Tax Exempt Groups Owe IRS Nearly $1 Billion
Policy + Politics

Tax Exempt Groups Owe IRS Nearly $1 Billion


Some organizations exempt from paying federal income tax are avoiding paying other taxes too—almost $1 billion worth.

That’s according to a new report from the Treasury Inspector General for Tax Administration (TIGTA), which found that more than 64,200 tax exempt groups –501(c)(3) organizations--had about $875 million in federal tax debt as of June 2012.

Related: IRS Gives Tax Dodging Workers $3 M in Bonuses

“Tax-exempt organizations have a responsibility to remit to the IRS taxes that have been withheld from employees as well as other applicable Federal taxes,” said J. Russell George, Treasury Inspector General for Tax Administration. “Failure to remit these taxes is a very serious matter.”

Most of the unpaid amounts are for payroll taxes of their employees as well as other taxes.

Still, the auditors said that these groups typically receive government payments for things like Medicare, Medicaid and government grants—totaling $148 million over a three-year period, own assets of more than $97 million, and continue to “not remit payroll and other taxes, including penalties and interest, totaling more than $25 million.”

"Instead of paying taxes, these organizations accumulated more and more Federal tax debt while continuing to operate with the benefits of an I.R.C. 501 (c)(3) tax exemption," the report said.

Related: Federal Government Pays Workers $5 Million to Not Work

The auditors found that while some groups owed very small amounts to the Internal Revenue Service, at least 1,200 groups had skirted paying at least $100,000 each.

The unpaid taxes spanned multiple tax filing seasons. Nine organizations each had Federal tax debt stretching 10 or more years that collectively totaled more than $5.5 million, TIGTA said.

The IRS, for its part, agreed with the auditor's recommendations, but said the report "paints an incomplete picture of IRS enforcement efforts on employment tax, particularly in the small sample reviewed for this report," an agency official said in a statement. It added  that "the IRS had opened collection cases on all 25 tax-exempt organizations selected by TIGTA for review with 17 of these cases fully paid and already closed, and our work continues with the final eight remaining groups."

The report did not name the organizations that owe the IRS money. However, it did note that some of the officers in charge of the organizations also did not file their own personal tax returns either-- 22 officers were "involved in abusive activity."

The IRS has had similar problems collecting taxes from government workers. In May, the USA Today obtained federal data through a Freedom of Information Act request showing that federal workers owed at least $3.3 billion in back taxes.

And this summer, TIGTA reported that IRS workers who were delinquent on their taxes were receiving bonuses anyway.

This article was updated with a statement by the IRS at 4:36 p.m.

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