News Intelligence Analysis
June, 2007
Thousands of Organizations
Exempt from Federal Income Tax
Owe Nearly $1 Billion in Payroll and Other Taxes
A study by the GAO found that nearly 55,000 tax exempt organizations had almost $1 billion in unpaid federal taxes as of September 30, 2006. About 1,500 of these entities each had over $100,000 in federal tax debts with some owing tens of millions of dollars. Willful failure to remit payroll taxes is a felony under U.S. tax law. The GAO found abusive and potentially criminal activity, including repeated failure to remit payroll taxes withheld from employees. Officials diverted the money to fund their operations, including paying themselves large salaries ranging from hundreds of thousands of dollars to over $1 million. Of twenty-five cases investigate, many officials accumulated substantial assets, such as million-dollar homes and luxury vehicles. Key officials and employees at four exempt organizations were engaged in criminal activities, including attempted bribery of an IRS official and illegal gambling. Despite repeatedly abusing the federal tax system, these entities continued to retain their tax exempt status.
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