House passes bipartisan IRS reform bill without ‘Free File’ provision

The House on Monday easily passed a new version of a bipartisan IRS reform bill after lawmakers removed a controversial provision that would have codified a program in which the agency partners with tax-preparation companies.

The legislation, called the Taxpayer First Act, passed by voice vote. It now heads to the Senate, where it also has the support of lawmakers on both sides of the aisle.

{mosads}“This is not a Republican or a Democratic bill. It is an American one,” said Rep. John Lewis (D-Ga.), the chairman of the House Ways and Means Subcommittee on Oversight.

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said in a statement after the House vote that the bill “should pass in the Senate without delay.” The top Democrat on the panel, Sen. Ron Wyden (Ore.), also said that he hopes the Senate quickly passes the bill.

The measure, which includes dozens of provisions aimed at improving the IRS, could be one of the few pieces of legislation to be enacted this year under a divided government.

It includes provisions designed to bolster the IRS’s customer service, strengthen taxpayers’ rights during the enforcement process, improve the agency’s information technology and help victims of tax-related identity theft.

The House had previously passed a version of the bill in April. But lawmakers reintroduced the bill last week, dropping a previously included provision that would codify the IRS’s “Free File” program.

Under that program, the IRS partners with tax-prep companies, and those firms offer free online filing services to low- and middle-income taxpayers.

Some Democratic lawmakers raised concerns about the Free File provision when the House voted on the earlier version in April. They cited a ProPublica article about tax-prep companies’ lobbying on codifying the program, and said that they thought the IRS should offer its own free electronic filing service.

After the April vote, ProPublica wrote additional articles about the program, reporting that tax-prep companies such as H&R Block and TurboTax had taken steps to hide their free options under the program from customers.

Those articles prompted both Republican and Democratic lawmakers to urge the IRS to review the Free File program. The IRS has started a review, with Commissioner Charles Rettig saying last month that the agency was bringing in an outside contractor to examine the program. Additionally, several lawsuits, including a pair from the Los Angeles city attorney, have been filed against tax-prep companies following ProPublica’s articles.

It became clear to lawmakers, who wanted to advance the other provisions in the Taxpayer First Act, that the Free File provision needed to be dropped in order for the bill to be enacted, prompting the bill’s revision and reintroduction.

Lawmakers highlighted several provisions in the bill, including those to prevent low-income taxpayers from being subject to the IRS’s private debt-collection program, establish an independent appeals office and permanently authorize a program in which the IRS partners with certified volunteer organizations to provide free filing assistance to underserved communities.

Both Lewis and Ways and Means Committee ranking member Kevin Brady (R-Texas) praised the bipartisan process that led to the production of the bill. The Ways and Means Subcommittee on Oversight had held a series of hearings and roundtable discussions about how to improve the IRS, before the first version of the package was introduced last year.

“I’m proud of the process and the product,” Lewis said.

“This bill represents what this body can accomplish when we work together across the aisle,” Brady said.

Freshman Rep. Katie Hill (D-Calif.), one of the lawmakers who raised concerns with the Free File provision in April, said that she was “beyond grateful” that her concerns were heard and acted upon.

“The fact that we were able to get this provision resolved is showing how Congress is changing and showing how we are bringing power away from corporations and special interests and back into the hands of regular people,” she said.

H&R Block, one of the companies that allegedly hid its option under the Free File program, said that it supports the bill, “which would improve and modernize many IRS services, and make permanent the IRS Security Summit initiative, which helps to protect the American tax system and taxpayers against international Identity Theft Refund Fraud.”

The company also said that it has helped millions of Americans under the Free File program and supports the IRS’s review of the program.

— This report was updated at 3:46 p.m.