Bolstering our country’s manufacturing capabilities. Alleviating supply chain woes. Kickstarting R&D for innovation.
It’s easy to like, even to laud, the IRA as a landmark piece of legislation.
But some of the fine print may be worth scrutinizing from a business standpoint, most notably its provisions related to taxation enforcement, which may impact organizational approaches to compliance, audit readiness and more.
Why? For one, the goals of the bill, as laid out in the Democrat’s official fact sheet, include this salient line: “There are… no new taxes on small businesses – we are closing tax loopholes and enforcing the tax code” (emphasis added).
What does this mean, and how will it happen in practice? Are new enforcement mechanisms currently being implemented, or is the agency just shifting its priorities while increasing headcount? Could 87,000 new IRS agents really be about to descend on your QuickBooks, as one Republican lawmaker suggested?
The answer, at least for that last one, is an emphatic “no,” but the others are less simple. The reality is, no one knows how a lot of the details are going to play out at present.
Still, the sheer level of investment that the IRA is channeling to the IRS should be enough to give FP&A leaders pause. Just look at the numbers:
- The bill appropriates nearly $80 billion to enhance the capabilities of the IRS.
- Of that money, the majority, or north of $45 billion, will specifically be directed toward enforcement-related activities.
- In terms of the IRS’s current budget for enforcement, that figure amounts to an increase of 69 percent through year-end 2031.
Of course, it goes without saying that the IRS will likely need some time — years, probably — to fully operationalize that scale of investment. But considering the sheer magnitude of the budgetary increase, together with the stated goals of the bill, it isn’t hard to extrapolate at least two key takeaways for forward-thinking leaders.