Equity in the Operation and Application of the Tax Code and U.S Funding Distribution

WHEREAS, From 2010 to 2019, an analysis of Internal Revenue Service ("IRS") data from Transactional Records Access Clearinghouse ("TRAC") at Syracuse University found that households earning less than $25,000 annually were five times as likely to be audited by the IRS; and

WHEREAS, The General Accountability Office ("GAO") found in 2022 that years of budget cuts have resulted in IRS agents focusing attention on collecting revenue through the use of "correspondence audits" in which the agency requests additional information from U.S. taxpayers through the use of algorithm-generated correspondence; and

WHEREAS, Correspondence audits result in fundamental unfairness in the collection of taxes by requiring lower income taxpayers to substantiate the anti-poverty earned income tax credit and income derived from other anti-poverty programs; and

WHEREAS, The IRS has falsely assumed that correspondence audits do not place undue burden on lower income households due to the complex issues involved with substantiating use of anti-poverty programs; and

WHEREAS, We have seen a once in a generation investment of federal funding into the U.S economy; and

WHEREAS, The U.S. President has instructed that the funding be distributed with an "Equity Lens" meaning that those who need the most, receive the most; and

WHEREAS, IRS ignorance of the complex needs and administrative burden faced by lower income households regularly results in the IRS disallowing use of anti-poverty tax credits and issuing a Notice of Deficiency; and

WHEREAS, Notices of Deficiency and tax delinquencies harm the financial lives of lower income taxpayers, cause indebtedness, lower credit scores, increase economic harm, and widen the racial wealth gap, opposite the intended outcome of anti-poverty programs; and

WHEREAS, The National Taxpayer Advocate has noted this fundamental unfairness in the application of tax practice, and has asserted that the IRS should shift its practices to focus greater attention on increasing audit rates for higher income taxpayers; and

WHEREAS, The IRS received an $80 billion increase in funding for 2022-2031 through the Inflation Reduction Act that the Congressional Budget Office projects to bring in $204 Billion in revenue.

THEREFORE, BE IT RESOLVED, that the NAACP demands that the IRS ensure that revenue enhancements intended to improve IRS capacity do not increase financial harm to lower income taxpayers.

BE IT FURTHER RESOLVED, that the NAACP demands an accounting of: (1) how the equity lens is applied; (2) where the funding is going; and (3) to whom it is going. We further demand that the oversight documentation be submitted to the NAACP and its Economic Justice Department.

BE IT FURTHER RESOLVED, that the NAACP demands that the IRS improve equity and fairness by creating and publishing a public plan to ensure that taxpayers with reportable income over $400,000 from all sources, and corporations are not audited at lower rates than taxpayers with reportable income of $25,000 or below.

BE IT FURTHER RESOLVED, that the NAACP demands an immediate end to "correspondence audits" of any households with reportable income at or below $25,000, and that any lower income household experiencing an audit be provided assistance by the IRS or other contracted personnel trained in financial literacy counseling and tax compliance issues faced by lower income taxpayers.

BE IT FINALLY RESOLVED, that the NAACP will encourage Congress to exercise its oversight function to ensure that the IRS develop and implement strategies to improve equity in tax collection and provide an annual public report on this policy and its application to support tax fairness and compliance among all taxpayers.