimately be responsible for passing any tax legislative changes and funding agreements, though they would go to the president for a signature.
Director, Washington National Tax Office
+1 202 861 4144
Senior Manager, Washington National Tax Office
+1 202 521 1511
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.