President Obama signed into law an omnibus appropriations bill on Jan. 17 that leaves the IRS with $11.3 billion in funding for fiscal year 2014. The Consolidated Appropriations Act, 2014, cuts the IRS' budget by $526 billion from the enacted fiscal year 2013 level. The funding amount, however, is an increase from the IRS' fiscal 2013 sequestration operating level of $11.2 billion.
The enacted law also places some oversight over the IRS, mandating that specific funds be used to combat identify theft and to assist taxpayers with customer service issues. It further restricts the IRS from using any of its funding from making videos, unless the video is approved by an IRS-wide editorial board. The specific restriction on videos stems from a June 2013 report by the Treasury inspector general for tax administration that detailed IRS spending on parody videos of Star Trek and Gilligan's Island that were used for training purposes.
The spending agreement should avoid another showdown over government spending until the fiscal year ends on Sept. 30, 2014, but Treasury Secretary Jacob Lew recently warned legislators that the federal government would hit the debt ceiling in late February — sooner than expected. The law currently gives the government borrowing authority until Feb. 7, but after that date, the Treasury Department can undertake "extraordinary measures" to prevent the government from exceeding the debt ceiling.
President Obama has repeatedly said he will not negotiate with Republicans over the debt ceiling. Some Republicans have said they will not raise the debt ceiling without major cuts in spending, but leadership is wary to delve into such a messy fight during an election year. If Congress agrees to increase the debt ceiling, the consecutive resolutions of both the spending and the debt ceiling fights would give Congress some time to debate tax reform.
However, Senate Finance Committee Chair Max Baucus, D-Mont., is expected to leave Congress in early February to become the next U.S. ambassador to China, and he has not yet said whether he will release any more tax reform discussion drafts. House Ways and Means Committee Chair Dave Camp, R-Mich., had previously planned to release his chairman's mark in the first quarter of 2014, but the timing is now less clear. Congress will also soon face increasing pressure to address the 55 "extender" provisions that expired at the end of 2013, including the research credit.
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