Corporate Scandals

More Than 3,000 Recipients of Stimulus Funds Owe More Than $750 Million in Unpaid Taxes

|

The Government Accountability Office released a report today revealing that 5 percent of the 80,000 entities that received federal contracts and grants through the American Recovery and Reinvestment Act of 2009 have tax problems. From the GAO's summary: 

At least 3,700 Recovery Act contract and grant recipients–including prime recipients, subrecipients, and vendors–are estimated to owe more than $750 million in known unpaid federal taxes as of September 30, 2009, and received over $24 billion in Recovery Act funds.

This represented nearly 5 percent of the approximately 80,000 contractors and grant recipients in the data from www.Recovery.gov as of July 2010 that GAO reviewed.

Federal law does not prohibit the awarding of contracts or grants to entities because they owe federal taxes and does not permit IRS to disclose taxpayer information, including unpaid federal taxes, to federal agencies unless the taxpayer consents. The estimated amount of known unpaid federal taxes is likely understated because IRS databases do not include amounts owed by recipients who have not filed tax returns or understated their taxable income and for which IRS has not assessed tax amounts due. In addition, GAO's analysis does not include Recovery Act contract and grant recipients who are noncompliant with or not subject to Recovery Act reporting requirements.

GAO selected 15 Recovery Act recipients for further investigation. For the 15 cases, GAO found abusive or potentially criminal activity, i.e., recipients had failed to remit payroll taxes to IRS. Federal law requires employers to hold payroll tax money "in trust" before remitting it to IRS. Failure to remit payroll taxes can result in civil or criminal penalties under U.S. law.

Here's the breakdown contained in the full report: 

[C]orporate income taxes comprised $417 million, or about 55 percent, of the estimated $757 million of known unpaid federal taxes. Payroll taxes comprised $207 million, or about 27 percent, of the taxes owed by Recovery Act contract and grant recipients we reviewed. Unpaid payroll taxes included amounts that were withheld from employees' wages for federal income taxes, Social Security, and Medicare but not remitted to IRS, as well as the matching employer contributions for Social Security and Medicare. The remaining $133 million was from other unpaid taxes, including excise and unemployment taxes.

Read the full report

Picture of stimulus courtesy of Flickr user Daquella manera.

NEXT: Gee, Pops, Do Republicans Ever Have Sex Scandals? Or, Yet Another Reason Why Independents Are Growing.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Only 5% are tax delinquent? Isn’t that pretty low for Federal government contractors?

    1. Why would it be high? Gotta pay the piper to keep the gravy train coming, after all.

      1. All I’m saying is that I bet more than 5% of Congress has had tax trouble, and they actually make the stupid laws, not just bow down to them.

        1. So what you’re saying is…your mom.

          1. Finally, someone understands me.

  2. Glass half full: 95% of bailout recipients were more than happy to send that taxpayer dollar right back to the IRS.

  3. WISE UP AND WEAPON UP ? There is a time and purpose for every
    season!
    [The time of peaceful protests has ended ]
    The time has come for the [ Spheres of Parity ] to wise up and begin in
    earnest realizing the fact that the time of Peaceful Protest and
    Demonstrations has passed, from Palestine to Okinawa , hand holding and
    demonstrations only work within systems that have a moral code of ethics,
    and that moral code does not extend to the American – Israeli Military
    Industrial Complex- the [EMPIRE ] , the Corporation Plutocracy of
    Hypocrisy, and its dog to the tail relationship between it and the Pure
    Jewish State of Israel, the Ultra Theocratic Democracy of Hypocrisy, or
    their autocratic minions placed into and maintained in positions of power ,
    their plan is a simply one , just keep talking while they keep pushing
    forward on world domination, militarily , economically, and politically
    agenda. The tail of the dog the Pure Jewish State of Israel continues to
    move step by step to establish a Pure Jewish State , from the Jordan River
    to the Mediterranean Sea , the Nile to the Euphrates , made up of only
    those of Pure Jewish Blood, a state of Pure Theocratic Zionism, not a
    Democratic State, wagging the dog the American Corporation Plutocracy
    of Hypocrisy , which is creating a Nuclear Choke Chain Necklace of Pearls
    running from [ Foothold Germany] to [ Foothold Okinawa ] . The [EMPIRE ]
    no longer can nor should be seen as anything but a threat seeking world
    domination, by the positioning of forward military installations with
    advanced military technology in such a way as to extort control by threat
    of overwhelming military force , [ WMD] Weapons of Mass Destruction .
    [MAD ]
    The only protection against not only the Status Quo , which is not really
    that but a stalling tactic as it continues to undermine the regional security
    of nation after nation, region after region, is that of building a response
    system , to neutralize that threat, not a defensive system , a modern day
    regional [ MAD ] Mutual Assured Destruction System a tactically offensive
    system . And for those already engaged in military operations against the
    [EMPIRE ] it is time to do what is necessary to ensure victory at what ever
    cost , defeat is now more than ever not an option , Osama Bin Laden was a
    warrior of Islam and Islam is at war with the [ EMPIRE] make no mistake
    about that, his vision that Islam must strike at the heart of the beast was
    correct, it is a tit – for- tat, for every action there is an opposite and equal
    reaction thinking , it is what keeps things in a balanced state , the concept
    that those who would do harm to us must expect that they in turn will not
    walk away untouched. The [ EMPIRE] no longer recognizes the sovereignty
    of other nation ‘s national boarders, or the regimes , governing the citizens
    of those regions, but feels it is the world ‘s Omnipotent Imperial Regent
    Nation. But this concept does not only apply to the ongoing [EMPIRE ]
    Islamic War , but the war being planned against the regional interests of
    the developing [ PARITY SPHERES OF INFLUENCE] and those are the
    [BRICS] Brazil, The Russian Federation , India, The Democratic Peoples
    Republic of China , and the Republic of South Africa ], this applies at this
    moment in time directly to three member of those Spheres The Russian
    Federation , India , and The Democratic Peoples Republic of China , as the
    Nuclear Choke Chain Necklace of Pearls is to take hold within their
    regional spheres of influence.
    [EMPIRE KEEP OUT]
    The [PARITY SPHERES OF INFLUENCE] regional association membership
    systems of government will provide an umbrella of [WMD] protection
    against the [EMPIRE ] solidifying, the regional and territorial integrity ,
    economic growth , political interests , and national sovereignty , of each
    association member , at all costs to defend against any external forces
    applied to its regional sphere of influence membership nations by the
    [EMPIRE ] , with a no non – sense First Strike Nuclear Tactical Offensive
    Military System . The [ EMPIRE ] has brought the world to this point in
    history , were it has become necessary to take drastic measures to end its
    War of Economic Stimulus at the expense of those nations that lack the
    ability to defend their interests . Sometimes you simply have to draw the
    hard line , to put up fences to make a good neighbor of a bad one , the
    global community has reached that point , the [EMPIRE ] has become that
    neighbor the one that the neighborhood would rather not have, the
    community of nations must now deal with that neighborhood bully with
    drastic measures, the fences must be built of [21 st ] Century Nuclear First
    Strike Nuclear Missiles, with warning signs , no trespassing [EMPIRE KEEP
    OUT] , all will be welcomed who come with the open hand of friendship
    but those who come with the closed fist of war will not set one foot upon
    its [ PARITY SPHERE OF INFLUENCE ] association membership soil , it time to
    bring to and end the [ EMPIRE] reign of terror, it ‘s time to wise up and
    weapon up .
    HERCULE TRIATHLON SAVINIEN

    1. damn u jordie, my universal translator is kaput

    2. I’m not sure, Captain, but I think I sense eliminationist rhetoric.

    3. Nuclear Choke Chain Necklace of Pearls? No, Nuclear Choke Chain Necklace of Awesome!

    4. I missed you. I’ve been having to volunteer at homeless shelters to get my daily recommended dose of insane. It is way easier for me to get it while reading H&R.

    5. I can’t really argue with anybody who closes his rant with “it’s time to wise up and weapon up”, no matter how insane the rest of the rant may be.

  4. They don’t charge tax on Obamabucks, do they? That’s like taxing the “Cash for Clunkers” subsidy, or the First Time Buyer Rebate.

    Crazy, dude.

  5. IRS databases do not include amounts owed by recipients who have not filed tax returns or understated their taxable income and for which IRS has not assessed tax amounts due.

    Huh?

    1. “The IRS doesn’t know what it doesn’t know.”

      1. I believe, in Rumsfeldese, that is a “known unknown.”

      2. I have always depended on the kindness of filers.

    2. How can the IRS be so remiss in its duties as to not assess (partial) tax amounts due from these recipients? They seem pretty “good” at figuring out what I owe.

  6. An intriguing predicament. If you allow these recipients to avoid their taxes, then they’re being unpatriotic. However, if you force them to pay them, then you potentially cancel out the stimulus they received and all the supposed benefits.

    What’s a stimulus supporter to do?

    1. No, no, no… you still don’t understand the multiplier effect. Any dollar spent by the federal government, even a dollar given right back to it stimulates the economy for more than letting is sit around in the vault of Scrooge McDuck.

      Government could harness its full power with a 100% tax on block grants. It gives out $10,000 and the multiplier effect means they tax back $80,000. Then they give out $80,000 and tax back $640,000!

      Multiplier effect! It’s like a license to print money!

      1. Look how the Soviet Union used the multiplier effect to launch Sputnik! Watch out, you bourgeois fools, as the super American multiplier allows us, too, to launch Sputnik!

      2. I thought the license to print money was the license to print money and the multiplier effect was the sucrose on the fructose.

        Fortunately, the Gobcotillions given to bailout Goldman et al will generate millions in taxes ….which means for every dollar “invested” we lose 100 billion dollars. Remeber, what we lose in the transaction, we make up for in volume…we’re in the money, we’re in the money….

    2. The more taxes you pay, the more patriotic you become!

      1. We used to sell indulgences, Joe. Thanks for cribbing the idea of buying your way out of sins.

  7. I don’t think it’s relevant that these companies owe taxes. They probably owed them at the time they were given money, and it wasn’t a consideration. Of course, I agree when companies owe taxes their not very stable in general, and i ought to know. You can know too by visiting
    Tax Problem
    and downloading valuable free info

    1. Is this related to the $3 million the UN just offered me?

Please to post comments

Comments are closed.