The House GOP’s Financial Services and General Government Appropriations Bill, released this week by committee Chair Tom Cole, R-Okla., targets the IRS’s Direct File program via a policy rider that prohibits the funding of “a government-run tax preparation software that Congress has not authorized.” 

Just last week, the IRS announced that Direct File would be made permanent following a pilot program that saw more than 140,000 taxpayers across 12 states use the free electronic filing system. The tax agency said the program received more than $90 million in refunds and reported $35 million in balances due during its pilot run. 

Treasury Secretary Janet Yellen touted Direct File further this week during testimony before the Senate Appropriations Subcommittee on Financial Services and General Government, noting that all states will be invited to participate in the program “as soon as next filing season,” with expansion on the horizon “to support all of the most common tax situations over the next few years.”

House Republicans’ bill, which cuts the IRS’s budget by $2.2 billion from fiscal 2024 funding levels, is the culmination of months of sustained attacks on Direct File from GOP members of Congress, state attorneys general and state treasurers and comptrollers. 

The highly lucrative tax preparation industry has also been gunning for Direct File. In an April statement to FedScoop, a spokesperson for Intuit — maker of TurboTax — said the tax agency’s Direct File post-mortem included estimates that were “clearly low, inaccurate, and the IRS even acknowledges conveniently leaving out necessary costs to build and run the pilot.”

Democrats, meanwhile, railed against Republicans’ proposed cuts to the IRS — which include a $2 billion reduction in enforcement funding — and especially the move against Direct File. Senate Finance Committee Chairman Ron Wyden, D-Ore., said in a statement that “the centerpiece” of Republicans’ budget plan for the IRS is “helping rich people cheat on their taxes.”

“If Republicans have the opportunity, they will deprive law-abiding taxpayers of the choice to file their taxes for free with the IRS’s new direct file program by shutting it down before it expands nationwide,” Wyden said. “In short, the winners in this plan are rich tax cheats like Donald Trump, and the losers are typical Americans who earn a wage, follow the law and want to file their tax returns every spring without getting ripped off by big tax software companies.”

News of the GOP’s Direct File targeting came amid a victory lap for the IRS and its Document Upload Tool, which processed its one millionth taxpayer submission. The agency had a limited rollout of the tool in 2021 and expanded it substantially in 2023 thanks in part to funding from the White House’s Inflation Reduction Act.

“The Document Upload Tool is a key part of our ambitious initiative to transform the IRS into a virtually paperless agency, and we continue to see increased use of this by taxpayers,” IRS Commissioner Danny Werfel said in a statement. “This tool saves time for taxpayers and helps IRS employees process responses faster and more efficiently.”

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Language included in the VA appropriations bill provides $1.2 billion for the Oracle Cerner-operated electronic health record contract, as well as $424 million for infrastructure readiness preparations associated with the system. It would also allocate $253 million for program management.

The proposed fresh funding comes amid increasing scrutiny from Congress over the troubled EHR rollout and wider scrutiny of technology procurement at the department. Last month, lawmakers in the Senate introduced a bipartisan bill that seeks to create an oversight board to review major acquisitions by the Department of Veterans Affairs.

Following passage by lawmakers in the House, the Military Construction, Veterans Affairs, and Related Agencies Appropriations Bill now moves forward to be considered by Senate lawmakers after they return from recess.

In its current form, money allocated to the EHR for fiscal 2024 is contingent on the agency providing a quarterly report of obligations, expenditures and the technology deployment schedule to Congress. The initiative will be administered by the Office of the VA Deputy Secretary.

According to the bill, the VA is not expected to request the release of the 25% of funds set aside for fiscal 2023, and it plans to pause new deployments of the system in fiscal 2024. In April, the VA announced that it had stopped all further implementation of the project as part of a major reset. 

In a statement at the time, the agency said that the system would not be brought online at any further locations until it is considered “high functioning” and issues at current locations are resolved.

Within 30 days of the appropriations bill being enacted, lawmakers are seeking a report of each new EHR requirement and customized interface added in fiscal years 2022 and 2023, to establish whether they were outside of the scope of the contract. And within 45 days, lawmakers want a briefing on the department’s plan to set enterprise standards, according to the bill.

Previous legislation also requires the Department of Veterans Affairs to provide Congress with updates on steps the agency has taken to revise and enhance the EHR training program, ensure proper medication management and the accuracy of patient data, and that the system is properly identifying veterans who may be at high risk for suicide. 

In May, the VA struck an agreement with Oracle Cerner to renew the technology giant’s contract for the electronic health record modernization program. In a statement at the time, the agency said the renegotiated contract “dramatically increases” the agency’s ability to hold the company to account.

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The Senate Committee on Appropriations on Thursday waved through language in the Financial Services and General Government Appropriations Act that would claw back the sum, which was awarded to USDS as part of a funding package included in the American Rescue Plan.

The move to recoup funds from the executive branch-housed technology unit comes amid concerns from senior leaders within the federal IT community over its transparency and use of funding.

Advocates for the White House digital services unit say it offers a mechanism for bringing senior Silicon Valley talent into government service for a defined period, and cite projects such as the COVID.gov website as an illustration of where it can be most successful. However, in recent months, government IT leaders and lawmakers have raised concerns about a lack of operational transparency from the unit.

Speaking with FedScoop, one currently serving government technology leader described USDS’s strategic plan as opaque and said it was often difficult to obtain operational details from the unit. “What the hell are they working on? What are they doing that is pushing forward the enterprise and the administration’s priorities?” they said, speaking with FedScoop on the condition of anonymity because they were not authorized to share their concerns.

In a statement to FedScoop, former Senate Homeland Security and Government Affairs Committee Senior Adviser Matt Cornelius said: “During my time in Congress, I was deeply critical of USDS’s leadership and financial management, especially their steadfast refusal to provide simple accounting data on how they were using the $200m they received under the ARP.”

“I’m glad that the Senate Appropriations Committee followed my public recommendation to rescind USDS’s ARP funds and believe the decision is a clear, powerful step towards enforcing greater transparency and fiscal responsibility in the office. If USDS is going to survive long term, they need to jettison their flippant disregard for Congress and be more forthcoming about their financial management practices and performance goals,” Cornelius added.

USDS, which was launched in 2014 by the White House provides consultation services to federal agencies on IT and technology issues and works to improve and simplify digital services and improve federal websites in particular.

During the past couple of years, the unit has sought to hire engineers, designers, product managers, acquisition strategists, and policy experts to expand its work. It has grown to a team of over 200 people and a network of over 500 alumni as of 2021 while becoming a farm system for federal chief information officers and chief technology officers.

That work includes supporting the Centers for Disease Control and Prevention during the COVID-19 pandemic, streamlining financial relief, improving the immigration and refugee processes, aiding students with their loans, and reforming procurement and federal hiring.

In particular, USDS played a key role in the COVID-19 rapid test website that launched in early 2022 in conjunction with the U.S. Postal Service to make 500 million rapid tests available on the heels of the Omicron COVID-19 variant’s rapid spread.

“Placing USDS back into the regular appropriations process will ensure that they are more transparent with Congress about the purpose of the office and the amount of funding they need to support their mission, and will allow Congress to set up necessary guardrails to ensure USDS effectively utilizes any future resources Congress allows them to receive,” said Cornelius.

In a statement, Rohan Bhobe, CEO of D.C.-based civic tech company Nava Public Benefit Corp., said: “Government agencies have made a lot of progress towards implementing the Biden Administration’s Customer Experience Executive Order, but there’s a lot of work that still needs to be done. Government services that are more simple, effective, and accessible to all can also save taxpayer dollars and help government agencies become more resilient. 

Bhobe added: “The technology expertise agencies like USDS and 18F have provided, in partnership with their civil service partners, has empowered many federal agencies to effectively deliver better digital experiences to millions of people. We hope Congress will continue to prioritize investing in technology infrastructure that helps millions of their constituents conduct business with their government every day.”

USDS did not respond to requests for comment.

Editor’s note, 7/17/23: This story was updated to include comment from Nava Public Benefit Corp.

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The House Appropriations Committee on Wednesday said in a summary of the Financial Services and General Government appropriations bill that it wants to eliminate funding for the TMF in fiscal 2024 as part of its efforts to “cut wasteful spending” across the federal government.

The Subcommittee on Financial Services and General Government conducted its markup of the bill Thursday morning. The bill also seeks to ensure “agencies return to pre-COVID telework policies and levels.”

The Biden administration requested $200 million for the TMF in its 2024 budget request earlier this year, compared to the $300 it requested for fiscal 2023 — which resulted in just $50 million of additional funding, despite the urging of some top lawmakers to fund the program at the requested levels.

It’s been common since the creation of the TMF for fiscally conservative lawmakers to try to zero it out.

Speaking with FedScoop earlier this year on the fifth anniversary of the TMF, Federal CIO Clare Martorana told FedScoop the fund has proven itself as an alternative model to drive modernization that delivers near-term impact in the federal government outside of the otherwise snaillike two-year budget cycle.

“There’s some data out in the marketplace done by large consulting companies that talk about the failure rate of IT projects. And it’s pretty significant — projects over $6 million with a significant failure rate. And that’s not acceptable to us. And as technologists, we know how to do this differently. And the way that you do it differently is the way that we’ve designed TMF,” Martorana explained during an interview on the Daily Scoop podcast.

Despite the potential absence of funding for fiscal 2024, the General Services Administration-managed TMF still has money to spend from the $1 billion injection it received as part of the American Rescue Plan in 2021.

So far, the fund has invested more than $700 million across 38 IT modernization projects at 22 federal agencies since it was launched five years ago. It has more than $786 million remaining to spend, according to federal spending data.

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Lawmakers on the Department of Homeland Security subcommittee will tomorrow mark up draft fiscal 2023 funding legislation before it is considered by lawmakers on the full House Appropriations Committee.

Under the proposals, CISA will receive $2.93 billion, $417.1 million more than its request, split among cyber and infrastructure security, emergency communications, integrated and risk management operations, stakeholder engagement and requirements, and mission support.

Lawmakers cited increased cyberattacks and threats to critical infrastructure —  particularly in light of the Russian invasion of Ukraine and encroachment in the Arctic — as the reason for the additional funding. But CISA’s mission set, under the direction of Chris Krebs and now Jen Easterly, has been expanding in spite of the agency’s newness.

“Russia is clearly an accelerator of increased cybersecurity spending and management, which is to the good,” Jonathan Reiber, vice president of cyber strategy and policy at AttackIQ, told FedScoop. “But these investments are long overdue to bring the U.S. government into a place where it is in a strong enough position commensurate with the threat.”

CISA now handles red teaming and penetration testing for agencies at all levels of government, breach notifications, reporting and analysis, alerts, and technology recommendations and oversight.

The Shields Up campaign helping individuals and organizations defend against cyber intrusions, particularly from Russia, exemplifies the “good work” CISA does on the prevention side, Reiber said. 

“But then you need to validate those shields are working,” he added.

AttackIQ finds security programs generally operate at about 30% to 50% effectiveness against known cyber tactics, techniques and procedures. 

CISA has historically struggled to help states ensure their election security infrastructure is effective through red teaming and penetration testing due to staffing, technology and process limitations, Reiber said. 

Reiber would love to see CISA use any additional funding it ultimately receives from Congress to launch an automated testing function that remotely helps states improve their cyber effectiveness continuously.

Many states are lucky to test their systems once a year, which is why CISA has begun pivoting to automated security control validation, Reiber said.

Other areas where CISA needs additional funding include outreach, tabletop exercises like those conducted by the Joint Cyber Defense Collaborative, and forensics and analysis capabilities that have already improved thanks to the MITRE ATT&CK framework, he added.

CISA’s budget is a far cry from that of the Department of Defense’s at about $500 billion or even the FBI’s at about $50 billion, but it continues to tick up.

All told House Appropriations proposed a $2.7 billion increase to CISA’s parent agency, the Department of Homeland Security, budget — bringing it up to $85.67 billion.

Additional funds were flagged for border security, Coast Guard maritime security, a new pay system for Transportation Security Administration on par with other federal workers, and more dignified migrant processing.

House Appropriations seeks about $100 million for border technology, $20 million for innovative technology and $50 million for non-intrusive inspection technology at points of entry within Customs and Border Protection. 

The bill would further restore $4 million in TSA pipeline security funding cut in fiscal 2022.

Lastly the DHS Science and Technology Directorate would see an increase of $77.4 million to $963.8 million for, among other things, research, development and innovation and University Centers of Excellence.

“From dramatic investments in our nation’s cyber infrastructure to prevent increasingly pervasive cyberattacks to ensuring our Coast Guard has the tools it needs to protect our country from Russian aggression in the Arctic, this bill is key to bolstering our national security,” said Rep. Rosa DeLauro, D-Conn., the committee chair.

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The proposed sum is included in the House Appropriations Subcommittee on Financial Services and General Government funding bill, which provides annual funding for the departments of Treasury and Justice, the Executive Office of the President, and other independent agencies, including the General Services Administration and Small Business Administration.

If approved, it would provide additional funding to support modernization projects with a multi-agency impact and would be the latest backing for the central fund since it received $1 billion as part of the American Rescue Plan.

Earlier this March, the White House asked lawmakers to approve an additional $300 million in funding for the Technology Modernization Fund as part of the president’s fiscal 2023 budget request.

According to the White House, the fund provides value for money for the American taxpayer by tying project funding for IT capital investment to the delivery of project milestones and by providing funding in tranches.

The legislation will be marked up on Thursday by the Financial Services and General Government Subcommittee, before being sent to the full committee for further scrutiny.

The draft legislation was issued this week, alongside several other draft 2023 funding bills, including the defense funding bill, the homeland security funding bill and the agriculture-rural development-FDA funding bill.

In March, Federal CIO Clare Martorana said the TMF board was taking a methodical approach to investments in federal agency projects and that the fund had $766.1 million left to distribute.

Initial project proposals take 100 hours to review and move to the second, final phase: a full project proposal, where agencies must demonstrate their commitment to the board‘s performance- and milestone-based transformation process.

Since the fresh funding provided through the ARP, the TMF board has received over 120 proposals requesting more than $2.5 billion in support for technology projects from 40 federal agencies.

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The legislation, which was proposed by lawmakers on the House Appropriations Committee, would provide the TMF with one-tenth of the $500 million requested for the 2022 budget last month by the Biden administration, which also called for $9.8 billion to support civilian cybersecurity programs across government. However, it’s double the sum deposited in the fund in recent appropriations cycles.

TMF earlier this year received a $1 billion emergency injection as part of the American Rescue Plan Act after widespread lobbying by lawmakers and tech advocates for nearly a year. Federal agencies have drawn on the TMF to support long-term technology modernization, including DHS, which has applied for money from the fund to support at least four projects.

Budget funding requests are determined by lawmakers on the House and Senate appropriations committees. It is relatively unusual for House lawmakers to advocate for a sharp reduction in requested funds.

The legislation also provides funding of $34 million for the U.S. Treasury to cover a range of measures including technology modernization, and it also would approve a separate $132 million funding pool for the enhancement of cybersecurity systems at the department.

If enacted, it will also provide the Treasury’s CIO with $4 million to cover administrative expenses incurred while making cybersecurity improvements.

The draft legislation also outlines provisions for the IRS to receive $305 million for necessary expenses relating to business systems modernization.

Under the proposal, the Office of Management and Budget would receive $10.4 million for technology and the Office of Personnel Management would get $8.8 million for IT modernization and trust fund federal financial system migration or modernization.

The draft bill also would approve a budget for the newly created role of National Cyber Director, providing $15 million in funding for the position for the fiscal year.

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The proposal is part of a draft supplemental funding bill published Monday night in the House that would funnel $2.5 trillion to emergency response efforts during the COVID-19 pandemic. The legislation differs from the package that Senate Democrats and Trump administration officials have been negotiating this week, but it’s possible the House proposal could influence that measure.

Under the House bill, agencies could apply for funds to use through fiscal 2022 specifically for “technology-related modernization activities to prevent, prepare for, and respond to coronavirus.” If any of the money isn’t used by the end of September 2022, it would expire.

A Democratic aide to the House Appropriations Committee told FedScoop the money “would be used for technology-related modernization projects designed to cut costs and drive efficiencies across the Federal government, which is particularly relevant as more federal workers are working remotely because of the pandemic.”

The fund isn’t the only way agencies will get additional IT money during the pandemic, as they scale to face the difficulties of mobilizing their workforces to telework. Many agencies have requested funding to support their emergency IT as they have moved to a state of “maximum teleworking” during the novel coronavirus pandemic. And in this bill, appropriators look willing to meet agencies’ needs.

The money put into the TMF differs from those agency-specific appropriations in that “the board will prioritize projects that digitize federal actions and promote telework efficiencies,” the aide said. “Agencies always have the option to use their own money but the TMF allows them to invest in actions that have a longer horizon/[return on investment].”

Historically, the TMF board has awarded projects smaller amounts of money, less than $25 million. Agencies are then required to repay that money within five years. Thus far the TMF has awarded a total of $90 million to seven distinct projects— two at both the U.S. Department of Agriculture, General Services Administration, and one apiece at the departments of Energy, Housing and Urban Development, and Labor.

The TMF has struggled since its creation to resonate with lawmakers, who have funded it well short of the requests from the White House. The executive branch requested $150 million for the TMF in fiscal 2020 but ended up getting just $25 million. In fiscal 2019 the Trump administration requested $228 million and got $25 million. The White House requested $220 million for fiscal 2018, the fund’s inaugural year, and ended up with $100 million.

The Office of Management and Budget asked last month for $150 million for the fund in fiscal 2021.

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America is currently facing “generational defining challenges at home and abroad,” he wrote in his announcement. “After reflecting on how best to help our country address these challenges, I have made the decision to not seek reelection for the 23rd Congressional District of Texas in order to pursue opportunities outside the halls of Congress to solve problems at the nexus between technology and national security.”

The Republican lawmaker and ex-CIA agent has been one of the preeminent tech- and cybersecurity-minded members of Congress during his three-term run in the House. While serving as the chairman of the House Oversight and Government Reform Subcommittee on IT during his first two terms, Hurd sponsored legislation like the Modernizing Government Technology Act and oversaw agencies’ implementation of the Federal IT Acquisition Reform Act.

After a very close midterm reelection in 2018, Hurd became the ranking member of the House Permanent Select Committee on Intelligence’s newly formed Subcommittee on Intelligence Modernization and Readiness and took a seat on the House Appropriations Committee.

Hurd has continued to play a role in conversations about federal IT, however. In January, he and Robin Kelly, D-Ill., reintroduced their Federal CIO Authorization Act, a bill that would make the federal CIO a presidential appointee who reports directly to the director of the Office of Management and Budget. The legislation has passed the House.

Hurd is the only African-American Republican currently serving in the House.

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If enacted, this funding level would represent a huge cut from the $150 million that the White House has requested. It would, however, be a bump up from what the TMF got in fiscal 2019. The money would remain available until used.

The TMF, a central funding pot that loans money to federal agencies for IT modernization projects, was created by the Modernizing Government Technology Act, which President Trump signed into law in December 2017. The fund was launched with $100 million in fiscal 2018 and received another $25 million in fiscal 2019.

While the TMF has broad bipartisan support, appropriators have historically been a little skeptical. “We’ve not seen results from that program yet and we don’t have any data on it,” Sen. James Lankford, R-Okla., chairman of the Financial Services and General Government Subcommittee, said during the 2019 appropriations debate. Supporters, meanwhile, argue that the fund is a vital mechanism for supporting large-scale tech modernization in government.

Since its inception, the TMF’s seven-person board has given out a total of $90 million in funding to seven distinct projects — two projects at each the U.S. Department of Agriculture, General Services Administration, and one apiece at the departments of Energy, Housing and Urban Development, and Labor.

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