The House subcommittee responsible for IRS funding approved a bill on July 21 that would cut the IRS budget from $12.3 billion in fiscal year 2025 to just $9.5 billion in 2026. The proposed cut comes on the heels of IRS job losses that are expected to cut the agency’s workforce by over 25% by the end of the government fiscal year on Sept. 30, 2025.
Most of the proposed IRS spending cuts in the House bill would come on the enforcement side. The bill was opposed by committee Democrats. The Senate appropriations bill for the IRS is expected to be more bipartisan because Republicans lack the 60 votes needed to pass them without Democratic support. The government fiscal year ends on Sep. 30, 2025, and a continuing resolution will likely be needed to keep the government funded while lawmakers continue to work through spending negotiations.
A government shutdown is possible. Democrats are furious about the recent rescissions package, which they argue undermines previous bipartisan funding deals.
BDO Takeaway
While enforcement activity has taken a hit over the past year, the IRS is still very active in several areas, including transfer pricing, R&D credits, energy credits, and partnerships. The steep proposed funding cuts on the House side are not yet law and could change significantly in negotiations with the Senate.
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