HELENA – Montana Attorney General Austin Knudsen led a coalition of 13 attorneys general in demanding the Biden administration stop attempts to sidestep Congress by giving the Internal Revenue Service (IRS) the sweeping authority to prepare and file tax returns for all taxpayers.
In a letter sent Tuesday to Department of Treasury Secretary Janet Yellen, Attorney General Knudsen opposed the IRS-run Direct File Pilot Program as the Department was never granted the authority to create such a program by Congress. The program will also have negative consequences for low-income filers and devastate small businesses. He also raised concerns over the flawed study commissioned by the IRS to report on the system.
“Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house,” Attorney General Knudsen wrote. “The United States Constitution vests the power to make laws and appropriate funds with Congress. Allowing the Treasury Department to set up an IRS-run Direct File Pilot Program is a clear attempt by the Biden administration to circumvent these constitutional limitations.”
The Constitution gives Congress – not administrative agencies – the power to make laws and appropriate funds. However, Congress has not passed legislation granting the Treasury Department the authority or allocated any additional funds for the program.
While Congress commissioned a study from an “independent third party” to report on “the overall feasibility, approach, schedule, cost, organization, and design” of the system, the IRS chose New American – a liberal think tank – that previously supported an IRS-run direct file system to complete the study.
The IRS’s study was found to be deeply flawed. An independent watchdog, Treasury Inspector General for Tax Administration (TIGTA) found that the IRS may have overstated taxpayer interest in the system and that the $78 million cost to taxpayers “could not be substantiated” because of questions surrounding how many taxpayers would use Direct File and how the IRS estimated certain costs. One organization estimated the cost for a potential IRS-run free filing system would be comparable to the costs of Healthcare.gov, which cost more than $21.2 billion in its first 11 years.
Additionally, the IRS system does not address the needs of American taxpayers since taxpayers in participating states will need to use separate platforms to file their state and federal taxes. One study found that only 37 percent of filers with simple returns would use an IRS-run system and 29 percent of taxpayers would use the system if it did not also prepare state and local returns.
The attorneys general also raise concerns with the agency’s record of discriminating against low-income taxpayers and customer service issues. And reminded Secretary Yellen that millions of taxpayers already file their taxes for free with existing programs or work with small businesses to file their taxes at an affordable cost “because they want an advocate in their corner who will represent their interests against the IRS bureaucracy.”
“Treasury’s attempt to establish an IRS-run Direct File system side-steps Congress’ constitutional authority and the will of the American people by unilaterally establishing a new government program and further empowering an IRS that has repeatedly targeted some of the most vulnerable taxpayers. We urge the Department to end the IRS-run Direct File pilot program,” the attorneys general concluded.
Attorneys general from Georgia, Idaho, Iowa, Louisiana, Missouri, Nebraska, South Carolina, Tennessee, Texas, Utah, Virginia, and West Virginia.
Click here to read the letter.
Press release provided by Montana Department of Justice
