The embattled Internal Revenue Service said it is legally obligated to pay $70 million in bonuses to its unionized employees, despite the new budget constraints and the objections of lawmakers.

Sen. Charles Grassley, R-Iowa, sent a letter to acting IRS Director Daniel Werfel stating he does not believe the IRS is obligated to pay out the bonuses because of budget reductions caused by sequestration. Grassley pointed to an April directive for the Office of Management and Budget that stated “monetary awards should not be issued while sequestration is in place.”

But the IRS said Wednesday that they are legally bound to hand out the bonuses because of a binding agreement with the National Treasury Employees Union, which represents about 150,000 employees at 30 different agencies.

“The IRS is under a legal obligation to comply with its collective bargaining agreement, which specifies the terms by which awards are paid to bargaining-unit employees,” a spokesperson from the IRS said Wednesday.

The IRS is “actively engaged,” with the union members on the issue, the spokesman said.

The revelation about the bonuses sparked outrage on Capitol Hill, where lawmakers have been fighting to restore some of the money cut under sequestration, which has resulted in employee furloughs and cuts in services.

The IRS is already under intense scrutiny for spending $50 million on employee conferences and for targeting conservative groups who sought federal tax exempt status.

“The IRS always claims to be short on resources,” Grassley said. “But it appears to have $70 million for union bonuses. And it appears to be making an extra effort to give the bonuses, despite opportunities to renegotiate with the union and federal instruction to cease discretionary bonuses during sequestration. The IRS has to answer to the taxpayers. Is it conceding to the union on almost all of the bonus money in question? If so, what, if anything, did the IRS get in return?”

Grassley has requested Werfel provide the information related to the IRS decision to provide the bonuses, including internal memos and directives and opinions from the IRS chief counsel.

Since sequestration took effect, IRS employees have been furloughed regularly to cover the shortfall and the agency was forced to close all public services for one day, on May 24.