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House Report 119-508 - BARCODE AUTOMATION FOR REVENUE COLLECTION TO ORGANIZE DISBURSEMENT AND ENHANCE EFFICIENCY ACT
[House Report 119-508]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 119-508
=======================================================================
BARCODE AUTOMATION FOR REVENUE COLLECTION TO ORGANIZE DISBURSEMENT AND
ENHANCE EFFICIENCY ACT
----------------
February 20, 2026.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
----------------
Mr. Smith of Missouri, from the Committee on Ways and Means,
submitted the following
R E P O R T
[To accompany H.R. 6956]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6956) to require electronically prepared tax returns
to include scannable code when submitted on paper, and to
require the use of optical character recognition technology for
paper documents received by the Internal Revenue Service,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 3
C. Legislative History................................. 3
D. Designated Legislative History...................... 4
II. EXPLANATION OF THE BILL..........................................4
A. Scanning and Digitization of Tax Returns and
Correspondence..................................... 4
III. VOTE OF THE COMMITTEE............................................6
IV. BUDGET EFFECTS OF THE BILL.......................................7
A. Committee Estimate of Budgetary Effects............. 7
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 7
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 7
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......7
A. Committee Oversight Findings and Recommendations.... 7
B. Statement of General Performance Goals and
Objectives......................................... 7
C. Applicability of House Rule XXI, Clause 5(b)........ 8
D. Information Relating to Unfunded Mandates........... 8
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 8
F. Duplication of Federal Programs..................... 8
G. Tax Complexity Analysis............................. 8
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Barcode Automation for Revenue
Collection to Organize Disbursement and Enhance Efficiency Act'' or the
``BARCODE Efficiency Act''.
SEC. 2. SCANNING AND DIGITIZATION OF TAX RETURNS AND CORRESPONDENCE.
(a) Returns Prepared Electronically and Submitted on Paper.--With
respect to any Federal tax return which is prepared electronically, but
is printed and filed on paper--
(1) such return shall bear a code which, when scanned,
converts the data included in such return to electronic format,
and
(2) subject to subsection (b)(1)(B), the Internal Revenue
Service shall use barcode scanning technology to convert the
data included in such return to electronic format.
(b) Optical Character Recognition Software.--With respect to--
(1) any Federal tax return which--
(A) is not prepared electronically and is printed and
filed on paper, or
(B) is described in subsection (a)(1) but, for any
reason, the data included in such return cannot be
accurately converted into electronic format, or
(2) any correspondence which is received by the Internal
Revenue Service in a paper form (with the exception of any such
correspondence which has been received by the Internal Revenue
Service in electronic format),
the Internal Revenue Service shall use optical character recognition
technology (or any functionally similar technology) to transcribe such
return or correspondence.
(c) Exception.--
(1) In general.--Subsection (a) or (b) shall not apply to the
extent that the Secretary of the Treasury or the Secretary's
delegate determines that the technology described in such
subsection is slower or less reliable than--
(A) the process of manually transcribing returns or
correspondence received in a paper form, or
(B) any other process that the Internal Revenue
Service is using or would otherwise use.
(2) Report to congress.--Any exception to the application of
subsection (a) or (b) pursuant to paragraph (1) shall not take
effect unless the Secretary provides a report to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate regarding the determination
made under such paragraph within 30 days of such determination.
(d) Effective Date.--This section shall apply to--
(1) any individual income tax return (as defined in section
6011(e)(3)(C) of the Internal Revenue Code of 1986) received on
or after January 1 of the first calendar year beginning more
than 180 days after the date of enactment of this Act,
(2) any estate tax return (as described in section 6018 of
such Code) or gift tax return (as described in section 6019 of
such Code) received on or after January 1 of the first calendar
year beginning more than 24 months after the date of enactment
of this Act, and
(3) any other return or correspondence received on or after
January 1 of the first calendar year beginning more than 12
months after the date of enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 6956, the ``BARCODE Efficiency Act,'' as
amended, was ordered reported by the Committee on Ways and
Means on January 14, 2025.
The bill provides that taxpayers that prepare their returns
electronically but print and file the returns on paper must
print their returns with a scannable code that enables the IRS
to convert paper-filed tax returns into an electronic format
using scanning technology.
The bill requires the IRS to use optical character
recognition (``OCR'') technology (or any functionally similar
technology) to transcribe (1) any return not prepared
electronically and printed and filed on paper; (2) any return
prepared electronically but printed and filed on paper using a
scannable code that cannot be used to accurately convert data
into an electronic format; and (3) any correspondence received
by the IRS in paper form (unless such correspondence is also
received in electronic form).
B. Background and Need for Legislation
In 1986, the IRS began an electronic filing (``e-filing'')
pilot program with the goal increase the efficiency and
accuracy in processing tax returns and limit the need to
manually entering data from every paper return in the country.
During the first year of the pilot program, the IRS received
approximately 25,000 tax returns submitted through e-filing,
when the program launched nationwide in 1990, the IRS processed
over 4.2 million electronically filed tax returns, and most
recently, the IRS received over 154 million tax returns via e-
filing in 2025.
However, in 2025, over 165 million returns were received by
the IRS, meaning that over 10 million returns were not received
through e-filing. While innovative technology has improved over
the last four decades, the returns filed on paper, rather than
through e-filing, are still subject to potential manual entry
issues, such as intensive labor and human error.
This bill requires that tax returns prepared
electronically, but printed and filed on paper, include a
barcode that would allow IRS to scan and digitize the
information contained in the return. This requirement enhances
the efficiency of the IRS by reducing the time employees would
normally take to manually enter data from the return and
remove, or limit, the chance for human error that may occur
through manual entry. The bill also requires that the IRS use
optical character recognition software to scan and digitally
upload handwritten returns, paper correspondence, and tax
returns prepared electronically and then printed and filed on
paper if the data cannot be accurately scanned with the
barcode. This requirement will increase efficiency by allowing
IRS to use current technology to scan other documents that are
not covered by the first provision and reduce the need for
manual entry.
This bill creates an exception to the above listed
requirements by providing the Secretary of Treasury the
authority to determine whether or not to apply the requirements
of the bill if the Secretary determines that the technology
proscribed therein is slower or less reliable than manual entry
or any other process that is current used by the IRS. The bill
also requires the Secretary of Treasury to provide a report to
Congress to any such exception within 30 days of determination.
C. Legislative History
Background
H.R. 6956 was introduced on January 7, 2026, and was
referred to the Committee on Ways and Means.
Committee Hearings
On February 11, 2025, the Committee on Ways and Means
Oversight Subcommittee held a hearing titled, ``IRS Return on
Investment and the Need for Modernization'' to examine the lack
of return on investment from funding provided to the IRS by the
Inflation Reduction Act and the need for information technology
modernization at the agency.
Committee Action
The Committee on Ways and Means marked up H.R. 6956, on
January 14, 2026, and order the bill, as amended, favorably
reported (with a quorum being present).
D. Designated Hearing
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop and consider H.R. 6956:
On February 11, 2025, the Committee on Ways and Means
Oversight Subcommittee held a hearing titled, ``IRS Return on
Investment and the Need for Modernization'' to examine the lack
of return on investment from funding provided to the IRS by the
Inflation Reduction Act and the need for information technology
modernization at the agency.
II. EXPLANATION OF THE BILL
A. Scanning and Digitization of Tax Returns and Correspondence
PRESENT LAW
Every citizen, whether residing in or outside the United
States, and every resident of the United States within the
meaning of section 7701(b) must file an income tax return if
the individual has income that equals or exceeds the exemption
amount.\1\ Regulations issued by the Department of the Treasury
(``Treasury'') require individual taxpayers to make this return
using Form 1040, U.S. Individual Income Tax Return.\2\
Similarly, every corporation subject to Federal income tax,
regardless of the amount of its gross or taxable income for the
taxable year, is required to file a return.\3\ Various returns
are also required to be submitted by certain employers,
partnerships, estates, trusts, noncitizen nonresident
individuals, and taxpayers subject to Federal gift tax, estate
tax, generation-skipping transfer tax, excise taxes, and other
miscellaneous Federal taxes.
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\1\Sec. 6012(a)(1); Treas. Reg. sec. 1.6012-1(a)(1).
\2\Treas. Reg. sec. 1.6012-1(a)(6).
\3\ec. 6012(a)(2).
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In 1998, Congress declared a policy that (1) paperless
filing should be the preferred and most convenient means of
filing Federal tax and information returns, (2) the goal of the
Internal Revenue Service (``IRS'') should be to receive at
least 80 percent of all returns electronically by 2007, and (3)
the IRS should encourage private-sector competition to increase
electronic filing.\4\ Section 6011(f), also enacted in 1998,
authorizes Treasury to advertise the benefits of electronic tax
administration programs and to make payment of appropriate
incentives for electronically-filed returns.
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\4\The Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. No. 105-206, sec. 2001.
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Treasury generally is authorized to prescribe regulations
providing standards for determining which returns must be filed
on magnetic media or in another machine-readable form.\5\
However, except under certain circumstances, Treasury ``may not
require returns of any tax imposed by subtitle A on
individuals, estates, and trusts, to be other than on paper
forms supplied by the Secretary.''\6\
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\5\Sec. 6011(e). The statute uses the term ``magnetic media,'' and
applicable Treasury regulations specify that magnetic media includes
electronic filing. Treas. Reg. sec. 301.6011-2(a)(1).
\6\Sec. 6011(e)(1). In this context, ``Secretary'' refers to the
Secretary of the Treasury or his delegate. See sec. 7701(a)(11).
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REASONS FOR CHANGE
The Committee believes that modernizing the IRS's
processing of paper returns and correspondence is essential to
improving efficiency and reducing errors. Currently, paper
filings require manual transcription, which is time-consuming,
costly, and prone to mistakes that can delay refunds and
increase taxpayer burden. The Committee believes that requiring
barcodes on electronically prepared paper returns and mandating
the use of scanning and optical character recognition
technology for other paper submissions will accelerate
processing, improve accuracy, and allow the IRS to allocate
resources more effectively. These changes will enhance taxpayer
service and strengthen the integrity of the tax administration
system.
EXPLANATION OF PROVISION
The provision provides that taxpayers that prepare their
returns electronically but print and file the returns on paper
must print their returns with a scannable code that enables the
IRS to convert paper-filed tax returns into an electronic
format using scanning technology. The provision requires that
any electronically prepared return filed on paper include a
barcode to facilitate IRS digitization. However, the absence of
a barcode does not affect the validity of the return under the
Code. Returns submitted without a barcode will still be
considered properly filed and will be processed by the IRS
using alternative methods, such as optical character
recognition or manual transcription. The provision does not
impose penalties or authorize rejection of returns for failure
to include a barcode.
The provision also requires the IRS to use optical
character recognition (``OCR'') technology (or any functionally
similar technology) to transcribe (1) any return not prepared
electronically and printed and filed on paper; (2) any return
prepared electronically but printed and filed on paper using a
scannable code that cannot be used to accurately convert data
into an electronic format; and (3) any correspondence received
by the IRS in paper form (unless such correspondence is also
received in electronic form).
An exception to these requirements applies to the extent
the Secretary of the Treasury or his delegate determines that
the scannable code or the OCR technology is slower or less
reliable than the process of manually transcribing the returns
or correspondence received in paper form (or any other process
normally used by the IRS).
Under the provision, any such exception applies only if the
Secretary of the Treasury (or his delegate) provides a report
to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate
within 30 days of making a determination of the exception.
Although the provision applies by its terms to all returns,
most corporate, exempt organization, and partnership returns
(including amended returns) are already required to be filed
electronically under the Code and the regulations
thereunder.\7\ Therefore, in practice, the provision will
primarily affect individual income tax returns and estate and
gift tax returns.\8\
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\7\Sec. 6011(e).
\8\See IRS, Amended and Superseding Corporate Returns, available at
https://www.irs.gov/businesses/corporations/amended-and-superseding-
corporate-returns (stating that if the original corporate return was
required to be e-filed, the amended return generally must also be e-
filed); see also IRS, Instructions for Form 990 (Return of Organization
Exempt From Income Tax), available at https://www.irs.gov/pub/irs-pdf/
i990.pdf (noting on page six that electronic filing of amended exempt
organization returns is available only for the current tax year and the
two prior tax periods, and older returns must be paper-filed); and IRS,
Guidance for Amended Partnership Returns, available at https://
www.irs.gov/e-file-providers/guidance-for-amended-
partnership-returns (explaining that amended partnership returns may be
e-filed if the original return was e-filed).
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EFFECTIVE DATE
The provision is effective for individual income tax
returns received on or after January 1 of the first calendar
year beginning more than 180 days after the date of enactment.
The provision is effective for estate tax returns or gift
tax returns received on or after January 1 of the first
calendar year beginning more than 24 months after the date of
enactment.
The provision is effective for any other return or
correspondence received on or after January 1 of the first
calendar year beginning more than 12 months after the date of
enactment.
III. VOTE OF THE COMMITTEE
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 6956, the ``Barcode Automation for
Revenue Collection to Organize Disbursement and Enhance
Efficiency Act,'' on January 14, 2026.
H.R. 6956 was ordered favorably reported to the House of
Representatives as amended by a roll call vote of 42 yeas to 0
nays (with a quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... X ...... .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... X ...... ......... Mr. Davis............ X ...... .........
Mr. LaHood......................... X ...... ......... Ms. Sanchez.......... X ...... .........
Mr. Arrington...................... X ...... ......... Ms. Sewell........... ...... ...... .........
Mr. Estes.......................... X ...... ......... Ms. DelBene.......... X ...... .........
Mr. Smucker........................ X ...... ......... Ms. Chu.............. X ...... .........
Mr. Hern........................... X ...... ......... Ms. Moore (WI)....... X ...... .........
Mrs. Miller (WV)................... X ...... ......... Mr. Boyle............ X ...... .........
Dr. Murphy......................... ...... ...... ......... Mr. Beyer............ X ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Evans............ X ...... .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Schneider........ X ...... .........
Mr. Steube......................... ...... ...... ......... Mr. Panetta.......... X ...... .........
Ms. Tenney......................... X ...... ......... Mr. Gomez............ X ...... .........
Mrs. Fischbach..................... X ...... ......... Mr. Horsford......... X ...... .........
Mr. Moore (UT)..................... X ...... ......... Ms. Plaskett......... X ...... .........
Ms. Van Duyne...................... X ...... ......... Mr. Suozzi........... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
Mr. Yakym.......................... X ...... .........
Mr. Miller (OH).................... X ...... .........
Mr. Bean........................... X ...... .........
Mr. Moran.......................... X ...... .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6956 as
reported.
The staff of the Joint Committee on Taxation estimates that
the bill has a negligible effect on Federal fiscal year budget
receipts.
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority.
C. Cost Estimate Prepared by the
Congressional Budget Office
The Congressional Budget Act of 1974, as amended stipulates
that revenue estimates provided by the staff of the Joint
Committee on Taxation (``JCT'') will be the official estimates
for all tax legislation considered by Congress. As such CBO
incorporates these estimates into its cos estimates of the
effects of the legislation. The estimates for the revenue
provisions of H.R. 6956, as reported were provided by JCT (see
Part IV, A).
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Applicability of House Rule XXI, Clause 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
provide such a Federal income tax rate increase.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
F. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
G. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
The staff of the Joint Committee on Taxation has determined
that there are no provisions that are of widespread
applicability to individuals or small businesses.
[all]