wpostServer: http://css.washingtonpost.com/wpost2

Most Read: Politics

Read In

Now Viewing: People from around the country looking at Post Politics section

See what's being read across the country ›

Social Surface: Politics

Federal Eye
Posted at 06:43 PM ET, 05/23/2011

Report: Stimulus recipients owe $750 million in taxes

Thousands of companies and nonprofits reaping billions of dollars from the Obama administration’s economic stimulus program owe hundreds of millions of dollars in unpaid taxes, according to estimates in a new government report.

A Government Accountability Office investigation set for release Tuesday found that at least 3,700 recipients of $24 billion in contracts and grants from the economic stimulus program owe more than $750 million to the government.

Corporate income taxes were $417 million, or about 55 percent of the estimated unpaid taxes, the GAO said. Payroll taxes were $207 million, or about 27 percent, of the total; unpaid excise, unemployment and other taxes totaled an additional $133 million.

Many of the tax-delinquent companies were not subject to regular federal monitoring of tax debt because the federal government didn’t directly pay the recipients, according to the GAO. Much of the stimulus money first went to state governments or primary contractors, which then distributed the money to other recipients and vendors, many of which owed taxes.

Federal law doesn’t prohibit contractors with unpaid federal taxes from doing business with the government, and federal contracting officers are not required to consider a company’s tax delinquency unless it is already debarred or suspended for tax evasion, according to the GAO.

Federal law generally prohibits disclosing taxpayer data to contracting officers, further complicating efforts to determine a company’s tax status, the report said.

Sen. Tom Coburn (R-Okla.) and other lawmakers are pushing legislation that would bar tax-delinquent firms from conducting business with the government. Lawmakers who requested the report are scheduled to hear from GAO investigators and Obama administration officials on Tuesday.

The White House said Monday that the administration collected more than $100 million in unpaid taxes from tax-delinquent contractors last year. It is also requiring companies to certify whether they have a significant tax delinquency before applying for federal business.

GAO investigators referred 15 serious cases of tax delinquency to the Internal Revenue Service for further investigation, according to the report.

A nonprofit organization that owed more than $2 million in back taxes received more than $1 million in stimulus funds to provide “social services.” One of the organization’s executives was responsible for questionable business expenses and had numerous transactions with casinos totaling hundreds of thousands of dollars each year, the report said.

A security firm owing $9 million in back taxes received a contract for more than $100,000, despite frequent labor violations and a history of not cooperating with the IRS, investigators said.

And in what the report called an “extreme case of noncompliance,” an engineering firm earned a contract worth more than $100,000 despite $6 million in tax delinquency. The company had attempted to hide its tax status by failing to file returns.

The report didn’t identify any of the firms because of federal tax privacy laws, but the IRS has taken enforcement and collection action in each of the 15 cases. Six of the firms have agreed to pay back taxes, the report said.

The stimulus package totaled $819 billion.

The report estimates that as many as 4,500 stimulus recipients could owe upward of $909 million in taxes despite receiving a combined $29 billion in stimulus funds. The total amount of unpaid taxes is probably much higher, because IRS records reviewed for the report didn’t include amounts owed by recipients that failed to file tax returns or understated their income, the GAO said.

Recouping missing tax revenue is a growing concern on Capitol Hill amid talks about reducing the national deficit. Coburn has introduced legislation that would allow the government to fire tax-delinquent federal employees. Rep. Jason Chaffetz (R-Utah), a leading member of the House Oversight and Government Reform Committee, in February introduced a bill that would bar tax-delinquent firms from obtaining government contracts or grants.

“Contractors have an obvious obligation to pay their taxes,” Chaffetz said in February. Those that fail to pay their taxes “should be fired or lose funding.”

Share your thoughts in the comments section below.

By  |  06:43 PM ET, 05/23/2011

Categories:  Tracking the Stimulus, Contracting, Oversight

 
Read what others are saying
     

    © 2011 The Washington Post Company