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1 1 (May 20, 2024)

handle is hein.crs/govepky0001 and id is 1 raw text is: Con ressional Research Sentc fo~ fling I legi I lived Am ~ mee 914 0 Updated May 20, 2024 The IRS Technology Modernization Program: An Overview The Internal Revenue Service (IRS) collects 95% of the funds needed to operate federal government programs and agencies. In FY2023, the agency collected $4.7 trillion in gross revenues, processed 272 million tax returns and other forms, and issued $659 billion in refunds. The IRS's information technology (IT) systems are critical to this output. The capabilities of those systems have long been a concern to taxpayers, tax professionals, and lawmakers, among others. Critics regard key elements of the IRS's information systems as outdated, inefficient, and ill-suited to achieving the service's current strategic goals. These systems rely on core legacy computer systems installed in the 1960s that operate on computer programming languages such as Common Business Oriented Language (COBOL) and Assembly Language Code. The Government Accountability Office (GAO) maintains that legacy systems like the IRS's contribute to security risks, unmet mission needs, staffing concerns, and increased costs. The IRS has pursued several major technology modernization initiatives since the 1970s. It has spent billions of dollars on its current effort, the Business Systems Modernization (BSM) program, which started in the late 1990s. In recent years, the program has emphasized projects intended to expand and digitize taxpayer services (e.g., creating online taxpayer accounts for expedited case management). Central to such projects is the replacement of the IRS's COBOL-based Individual and Business Master Files, which are still used in the processing of individual and business returns. This In Focus briefly reviews the evolution of the BSM program and discusses some of the policy issues it raises. volution of the BSM Programn The BSM program focused on several technology development initiatives in its early years. Foremost among them was the Customer Account Data Engine (CADE 1), which was intended to replace the Individual Master File with a faster, more efficient, and more secure taxpayer data management system. In 2004 congressional testimony, GAO's Robert F. Dacey referred to CADE as the linchpin modernization project because most IRS information systems depended directly and indirectly on the file's data. IRS officials initially estimated that CADE 1 would cost $66 million and would be ready for deployment by late 2001. In 2009, after a string of delivery delays and cost overruns, the IRS stopped working on the project. In 2010, the IRS began to develop a successor to CADE 1 known as CADE 2. The project was slated to be finished in three phases, the first two of which were to be completed by January 2014. The GAO reported that only the first phase was completed by January 2014. According to the IRS's latest projection, CADE 2 should be fully deployed by FY2028. The IRS made significant changes in the BSM program when it launched a six-year plan (called the IRS Integrated Modernization Business Plan or IMBP) in April 2019 to make major improvements in taxpayers' interactions with the IRS. The plan revolved around projects intended to (1) expand online access to taxpayer information and other IRS services, (2) reduce call-wait and case-resolution times, (3) accelerate the processing of tax returns and refunds, (4) simplify the verification of taxpayer identities, and (5) retire millions of lines of legacy IT code. The IRS initially projected that these projects would be completed by FY2024 at a cost between $2.3 billion and $2.7 billion. An infusion of multiyear funding for the IRS under the Inflation Reduction Act (P.L. 117-115, IRA, see below for more details) seemingly has imparted new momentum to the IRS's long-standing technology modernization efforts. In April 2023, the IRS issued a Strategic Operating Plan (SOP) for using the $79 billion in mandatory IRA funding the agency was to receive between FY2022 and FY2031, including $4.8 billion in BSM funds. This funding is in addition to IRS discretionary funding in that period. One of the SOP's five objectives was to deliver cutting-edge technology, data, and analytics to operate more effectively. In a 2024 update of the SOP, the IRS stated that it is planning to undertake 18 technology modernization projects between FY2023 and FY2025, at a total cost in IRA funds of $3.3 billion. Three projects are expected to account for a significant portion of that expenditure: Enterprise Case Management, Individual Master File Modernization, and Identity and Access Management. Funding Congress set up a special appropriations account in FY1997 (the Information Technology Investment Account) for the BSM program. Since FY1998, BSM funds have been available only for the acquisition, development, and implementation of products and services related to modernization projects; they may not be used for the maintenance and operation of the IRS's existing IT systems, the cost of which is covered by a different appropriations account. Initial BSM funding was $295 million in FY1998. This amount has fluctuated ever since. Funding peaked in FY2002 (in current dollars) at $406 million and remained above $300 million until FY2005, when it fell to $203 million. BSM appropriations remained below $300 million until FY2012, when they rose to $330 million. Funding

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