A new report from the Treasury Inspector General for Tax Administration (TIGTA) highlights the slow pace at which the Internal Revenue Service (IRS) has spent the supplemental funding provided by the Inflation Reduction Act of 2022 (IRA). The IRA allocated $80 billion in supplemental funding to the IRS through 2031. However, subsequent legislative actions rescinded nearly $20 billion of these funds, leaving the agency with a reduced budget for some programs, with a total of $57.8 billion remaining, though a freeze is in place on $20.2 billion of this amount.
As of September 30, 2024, the IRS had spent just $9 billion of its IRA funding. Notably, the portion allocated for Taxpayer Services is projected to be depleted by Fiscal Year (FY) 2025, while funding for Business Systems Modernization will run out in FY 2026. This sluggish pace of spending raises concerns about the agency’s ability to utilize the full original allocation. While funding that is locked in for the long term can facilitate strategic planning, the IRS’s recent history raises doubts about its capacity to efficiently implement systemic changes.
A key concern with the IRA’s budget allocation is that it disproportionately favored enforcement over taxpayer services and modernization. Moving forward, Congress should prioritize appointing a new IRS Commissioner and a permanent Treasury Inspector General, while also granting authority to shift remaining funds toward taxpayer services and modernization initiatives.
Background on IRA Funding: The Four Buckets
The IRA provided the IRS with supplemental appropriations of $79.4 billion. Congress has already clawed back $21.6 billion from this funding, leaving the agency with $57.8 billion in remaining additional funding. On top of that, the American Relief Act of 2025 and the recently enacted continuing resolution put a temporary freeze on $20.2 billion in IRS enforcement funding, limiting access to those funds through the rest of FY 2025. Despite these reductions and restrictions, the remaining supplemental funding remains available through September 30, 2031. Below are the four main areas of spending and the total allocated levels:
Enforcement – Allocated for increased enforcement, including audits and compliance activities – $24 billion (originally $46 billion).
Operations Support – Designed to sustain general IRS operations and administrative needs – $25.3 billion.
Business Systems Modernization – Aimed at upgrading outdated IRS technology infrastructure – $4.8 billion.
Taxpayer Services – Intended to improve IRS customer service functions, such as call center support and assistance programs – $3.2 billion.
Key Findings from the TIGTA Report
TIGTA’s latest findings reveal a slow disbursement of IRA funds:
As of the end of FY 2024, the IRS had spent a total of $9 billion—only 15.6% of the remaining $57.88 billion in funding.
Between June 30, 2024, and September 30, 2024:
Enforcement spending increased from $805 million to $1.6 billion.
Operations Support spending rose from $3 billion to $4 billion.
Modernization funding grew from $1.6 billion to $2 billion.
Taxpayer Services spending declined from $1.4 billion to $1.3 billion, due to a realignment of obligations to discretionary accounts.
Notably, $2 billion of the reported spending covered routine operational expenses due to shortfalls in annual appropriations, meaning only $7 billion was used for supplemental funding purposes.
Funding for Taxpayer Services will be used up this year.
The IRS will spend $1.9 billion on Business System Modernization, leaving just $265 million that will be used up next year.
At the current pace—just $9 billion spent in three years—the prospect of effectively utilizing the entire IRA allocation remains dubious.
Recommendations
1. Authorize the IRS Commissioner to Transfer Remaining IRA Funding to High-Priority Areas
While the IRS provisions in the IRA were primarily meant to strengthen tax enforcement, taxpayer services and modernization efforts are also key priorities, yet supplemental funding for these areas is almost all used up. The new Commissioner should have explicit authority to reallocate unspent IRA funds to pressing needs to enhance IRS efficiency and responsiveness. A modernized cohesive taxpayer database at the IRS will enable it to streamline processes, increase efficiencies and productivity, and better serve taxpayers.
2. Schedule Hearings for a New IRS Commissioner
With the resignation of previous IRS Commissioner Daniel Werfel in January 2025, the IRS has been operating under an acting director. President Donald Trump nominated former Representative Billy Long (R-MO) on January 20, 2025, but a hearing to consider his nomination has not been scheduled yet.
The Senate should prioritize hearings on President Trump’s nominee for IRS Commissioner in order to plan for stable leadership and effective oversight of the IRS. NTUF also has suggested ten reforms that the administration and a new commissioner should implement that will ensure the IRS does not fail taxpayers.
3. Expedite the Nomination of a Permanent Treasury Inspector General (IG)
After nearly two decades of steady leadership under the late J. Russell George, TIGTA has been operating under an acting IG since January 2024. Former President Joe Biden was slow to nominate a successor, announcing David Samuel Johnson for the role on July 23, 2024. The Senate did not begin to consider the nominee until hearings were held by the Finance Committee on November 14, followed by a favorable Committee vote on December 5. But no other action was taken for the rest of the 118th Congress.
While Acting IG Heather Hill, a long-serving official at TIGTA, has ensured continuity, having a Senate-confirmed IG is critical for maintaining strong oversight of the IRS. TIGTA plays a vital role in identifying waste, fraud, and abuse in tax administration, particularly as the IRS manages an influx of new funding and responsibilities. This is in addition to long-standing challenges to modernize its antiquated technology and a hiring freeze just as tax season kicks off.
A permanent IG brings long-term accountability, independence, and stability to the office, reinforcing taxpayer confidence that oversight will not waver due to political or administrative transitions. The White House and Congress should prioritize filling this role to ensure robust oversight of one of the government’s most powerful agencies.
4. Improve Timeliness of IRS Spending Reports
While TIGTA’s reporting on IRA spending is commendable, the time lag in tracking expenditures hampers accountability. TIGTA and the IRS should provide more frequent and detailed reporting on IRS spending to ensure transparency and timely course corrections.
Conclusion
TIGTA’s report underscores the challenges associated with the IRS’s use of IRA funding, particularly the slow spending rate and the misalignment of allocations. Congress must take proactive steps to ensure that IRS leadership is in place, funds are directed toward essential modernization and taxpayer services, and oversight mechanisms are strengthened. These efforts will help modernize and streamline the IRS.