Rep. Katie Hill (Calif.) joins other Democrats at a news conference earlier this month. (Zach Gibson/Getty Images)

Liberals abandoned a last-minute rebellion Tuesday over a bill to change the Internal Revenue Service, with Democratic leaders easily pushing legislation through the House that would bar the IRS from creating free tax preparation software.

The House approved the bipartisan legislation on a voice vote as liberals, who feared the measure would enrich private tax preparers at the expense of millions of taxpayers, gave up their fight, in part because of the value of other elements of the legislation.

The bill includes other changes to the nation’s tax collection agency such as protections from private debt collectors and millions of dollars in program assistance for low-income taxpayers.

On Tuesday, ProPublica reported that the legislation included a provision to codify an existing arrangement preventing the IRS from creating online tax filing software to compete with private services such as TurboTax.

Reps. Katie Hill (D-Calif.) and Alexandria Ocasio-Cortez (D-N.Y.), who had criticized the provision over the IRS’s software, said in speeches before the measure passed that the package overall was worth supporting.

“They were persuaded to see that stopping passage based on one objection would kill highly palatable aspects of the bill,” said Brenda Jones, a spokesman for Rep. John Lewis (D-Ga.), a sponsor of the bill. “Those members recognized that these provisions were meaningful and that we might lose the opportunity to move these salient features forward indefinitely, so they agreed to allow the bill to pass on a voice vote.”

Under a memorandum of understanding between a group of private tax preparers and the IRS, the government may not offer free online filing services to taxpayers.

The IRS already offers a program that allows low-income taxpayers to file free, but it is done through industry software and industry systems and is not well-publicized. Only 2 percent of eligible low-income filers use the free system, while some experts have long argued the IRS could help more Americans by offering its own free online software system.

Supporters of the legislation will form a new “working group” to study the problems in the IRS’s partnership with private tax preparers, according to Jones. The new provision would probably not have an immediate impact since the IRS already does not offer its own tax software services.

But liberal lawmakers had threatened to tank the legislation over the provision, with Hill earlier in the day calling it a “sneaky provision the tax preparation lobby has been pushing for, and it hurts consumers.” Rep. Ro Khanna (D-Calif.) had also strongly criticized the measure and vowed to oppose it.

“It goes against everything we ran on. It has to be addressed. It’s a huge benefit to the corporations,” Hill said.

But defenders of the measure have argued House Democrats scored significant victories in the legislation such as new rules for private debt collection agencies that sometimes obtain debt payments from low-income taxpayers. The legislation also provides up to $30 million in matching grants for a program that provides help to low-income taxpayers.

“We think whatever the opposition to this might be, perhaps they are not reading the bill thoroughly because these provisions have existed for a long time,” Jones said, adding the proposal had been discussed at committee hearings and approved without eliciting dissent. “We just simply never got any pushback on them on the three years we have been working on this,” Jones said.



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