The original intent of the program seems to be a quid pro quo, where the IRS promises a non-compete with the tax preparation industry [1] in exchange for free federal tax prep for 70% of U.S. taxpayers [2].
As of 2019-12-26, the IRS no longer promises the non-compete [3], perhaps so it could start the Direct File pilot [4].
> The Consortium will offer Free Services to taxpayers at no cost. [...] During the term of the Agreement, the IRS will not compete with the Consortium in providing free, online tax return preparation and filing services to taxpayers.
As of 2019-12-26, the IRS no longer promises the non-compete [3], perhaps so it could start the Direct File pilot [4].
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[1]: From the summary of the proposed original agreement at https://www.federalregister.gov/documents/2002/08/08/02-1983...:
> The Consortium will offer Free Services to taxpayers at no cost. [...] During the term of the Agreement, the IRS will not compete with the Consortium in providing free, online tax return preparation and filing services to taxpayers.
[2]: "70%" source: see 4.1.3(i) of latest MOU: https://www.irs.gov/pub/irs-efile/ninth-memorandum-of-unders...
+info: https://www.irs.gov/e-file-providers/about-the-free-file-all...
[3]: Point (ii) of https://www.irs.gov/pub/irs-utl/FFI%20Signed%20MOU%20Addendu...
[4]: https://www.irs.gov/about-irs/strategic-plan/direct-file
see also: https://news.ycombinator.com/item?id=37920633