For-profit tax filing companies earn a win with bipartisan tax bill

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(Kimberly White/Getty Images for TurboTax)

Not too many people look forward to April 15, the deadline of tax season, and Congress may have just made the season even more gloomy.

A bipartisan bill that recently passed the House, the Taxpayer First Act, has stirred controversy with a provision that critics say would block the IRS and the U.S. government from ever offering a free online tax filing system. The bill passed the House by a voice vote, a method which only requires a majority vote and a roll call is not recorded. A companion bipartisan bill has been introduced in the Senate.

Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) pushed back on the critics’ arguments that the legislation would permanently block a free government service. Some lawmakers said they voted for the legislation because of other aspects included in the bill. Other members of the House opposed the provision and said they didn’t know it was included in the Taxpayer First Act.  Rep. Katie Hill (D-Calif.), vice-chair of the Committee on Oversight and Reform, called it a “sneaky provision the tax preparation lobby has been pushing for, and it hurts consumers.”

The absence of a free tax filing system provided by the government puts America in stark contrast to many of the world’s governments. While there is a private sector free filing service, called Free File which partners with the IRS, for those who make under $66,000, only 3 percent of eligible Americans use the program. Currently, the IRS already has an agreement with the Free File Alliance industry group to not make their own free system. The legislation passed by the House would place the current agreement into law. After the criticism, a working group was created to look into the IRS and its connections with the private companies.   

A government-created free system is opposed in America by companies like H&R Block and Intuit, creator of TurboTax, which profit from helping people file taxes. Unsurprisingly, both companies are big political players.

Both companies stepped up their lobbying in recent years. In 2018, H&R Block spent their most yet with more than $4 million. Intuit dropped the most on lobbying since 2014 with $2.6 million. They each lobbied heavily on the 115th Congress’ version of the Taxpayer First Act, with H&R Block mentioning the bill in 10 of its lobbying disclosure reports and Intuit mentioning it in 26.

Much of each company’s campaign contributions go to members in the influential House Ways and Means Committee and the Senate’s Finance Committee. During the 2018 cycle, Intuit contributed $38,500 to Ways and Means members, all from PAC money. On the Senate side, Intuit affiliates contributed $52,819 to members of the Finance Committee.

H&R Block shared the same two favorite committees. Its PAC sent $69,000, along with another $1,354 from individuals, to members of the House Ways and Means Committee and a combined total of $43,364 to Senate Finance Committee members.

Overall, contributions from H&R Block rose to the highest levels yet in the 2018 cycle, and while Intuit’s shrank in total compared to previous midterms, their PAC spending did rank at its highest yet in a non-presidential cycle.

Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means committee, said the bill would “protect low-and moderate-income taxpayers,” along with other reforms. Neal received $6,500 from Intuit during the 2018 cycle.

The top recipients of campaign contributions from Intuit affiliates were Rep. Zoe Lofgren (D-Calif.) with $27,550 and Sen. Bob Casey (D-Pa.), a member of the Senate Finance Committee, with $15,400.

The top recipient of contributions from H&R Block was former Sen. Claire McCaskill (D-Mo.), who was a member of the Senate Finance Committee, with $11,695. Three House members all received $10,000 each — Rep. Emanuel Cleaver (D-Mo.), House Minority Leader Kevin McCarthy (R-Calif.) and former Rep. Kevin Yoder (R-Ks.). Both McCaskill and Yoder lost reelection in 2018.

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