Nearly 55,000 tax-exempt organizations owed close to $1 billion in unpaid payroll and other federal taxes as of last September, according to a report released by the Government Accountability Office.
The GAO noted that about 1,500 of those organizations each had over $100,000 in federal tax debts, with some owing tens of millions of dollars. As of September 2006, nearly 1.8 million entities were recognized as tax-exempt organizations by the Internal Revenue Service and thus did not have to pay income taxes. However, they are still subject to payroll and other taxes.
Most of the debt represents payroll taxes, and the associated penalties and interest, some of it dating back to the early 1980s. The GAO decided to investigate 25 organizations, including health care facilities, industry associations, social clubs and child service organizations, and found what it called "abusive and potentially criminal activity."
The GAO said that officials at some of the organizations, which it did not identify by name, improperly diverted money, in some cases paying themselves exorbitant salaries, buying lavish homes and luxury vehicles. Key executives at four of the organizations engaged in criminal activity, including attempted bribery of IRS officials and illegal gambling. Despite the wrongdoing, the organizations retained their tax-exempt status. The GAO released the report in conjunction with a House Ways and Means Committee hearing into tax-exempt charities.
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