Tuesday, January 1, 2008
Over the past six months the General Accounting Office (GAO) has been reporting on the causes of the tax gap -- the differences between taxes owed and taxes collected (currently around $350 billion, according to some estimates). A GAO study reports that nonprofit organizations owe about $1 billion in back taxes -- primarily payroll taxes. Here is an excerpt from the report dated July 24, 2007.
What GAO Found:
Nearly 55,000 exempt organizations had almost $1 billion in unpaid
federal taxes as of September 30, 2006, with charitable organizations
being responsible for more than 85 percent of the $1 billion in debt.
About 1,500 of these entities each had over $100,000 in federal tax
debts, with some owing multi-million dollars in federal taxes. The
majority of this debt represented payroll taxes and associated
penalties and interest dating as far back as the early 1980s. Willful
failure to remit payroll taxes is a felony under U.S. tax law. The $1
billion figure is understated because some exempt organizations have
understated tax liabilities or did not file tax returns.
Now, identical bills introduced in both the House and the Senate on December 19, 2007 would prohibit the award of federal contracts or grants to organizations with "seriously delinquent tax debts." The House Bill (HR 4881) is here: Download taxdebtorbill.rtf , the Senate Bill (S 2519) is here: Download taxdebtorbill2.rtf . The Bills, if enacted, would enact the "Contracting and Tax Accountability Act of 2008." Here is the statutory language defining "seriously delinquent tax debt:"
(3) SERIOUSLY DELINQUENT TAX DEBT. --
(A) IN GENERAL. -- The term "seriously delinquent tax debt" means an outstanding debt under the Internal Revenue Code of 1986 for which a notice of lien has been filed in public records pursuant to section 6323 of such Code.
(B) EXCEPTIONS. -- Such term does not include --
(i) a debt that is being paid in a timely manner pursuant to an agreement under section 6159 or section 7122 of such Code; and
(ii) a debt with respect to which a collection due process hearing under section 6330 of such Code, or relief under subsections (a), (b), or (f) of section 6015 of such Code, is requested or pending.
For the administrative rules relating to the awarding of grants and contracts to exempt organizations, see OMB Circular A-110.