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The Government Accountability Office said charitable organizations made up more than 85 percent of the $1 billion in debt owed by some 55,000 tax-exempt groups as of Sept. 30, 2006.
About 1,500 of these groups individually owed more than $100,000 in federal tax debts, with some debts reaching tens of millions of dollars. Some debts dated as far back as the early 1980s, the report said, adding that the $1 billion figure is probably low because some tax-exempt organizations understate tax liabilities or do not file tax returns.
"Fortunately, these types of cases are more the exception than the norm," said Rep. Jim Ramstad, R-Minn., a House Ways and Means Committee member who requested the GAO report.
"But where there are cases of fraud and abuse, they should be rooted out so the reputations of countless charities that do good work are not tarnished, and Americans can be sure their donations will be put to good use," he said.
The report came out a day after the leaders of the Senate Finance Committee published a letter from acting Internal Revenue Service Commissioner Kevin M. Brown in which he acknowledged that tax abuses persist among charities and other tax-exempt groups. Brown also said the IRS does not always have the legal means to deal with the problem.
While the nation's 1.8 million tax-exempt groups -- such as charities, churches and educational institutions
-- do not have to pay federal income tax, they are still required to remit amounts withheld from employees' wages for federal income tax, Social Security and Medicare.
The GAO said it selected 25 organizations for investigation based mainly on the amount of debt and found abusive and potentially criminal activity in all 25. Willful failure to remit payroll taxes is a felony under U.S. tax law.
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One health care related group with more than $15 million in unpaid taxes gave its top official more than $1 million in annual compensation and benefits. It also made several hundred thousand dollars in cash transactions at banks and casinos.A social club owing more than $1 million and former officials had pleaded guilty to conducting an illegal gambling business, while the top official of a children's service group with debts of more than $500,000 was convicted of trying to bribe an IRS employee.
The report noted that the IRS does not have the authority to revoke an organization's exempt status because of unpaid federal taxes.
Another finding was that more than 1,200 of the tax-exempt organizations with more than $72 million in tax debt received more than $14 billion in direct federal grants in fiscal years 2005 and 2006. Of these, 1,150 were charitable organizations.
It said 71 percent of the nearly $1 billion in unpaid taxes is composed of payroll taxes and related penalties and interest.
Brown, in his 28-page letter to the Senate Finance Committee, mentioned such problems as the improper valuation of charitable contributions, inaccurate reports of executive compensation, questionable filings by not-for-profit hospitals, involvement in prohibited political activities and charities established to benefit the donor.
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On the Net:
Government Accountability Office: http://www.gao.gov/
[Associated Press;
by Jim Abrams]
Copyright 2007 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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