Report: Stimulus recipients owe more than $750 million in taxes

May 24, 2011

Thousands of companies and nonprofits that received funds 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 receiving $24 billion in stimulus contracts and grants owe more than $750 million to the government.

Corporate income taxes made up $417 million, or about 55 percent of the estimated unpaid taxes, GAO said. Payroll taxes totaled $207 million, or about 27 percent; unpaid excise, unemployment and other taxes equaled another $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 GAO. Much of the money first went to state governments or primary contractors, who then distributed it to other recipients and vendors.

Federal law doesn’t prohibit contractors with unpaid federal taxes from doing business with the federal 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 GAO.

Sen. Tom Coburn (R-Okla.) and other lawmakers are pushing legislation that would bar tax-delinquent firms from conducting business with the government.

The White House said Monday that the administration collected more than $100 million in unpaid taxes from tax-delinquent contractors last year.

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

Federal tax privacy laws prevent the GAO from publicizing the identity of the firms, 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 GAO report estimates that as many as 4,500 stimulus recipients could owe upwards of $909 million in taxes despite receiving a combined $29 billion in stimulus funds. The total amount of unpaid taxes is likely much higher, because IRS records reviewed for the report didn’t include amounts owed by recipients who failed to file tax returns , GAO said.

Ed O’Keefe is a congressional reporter with The Washington Post and covered the 2008 and 2012 presidential and congressional elections.
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