Valcourt, Quebec, June 15, 2021BRP Inc. (TSX:DOO; NASDAQ:DOOO) today announced that the Board of Directors has authorized the launch of a substantial issuer bid (the “Offer“) pursuant to which BRP will offer to purchase for cancellation up to $350 million of its subordinate voting shares (the “Shares“). All dollar amounts are in Canadian dollars.

Subject to obtaining the necessary exemptive relief under applicable securities laws in the United States and Canada, the Offer will proceed by way of a combination of a “modified Dutch auction” and a proportionate tender. Holders of Shares and multiple voting shares wishing to tender to the Offer will be entitled to do so pursuant to: (i) auction tenders in which they will specify the number of Shares being tendered at a price of not less than $94.00 and not more than $113.00 per Share in increments of $0.25 per Share, (ii) purchase price tenders in which they will not specify a price per Share, but will rather agree to have a specified number of Shares purchased at the purchase price to be determined by auction tenders, or (iii) proportionate tenders in which they will agree to sell, at the purchase price to be determined by auction tenders, a number of Shares that will result in them maintaining their proportionate equity ownership in BRP following completion of the Offer. Shareholders who validly deposit Shares or multiple voting shares without specifying the method in which they are tendering such shares will be deemed to have made a purchase price tender.

Holders of multiple voting shares will be entitled to participate in the Offer. Multiple voting shares taken up by BRP will be converted into Shares on a one-for-one basis immediately prior to take up. Beaudier Inc. and 4338618 Canada Inc., which collectively hold approximately 27.7% of BRP’s issued and outstanding Shares and multiple voting shares, have advised BRP that they will make proportionate tenders in connection with the Offer in order to maintain their proportionate equity ownership in BRP following completion of the Offer.

As of close of business yesterday, BRP had 40,100,015 Shares and 43,891,671 multiple voting shares issued and outstanding.

The purchase price to be paid by BRP for each validly deposited Share will be determined upon expiry of the Offer and will be based on the number of Shares validly deposited pursuant to auction tenders and purchase price tenders, and the prices specified by shareholders making auction tenders. As a result, BRP’s shareholders who tender their Shares (other than Beaudier Inc. and 4338618 Canada Inc. and shareholders who make a Proportionate Tender) will set the purchase price for the Offer. The purchase price will be the lowest price (which will not be more than $113.00 per Share and not less than $94.00 per Share) which enables BRP to purchase Shares up to the maximum amount available for auction tenders and purchase price tenders, determined in accordance with the terms of the Offer. Shares deposited at or below the purchase price as finally determined by BRP will be purchased at such purchase price. Shares that will not be taken up in connection with the Offer, including Shares deposited pursuant to auction tenders at prices above the purchase price, will be returned to the shareholders.

If the aggregate purchase price for Shares validly tendered pursuant to auction tenders and purchase price tenders is greater than the amount available for auction tenders and purchase price tenders (after taking into consideration the proportionate tenders), BRP will purchase Shares from the holders of Shares who made purchase price tenders or tendered at or below the purchase price as finally determined by BRP on a pro rata basis, except that “odd lot” holders (holders of less than 100 Shares) will not be subject to proration.

BRP expects to mail the formal offer to purchase, issuer bid circular, letter of transmittal, notice of guaranteed delivery and other related documents (the “Offer Documents“) containing the terms and conditions of the Offer, instructions for tendering Shares or multiple voting shares, and the factors considered by BRP, its Special Committee and its Board of Directors in making its decision to approve the Offer, among other things, on or about June 18, 2021. The Offer Documents will be filed with the applicable securities regulators in the United States and Canada and will be available free of charge on SEDAR at and on EDGAR at Shareholders should carefully read the Offer Documents prior to making a decision with respect to the Offer.

The Offer will not be conditional upon any minimum number of Shares being tendered. The Offer will, however, be subject to other conditions described in the Offer Documents and BRP will reserve the right, subject to applicable laws, to withdraw, extend or vary the Offer, if, at any time prior to the payment of deposited Shares, certain events occur. The Offer is expected to commence on June 18, 2021 and remain open for acceptance until 11:59 p.m. (Montreal time) on July 23, 2021, unless withdrawn, extended or varied by BRP.

BRP’s Board of Directors has approved the making of the Offer and the purchase price for Shares upon recommendation of its Special Committee. However, none of BRP, its Special Committee, its Board of Directors, the dealer manager or the depositary makes any recommendation to any shareholder as to whether to deposit or refrain from depositing any Shares under the Offer. Shareholders are urged to carefully evaluate all information in the Offer, consult their own financial, legal, investment and tax advisors and make their own decisions as to whether to deposit Shares or multiple voting shares under the Offer and, if so, how many such shares to deposit and at what price or prices.

The Offer referred to in this press release has not yet commenced. This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell BRP’s shares. The solicitation and the offer to buy the Shares will only be made pursuant to Offer Documents to be filed with the applicable securities regulators in Canada and the United States and remains subject to obtaining the necessary exemptive relief under applicable securities laws in the United States and Canada. The Offer will be optional for all shareholders, who will be free to choose whether to participate, how many Shares or multiple voting shares to tender and, in the case of auction tenders, at what price to tender within the specified range. Any Shareholder who does not deposit any Shares (or whose Shares are not repurchased under the Offer) will realize a proportionate increase in equity interest in BRP, to the extent that Shares are purchased under the Offer.

BRP has retained RBC Capital Markets to act as financial advisor and dealer manager in connection with the Offer and Computershare Investor Services Inc. (“Computershare“) to act as depositary. Any questions or requests for information may be directed to Computershare, as the depositary for the Offer, at 1‑800-564-6253 (Toll Free – North America) or 1-514-982-7555 (outside North America) or to RBC Capital Markets, as dealer manager for the Offer, at 1-855-214-1269 (Toll Free).

About BRP

We are a global leader in the world of powersports vehicles, propulsion systems and boats built on over 75 years of ingenuity and intensive consumer focus. Our portfolio of industry-leading and distinctive products includes Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft, Can-Am on- and off-road vehicles, Alumacraft, Manitou, Quintrex boats and Rotax marine propulsion systems as well as Rotax engines for karts and recreational aircraft. We complete our lines of products with a dedicated parts, accessories and apparel business to fully enhance the riding experience. With annual sales of CA$6.0 billion from over 130 countries, our global workforce is made up of more than 14,500 driven, resourceful people.

Ski-Doo, Lynx, Sea-Doo, Can-Am, Rotax, Alumacraft, Manitou, Quintrex, Stacer, Savage, Evinrude and the BRP logo are trademarks of Bombardier Recreational Products Inc. or its affiliates. All other trademarks are the property of their respective owners.


Certain information included in this release, including BRP’s intention to undertake a substantial issuer bid and the terms thereof (including the maximum dollar value of Shares that BRP may purchase under the Offer, the timing for launch and completion of the Offer and the price range within which BRP will repurchase shares under the Offer) and other statements that are not historical facts, are “forward-looking statements” within the meaning of Canadian securities laws. Forward-looking statements are typically identified by the use of terminology such as “may”, “will”, “would”, “should”, “could”, “expects”, “forecasts”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “outlook”, “predicts”, “projects”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases. Forward looking statements, by their very nature, involve inherent risks and uncertainties and are based on several assumptions, both general and specific, including that BRP may not receive the necessary exemptive relief to proceed with the Offer under applicable securities laws in the United States and Canada on the timeline anticipated, or at all. BRP cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of BRP or the powersports or marine industry to be materially different from the outlook or any future results or performance implied by such statements. Further details and descriptions of these and other factors are disclosed in the Offer and in BRP’s annual information form dated March 24, 2021.




U.S. Treasury Awards $1.25 Billion to CDFIs to Support Economic Relief in Underserved Communities Affected by COVID-19

Announcement Made by Vice President Harris Alongside Treasury Secretary Janet Yellen, U.S. Senator Mark Warner, and U.S. Representative Maxine Waters

WASHINGTON – The U.S. Department of the Treasury today awarded $1.25 billion in COVID-19 relief funds to 863 community development financial institutions (CDFIs). The awards were announced today by Vice President Kamala Harris at the White House with Treasury Secretary Janet L. Yellen. The grants will be made through Treasury’s CDFI Rapid Response Program (CDFI RRP) and will provide necessary capital for CDFIs to respond to economic challenges created by the COVID-19 pandemic, particularly in underserved communities.

“In serving places that the financial sector historically hasn’t served well, CDFIs lift our whole economy up. We know that for every dollar injected into a CDFI, it catalyzes eight more dollars in private-sector investment, meaning that today’s announcement might lead to an additional $10 billion in investment,” said Secretary Janet Yellen. “The President and the Vice President ran on a very ambitious agenda – ‘Build Back Better,’ unwinding systemic racism, creating an economy that works for everyone. I believe this is what that looks like in practice. By channeling more capital into CDFIs, we are translating those ideals into reality.”

The CDFI RRP grant funds will be used to support eligible activities such as financial products, financial services, development services, and certain operational activities, and to enable CDFIs to build capital reserves and loan-loss reserves. The CDFI Fund designed the program to disburse the funds rapidly in light of the nationwide economic impacts of the COVID-19 pandemic. The CDFI RRP was authorized by the Consolidated Appropriations Act, 2021.

“These awards provide CDFIs with an unprecedented level of flexible capital to help distressed and underserved communities across the country take meaningful steps towards recovering from the debilitating economic impacts of the COVID-19 pandemic,” said CDFI Fund Director Jodie Harris. “CDFI RRP awards will enable CDFIs to help businesses keep their doors open, help families make ends meet, and help maintain important community facilities during this difficult time.”

CDFI RRP award recipients are headquartered in 48 states, the District of Columbia, Guam, and Puerto Rico. The award recipients include 58 organizations that committed to direct their awards to investments in Native American, Native Alaskan, and Native Hawaiian communities; they received a total of $54.6 million in awards.

In addition, 28 organizations that primarily serve Puerto Rico received $47.3 million in awards, and 90 minority depository institutions received a total of $133.9 million in awards.

CDFI RRP awards will reach a wide variety of low-income communities across the United States impacted by the COVID-19 pandemic. The awardees include CDFIs that serve rural, major urban, and minor urban markets. Primary geographic markets served by CDFI RRP awardees include:

  • Major urban areas: 339 organizations receiving $478.7 million in awards
  • Small urban areas: 277 organizations receiving $414.2 million in awards
  • Rural areas: 245 organizations receiving $353 million in awards

A CDFI can be a bank, credit union, loan fund, or venture capital fund. The CDFI RRP award recipients include:

  • Loan funds: 463 organizations receiving $571.3 million in awards
  • Credit unions: 244 organizations receiving $401.8 million in awards
  • Banking entities: 149 organizations receiving $267.1 million in awards
  • Venture capital funds: seven organizations receiving $9.4 million in awards

For more information about the CDFI Fund and its programs, please visit


Treasury and IRS Announce New Online Tool to Help Families Register for Monthly Child Tax Credit

Non-filer Tool Helps Families Who Aren’t Normally Required to File Tax Returns Register for Child Tax Credit

Treasury Also Releases Information to Help Organizations Focus Outreach Efforts to Sign Families Up for Monthly Payments of the Child Tax Credit

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service announced today the availability of a new online tool to help families who normally aren’t required to file an income tax return to register quickly for the expanded and newly-advanceable Child Tax Credit from the American Rescue Plan. The new tool is part of a larger effort to help more families obtain advance Child Tax Credit payments.

“At Treasury, our goal is to make sure that every American can get the relief funding they need as simply as possible,” said Secretary Janet L. Yellen. “We know working families can’t put off paying for doctor’s visits or grocery bills, and this new tool will help more people get their tax credit every month, starting in July.”

Available through, the new Non-filer Sign-up Tool is for people who did not file an income tax return for 2019 or 2020 and did not use the IRS Non-filers tool last year to register for Economic Impact Payments. The tool enables them to quickly provide required information about themselves and their qualifying children age 17 and under. Users of the tool can also choose to enter direct deposit bank information so the IRS can deposit the payments directly into their checking or savings account. Eligible individuals who filed a 2019 or 2020 tax return or used the IRS Non-filers tool last year to register for Economic Impact Payments do not need to take any action to receive their advance Child Tax Credit payments beginning in July. This tool, an update of last year’s IRS Non-filers tool, is also designed to help eligible individuals who don’t normally file income tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim the Recovery Rebate Credit for any amount of the first two rounds of Economic Impact Payments they may have missed.

Experts estimate that the American Rescue Plan has the potential to lift more than five million children out of poverty this year, cutting child poverty by more than half. The plan increased the maximum Child Tax Credit amount in 2021 to $3,600 per child for children under the age of 6 and to $3,000 per child for children ages 6 through 17. The advance Child Tax Credit payments, which will generally be made on the 15th of each month, create financial certainty for families to plan their budgets. Eligible families will receive a payment of up to $300 per month for each child under age 6, and up to $250 per month for each child ages 6 through 17. The first monthly payment of the expanded and newly-advanceable Child Tax Credit will be made on July 15. Most families will begin receiving monthly payments automatically next month without any further action required. For families who are not required to file an income tax return but are still eligible for advance Child Tax Credit payments, the IRS worked with Intuit and the Free File Alliance to launch this new online tool.

As part of today’s announcement, Treasury Department’s Office of Tax Analysis analyzed IRS data to identify where children who may be eligible to be claimed for the expanded and newly-advanceable Child Tax Credit but who had not been claimed on a recent tax return are located. The data can be used to help organizations focus their outreach efforts seeking to sign up non-filers for monthly Child Tax Credit payments. This ZIP Code-level analysis is available here (PDF,Excel).  This new analysis was informed by the work that the Office of Tax Analysis did last year to identify and send letters to nearly nine million people who hadn’t filed a tax return recently but who may have been eligible for an Economic Impact Payment. 

Today’s announcement represents the latest collaboration between the Bureau of the Fiscal Service and the IRS — and between Treasury and the White House American Rescue Plan Implementation Team — to ensure help quickly reaches Americans in need as they recover from the COVID-19 pandemic. In the coming weeks, the IRS will be adding other new tools:

  • An interactive Child Tax Credit eligibility assistant to help families determine whether they qualify for advance Child Tax Credit payments.
  • Another tool, the Child Tax Credit Update Portal, will initially enable anyone who has been determined to be eligible for advance Child Tax Credit payments to see that they are eligible and unenroll, or opt out, of the advance payment program if they prefer. Later, the tool will allow people to check on the status of their monthly payments and make updates to their information. A version in Spanish will be available later this year.

Since March 12, the IRS has also distributed approximately 169 million Economic Impact Payments with a value of approximately $395 billion as a part of the American Rescue Plan.

For additional information for taxpayers on how they can access the Child Tax Credit, visit and see Frequently Asked Questions here.



Statement by the Acting Comptroller of the Currency at the Financial Stability Oversight Council

News Release 2021-65 | June 11, 2021

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu made the following statement today at the meeting of the Financial Stability Oversight Council (FSOC) with respect to the LIBOR transition:

Thank you, Madam Secretary, and thank you for your leadership of this body as I join colleagues in the Council for the first time today. The Council’s financial stability mission is one I regard as critical for our nation’s financial system and I look forward to contributing meaningfully to our discussions as Acting Comptroller.

As indicated in today’s presentation by Vice Chairman Quarles, we are at an important juncture in the LIBOR transition. There are important financial stability implications for this body and the financial system. Importantly, over the long run financial stability is a critical interest of all stakeholders whatever their size and market participation. The Secured Overnight Financing Rate (SOFR) is a robust replacement rate that has been carefully developed and will be reliably produced in a wide range of market conditions.

The widespread adoption of SOFR in derivatives and other markets will promote financial stability for all participants in the financial system. SOFR enjoys broad applicability and already has a proven track record.

We expect every bank, regardless of size, to demonstrate that its replacement rate selections are appropriate for the bank’s products, funding needs and operational capacities. In particular, we want to emphasize the importance of banks considering the strength of the fallback provisions they employ.

It is imperative that banks continue careful planning for the LIBOR transition. OCC examiners will continue to work with banks to ensure their full preparedness.

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Media Contact

Bryan Hubbard
(202) 649-6870

Remarks by Secretary of the Treasury Janet L. Yellen to the Financial Stability Oversight Council on LIBOR Transition

As prepared for delivery

The Council first discussed the importance of reference rate reform in 2012, and a great deal of progress has been made since then.  The Alternative Reference Rates Committee, or ARRC, has worked to identify and address transition issues, including analysis of potential alternative rates and the recommendation to use the Secured Overnight Financing Rate, or SOFR.  SOFR provides a robust rate, suitable for use in most products and with underlying transaction volumes that are unmatched by other LIBOR alternatives.

The ARRC has also addressed other issues, including drafting clear and effective contractual fallbacks to alternative rates upon LIBOR’s cessation; facilitating the development of SOFR derivatives markets; developing conventions for the use of SOFR across asset classes; and proposing legislation, which New York State recently enacted, to help transition certain legacy contracts.

Despite this progress, we have reached a critical juncture, and more must be done to facilitate an orderly transition.  With U.S. dollar LIBOR’s cessation dates fully known, many market participants are actively evaluating their options and undertaking the work to transition contracts.  While important progress is being made in some segments of the market, other segments, including business loans, are well behind where they should be at this stage in the transition.

The decisions made now around the selection of alternative rates will determine whether some of LIBOR’s shortcomings may be replicated through the use of alternative rates that lack sufficient underlying transaction volumes.  I am concerned about recent use, and potential future growth in use, of these rates in derivatives, where the volume of derivatives contracts referencing these alternative rates could quickly outnumber the transaction volumes underlying the reference rate, leaving it vulnerable to manipulation and disruption – one of the primary issues with LIBOR.

Additionally, I understand the desire of some market participants for a forward-looking SOFR term rate, as it would provide a useful additional tool in the transition away from LIBOR.  I encourage market participants to act promptly to support the switch in derivatives from LIBOR to SOFR this summer, as suggested by the CFTC’s benchmark subcommittee on benchmark reform and the ARRC. It is important for term SOFR to be grounded in a deep SOFR derivatives market and to be used in a way that does not diminish that activity.  Action by market participants now will allow the ARRC to recommend a term SOFR rate quite soon.

The most critical step in the transition is the move toward truly robust alternative rates, like SOFR, which can mitigate the need for future transitions.  A failure to adopt robust alternative rates would leave us continuing to face the same risks and challenges that we face today.


READOUT: Deputy Secretary of the Treasury Wally Adeyemo’s Roundtable Discussion with Businesses

WASHINGTON – Earlier today, Deputy Secretary of the Treasury Wally Adeyemo participated in a virtual roundtable discussion with representatives of U.S. multinational companies across a range of sectors to discuss the impact of U.S. economic and financial sanctions on their operations. The Deputy Secretary highlighted the Biden-Harris Administration’s commitment to strengthening American competitiveness and innovation, and reinvigorating America’s global leadership.

The Deputy Secretary noted the important role the private sector plays in sanctions implementation to further U.S. national security, foreign policy, and economic policy objectives.  Through the sanctions review, the Deputy Secretary seeks to identify ways to promote a warranted, strategic, and judicious use of sanctions.

The meeting was one in a series of discussions with a range of internal and external stakeholders to develop a detailed understanding of the expectations and effects of U.S. economic and financial sanctions.


OCC Hosts Virtual Mutual Savings Association Advisory Committee Meeting June 29

News Release 2021-64 | June 10, 2021

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today announced it will host a virtual meeting of the Mutual Savings Association Advisory Committee (MSAAC) on Tuesday, June 29, 2021. The virtual meeting is open to the public and will begin at 9:00 a.m. Eastern Daylight Time (EDT).

The purpose of the MSAAC meeting is to advise the OCC on regulatory or other changes the OCC may make to ensure the continued health and viability of mutual savings associations.

Members of the public may submit written statements to the MSAAC by sending an e-mail to [email protected]. The OCC must receive written statements no later than 5:00 p.m. EDT on Thursday, June 24, 2021.

Members of the public who plan to attend the virtual meeting should contact the OCC by 5:00 p.m. EDT on Thursday, June 24, 2021, to inform the OCC of their desire to attend the meeting and to obtain information about participating in the meeting. Members of the public may contact the OCC by emailing [email protected] or by calling (202) 649-5420. Attendees should provide their full name, email address, and organization, if any. Members of the public who are hearing impaired should call (202) 649-5597 (TTY) by 5:00 p.m. EDT, Thursday, June 24, 2021, to make necessary arrangements.

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Stephanie Collins
(202) 649-6870

Testimony of Secretary of the Treasury Janet L. Yellen to the Subcommittee on State, Foreign Operations, and Related Programs, U.S. House of Representatives

Chairwoman Lee, Ranking Member Rogers, and members of the Subcommittee, it’s a pleasure to join you today.

When I took office, one of my greatest concerns was a K-shaped recovery from the pandemic; a recovery where high-income households rebounded quickly – or even emerged better-off – while low- and middle-income families suffered for a very long time. We can be confident now that’s not going to happen, thanks in part to your support of the fiscal stimulus in the American Rescue Plan.

The same, though, cannot be said of the global economy. Low-income nations haven’t had the fiscal space to implement sweeping relief, as we did with the American Rescue Plan. Even their ability to access vaccines is limited. There are still roughly two dozen countries – all of them low-income – where more than 99% of the population is unvaccinated.

In some ways, the economic divergence we feared here in the United States is happening on the world stage. By the end of the year, COVID-19 might push as many as 150 million people back into living on less than $2 a day.

America is better off in a wealthier, vaccinated world than a poorer, unvaccinated one. That’s undeniable. It will be much more difficult, for instance, to address global security threats like climate change if a good portion of the globe cannot make the effort necessary to green their economies because they’re still dealing with the lingering effects of the pandemic.

The United States must lead in addressing this global divergence. The Treasury Department is prepared to be part of this leadership. We just need the resources.

By now, I am sure you have seen the Administration’s budget proposal. I would call your attention to four areas.

The first is funding for international financial institutions (or IFIs) like the World Bank and the African Development Bank. During the pandemic, they have provided more than $200 billion to help developing countries stay afloat and fight the virus, including for vaccines. But they require more support, in part because the United States has not always fully contributed what it has committed. We have over $2.7 billion in unmet commitments to IFIs, and this will grow unless Congress appropriates funding to meet our current-year commitments and pay down our unmet balance.

The second involves low-income-country debt. The pandemic has wreaked havoc on the finances of these nations, and if they are going to rebuild, many will need to address their debt vulnerabilities. The United States led in creating the G20 Debt Service Suspension Initiative (or DSSI) and the Common Framework for Debt Treatments for precisely this reason, but now we need to fund both. Without new funding, the United States could be forced to delay the multilateral debt process under the Common Framework and charge much higher interest rates on DSSI debt service suspensions.

Third, our budget includes funding for the IMF’s Poverty Reduction and Growth Trust – and authorization to lend Special Drawing Rights to it or another appropriate fund. This would be America’s first direct contribution to the Trust, and it will also help establish a trust fund that would support the recovery of low- and middle-income countries, as well as broader economic reforms that would improve the lives of their people. We’re working with the IMF and other international partners on this.

Fourth, on the other side of the pandemic, we have to help low-income nations grapple with the reality of climate change – because that’s the only way we’ll reach net-zero emissions, as a global community. Treasury’s request includes roughly $1 billion for this purpose. The money is to make sure that developing countries can adapt to the changing climate. But it’s also to ensure that as these nations continue to grow and develop, they do so sustainably. Among other things, the funding would go towards expanding clean energy production and conserving rainforests, which reduces emissions.

The speed and strength of the world’s recovery depend on the leadership of the United States in general – and, I believe, on the United States Treasury in particular. I look forward to working with you to ensure that we can indeed lead in the years to come.


READOUT: Deputy Secretary of the Treasury Wally Adeyemo’s Call with Indonesian Finance Minister Sri Mulyani Indrawati

WASHINGTON – Earlier today, Deputy Secretary of the Treasury Wally Adeyemo spoke with Indonesian Finance Minister Sri Mulyani Indrawati. Deputy Secretary Adeyemo expressed his support for strong U.S.-Indonesia relations and close cooperation with Indonesia on key global challenges. He welcomed the shared goals between the United States and Indonesia to work together towards reaching a historic multilateral agreement to make the international tax system more fair and end the race-to-the-bottom in corporate taxation.  He also discussed shared efforts to promote a strong, sustainable, and inclusive economic recovery from the COVID-19 pandemic, and global efforts to respond to climate change.  Deputy Secretary Adeyemo welcomed the opportunity to work with Indonesia during its upcoming G20 presidency in 2022.


Testimony of Deputy Assistant Secretary for Tax Policy Mark J. Mazur to the Subcommittee on Oversight and Subcommittee on Select Revenue Measures, U.S. House of Representatives

Chairman Thompson, Chairman Pascrell, Ranking Member Smith, Ranking Member Kelly, and Members of the Subcommittees: Thank you for inviting me to discuss tax compliance and the Administration’s tax compliance agenda. Improving tax compliance can help meet our Nation’s most important tax policy goals: building a tax system that raises adequate revenue in an equitable and efficient manner. 

The Internal Revenue Service (IRS) has endeavored to estimate the amount of non-compliance with the Federal tax system since at least the 1970s. The Taxpayer Compliance Measurement Program (TCMP) was the foundation for these early efforts. In the early 2000s, the IRS launched the National Research Program (NRP) to estimate non-compliance in a more rigorous way. The NRP also instituted procedures to reduce the burden on taxpayers whose tax returns were randomly selected to be part of the study. The main focus of the NRP is compliance with the individual income tax and self-employment taxes, but additional components examine compliance with other taxes.

The Research, Applied Analytics, and Statistics organization in the IRS regularly produces a measure of tax non-compliance, called the “tax gap”. This term is defined as the amount of true overall tax liability that is not paid voluntarily and on time. There are three main subcategories of the tax gap (or non-compliance): filing compliance (whether a tax return was filed on time); reporting compliance (whether the correct amount of tax liability was reported on the tax return filed); and payment compliance (whether the taxpayer completely paid the tax liability shown on the return). Each of these components of compliance (or non-compliance) is estimated for each of the major taxes imposed by the Federal government. When summed up, they provide an estimate of the overall tax gap. For 2011-2013, the IRS estimates the gross tax gap to average $441 billion per year. When enforcement collections and other late payments are taken into account, the average annual net tax gap is estimated to be about $381 billion for the 2011-2013 time period.

If we project the IRS annual tax gap estimate from 2011-2013, assuming that it grows with the overall economy, the estimate of the gross tax gap would be about $580 billion for 2019. Over the coming decade, the gross tax gap is projected to total approximately $7 trillion, roughly 15 percent of all owed taxes. Tax non-compliance has serious consequences for the majority of Americans who pay their taxes in full each year. A larger tax gap generates the following results: higher tax rates elsewhere in the system, lower revenues to fund the nation’s fiscal priorities, or higher budget deficits and larger amounts of federal debt. Extensive and persistent non-compliance also undermines confidence in the fairness of our tax system.

In part, the large and growing tax gap is the result of a sustained period of under-investment in the IRS. The IRS budget has been reduced by about 20 percent in real terms over the last decade. Since the IRS budget largely covers personnel, staffing dropped and there was a steep decline in audit rates. The IRS has had insufficient resources to meet enforcement and administrative challenges and to deliver customer service to taxpayers.

The Administration’s Fiscal Year 2022 Budget and the American Families Plan propose a transformative investment in the resources and information available to the IRS. The plan has several key components.

First, provide the IRS the resources it needs to address tax non-compliance and serve taxpayers. A sustained, multi-year funding stream would provide nearly $80 billion in additional resources to the IRS over the next decade. Treasury has worked with the IRS to make sure that resources and staffing will grow at a pace that can be smoothly absorbed. The mandatory nature of the vast majority of this funding will provide the certainty required to make investments in high-quality tax enforcement staff who have the skills, knowledge, and training required to understand the complicated tax situations of corporations, partnerships, and high-income individuals. Multi-year funding certainty also enables key investments with large fixed costs, such as modernizing information technology, building a strong human capital office, and assembling talented research teams.

Second, invest in better IRS technology systems to help identify non-compliance and improve customer service. The IRS too often relies on antiquated and siloed technology systems. Modernization funding would allow the IRS to address technology challenges, develop innovative machine learning techniques to better detect non-compliance, and support efforts to meet threats to the security of the tax system, like the 1.4 billion cyberattacks the IRS experiences annually. These technology improvements would also help the IRS overcome taxpayer service challenges, allowing taxpayers to communicate with the IRS in a clear, timely manner. Improved IT and taxpayer service will also help the IRS effectively and efficiently deliver tax benefits to eligible households.

Third, improve information reporting to give the IRS better information on opaque sources of income. When the IRS can verify taxpayer filings with third-party information reports, such as the W-2 forms submitted by employers to report wages, income reporting compliance rates exceed 95 percent. Without third-party reporting, income reporting compliance rates can fall below 50 percent. Strengthening third-party reporting is one of the most effective ways to improve tax compliance, and Congress has repeatedly extended information reporting requirements as business practices changes and as technology improves. These changes have been effective. To ensure new reporting does not create additional burden on individual taxpayers, the Administration’s proposal would call for financial institutions to report known account information to the IRS and the taxpayer, in particular providing information about total account outflows and inflows to financial accounts. The IRS will use this new information to better target enforcement activities, detecting obvious areas of gross non-compliance and decreasing the likelihood that fully compliant taxpayers will be subject to audit. Under the enhanced information reporting, voluntary compliance will rise, as taxpayers realize that the IRS has an additional lens into previously underreported income streams. This new information reporting regime will be comprehensive, and so the proposal envisions that it would cover payment services providers as well as cryptocurrencies and cryptoasset exchange accounts.

Fourth, undertake complementary proposals to improve tax administration. The FY 2022 Budget includes several additional important measures related to tax administration. One proposal calls for IRS to have the ability to regulate paid tax preparers. Taxpayers often make use of unregulated preparers who can lack the training and knowledge to provide accurate tax assistance. Regulation of paid preparers can help improve the accuracy of tax returns filed. In addition, the Budget calls for additional sanctions for so-called “ghost preparers” who fail to identify themselves on the tax returns which they prepare.

Together, these proposals would provide many benefits: raising about $700 billion in revenue over the course of a decade, creating a fairer tax system, building a more efficient tax system, and improving taxpayer service.

Revenue Effects

Treasury’s Office of Tax Analysis estimates that these compliance initiatives would raise about $700 billion in additional tax revenue over the next decade. These estimated revenues are largely raised in the latter years of the 10-year budget window as investments in staffing and technology will take time to build and become fully productive. As Figure 1 shows, the estimated amount of revenue raised in the second decade from these compliance initiatives is more than twice what is estimated to be raised in the first decade.

The proposal for additional IRS funding is estimated to raise about $240 billion of net revenue over the ten-year budget window. These estimates are based on historic data from the IRS on the return on investment (ROI) from its various enforcement activities. The total gross  revenue generated from the $80 billion increase in the IRS budget over the next 10 years is estimated to be around $320 billion for the same period, which implies an average ROI of approximately 4-to-1.

In several respects, these estimates tend to be conservative. The revenue potential for additional resources devoted to tax administration is based on ROI estimates from the IRS for current enforcement-related activities. Potential benefits from overhauling and integrating IT systems and improving taxpayer service are omitted from these calculations. In addition, estimates for additional enforcement actions supported by increased IRS funding cover only the additional tax payments generated and do not incorporate deterrent effects, which may be significant.

Figure 1: Estimated Revenue Raised from Compliance Initiatives, 2022–2040

Revenue Estimates of IRS Compliance Proposals FY 2022-2041

















The amount of increased revenue estimated to be raised by the proposed financial reporting regime requires some assumptions about implementation. Once the proposal is enacted, we would expect an increase in voluntary compliance as taxpayers realize that the IRS has a lens into previously unreported income. The revenue and voluntary compliance increases are expected to phase-in over time, as taxpayers and the IRS adjust to the new reporting regime. The proposed information reporting regime is expected to become effective for tax year 2023, as it will require time for the IRS and for financial institutions to implement this reporting system in ways that maximize effectiveness. The proposed financial reporting system is estimated to raise about $460 billion over the coming decade.

A Fairer Tax System

As noted above, the tax gap has three distinct elements: taxpayers who fail to file returns (about 9 percent of the gross tax gap); those who underreport income or overclaim deductions or credits on tax returns (about 80 percent of the gross tax gap); and those who underpay taxes despite reporting obligations in a timely manner (about 11 percent of the gross tax gap).

Underreporting is the biggest component of the tax gap generally grows with actual economic income. In part, non-compliance rises with income because higher-income taxpayers have access to more sophisticated forms of noncompliance, and this sophisticated activity is harder for the IRS to detect. Even more important, higher-income taxpayers are more likely to have sources of income that are less visible to the IRS.  

For typical wage and salary income, where employers provide a Form W-2 to both employees and the IRS (as well as automatically withhold income taxes), income reporting compliance is very high, with only an estimated 1 percent misreporting rate. But, when there is less third party reporting, compliance falls. For opaque income sources like proprietorship income and rental income, income misreporting is estimated to be over 50 percent.

The Administration’s financial reporting initiatives will provide the IRS with new information related to opaque income sources. This information will help the IRS direct audit resources toward those taxpayers whose financial situations are mismatched with their reported income. The information reporting proposal would also improve voluntary compliance as taxpayers come to understand that the IRS has additional information about their true financial situation.

The goal is to improve the fairness of the tax system by treating all types of income, whether business income or wage income, more similarly. The requested enforcement resources largely would be directed at the complex tax returns of high-income individuals and the businesses they control, both of which have seen sharply reduced audit rates in recent years. In particular, under the FY 2022 Budget proposal, audit rates for taxpayers below $400,000 in true income would not increase relative to recent years. 

One important stream of research has begun to identify disparities in tax enforcement activities. Historically, this inquiry has been complicated by the absence of data on taxpayers’ race or ethnicity. The Biden Administration recently launched an Equitable Data Working Group that seeks to address these data limitations across federal datasets. At the same time, the Treasury Department is currently undertaking research to study the relationship between the tax code and racial inequities. This multi-year project will require close engagement between federal agencies and those in the research and advocacy communities.  The Biden Administration’s commitment to racial equity was a key factor affecting how these policies are implemented.

A More Efficient Tax System

Collecting more tax revenue by closing the tax gap improves the efficiency of the tax system in several ways. First, a broader tax base can raise more revenue than a narrow one, holding tax rates constant. When noncompliant taxpayers shirk their tax obligations, that raises the relative tax burden on compliant taxpayers. Second, when some types of income can more easily escape taxation than others, the allocation of resources in the economy is inefficiently distorted toward some sectors and away from others. In effect, these distortions make the tax-evading sectors too large and the tax-compliant sectors too small relative to a more neutral treatment.  Third, tax non-compliance also distorts competition between taxpayers in any given industry. For example, consider one business that pays their taxes honestly, but competes against another business that evades most of their tax burden by underreporting income. The dishonest business will have an unfair advantage relative to the honest business. And similar distortions will occur as taxpayers over-invest in non-compliance techniques including complex organizational forms that have little relation to efficient business operations, reducing the resources available for more economically productive activities.

Building a Better Tax Administration System

The Administration’s tax compliance proposals are complementary, and they will work together to create a more efficient and equitable tax administration. When the IRS is adequately funded, it will be able to better process all the information it receives. With improved information reporting, the IRS will be able to better utilize its enforcement resources. Similar complementarities exist between well-trained enforcement personnel and modern information processing systems.

The Administration’s proposals will also improve most taxpayers’ experiences. Adequate staffing and technology are essential for taxpayers to communicate effectively and efficiently with the IRS, getting questions answered in a timely fashion, easing access to appropriate tax benefits and tax refunds, and generally facilitating a smoother filing process. Taxpayers also will be able to interact with the IRS to ensure that their accounts are kept up-to-date. And improved systems will make it less likely that compliant taxpayers get swept up in burdensome audit processes.  

Since most of the newly-requested funding will be allocated in a multi-year manner, that will assure the IRS that it will have the resources required to invest in long-deferred technology modernization. The IRS will also be able to invest in building staffing capacity. Once these proposals are enacted, regular reporting on milestones and performance metrics will be essential in order to evaluate progress in closing the tax gap.

We all believe that taxpayers should pay the amount of tax that they legally owe under the laws enacted by Congress. Today, there is a large gap between that belief and the tax compliance reality we observe. The compliance proposals contained in the Administration’s FY 2022 Budget can take important steps toward narrowing that gap. We look forward to working with Congress to address this long-standing problem.