MOST COMPANIES DON’T PAY FEDERAL TAXESWashington, D.C. — Approximately two thirds of U.S. companies and foreign companies doing business in the U.S. paid no federal income taxes between 1998 and 2005, according to a new report. The Government Accountability Office found that over 38,000 foreign companies had zero tax liability in 2005, as did 1.2 million U.S. businesses — despite a combined $2.5 trillion in revenue for the companies.

Approximately a quarter of the U.S. companies that did not pay corporate taxes were large companies with at least


Many of the companies are not reporting U.S. income taxes for a variety of reasons, including operating losses, tax credits and transfer-pricing abuses. The GAO set out to compare the reported tax liabilities of foreign- and U.S.-controlled corporations to see the effect of transfer pricing. Foreign-controlled domestic corporations showed lower tax liabilities than U.S.-controlled corporations by most measures, the GAO found, and a greater percentage of large foreign-controlled domestic corporations reported no tax liability in a given year from 1998 through 2005.


New York — Deloitte & Touche and its audit client General Motors agreed to settle a securities class-action lawsuit for a total of $303 million. GM will pay $277 million as part of the settlement, while Deloitte will contribute $26 million. The case stems from claims that GM issued a series of false and misleading statements to investors about the automaker’s financial health going back to 2000. The settlement requires approval by the judge overseeing the case.

GM said in a filing that it plans to record a charge of $277 million in the quarter ended June 30, 2008, but added that a portion of the settlement costs may be covered by insurance.

The complaint alleges various violations of generally accepted accounting principles, including an allegation that GM accelerated its recognition of income instead of spreading it out over a period of time. The plaintiffs claimed that Deloitte nevertheless issued a clean audit opinion.

AMT Discrepancies Trip Up IRS

Washington, D.C. — The Internal Revenue Service has not always followed the proper procedures when resolving discrepancies in the money owed by taxpayers for the Alternative Minimum Tax, according to a new report.

The IRS provides taxpayers with various online tools to determine whether they will have to prepare a Form 6251 to determine their AMT liabilities. While the tools generally seem to work, the complexity of the AMT causes errors in determining and computing the tax, noted a report by the Treasury Inspector General for Tax Administration. In 2006, computer checks identified about 226,000 discrepancies between the AMT figures reported, or not reported, by taxpayers and the amounts computed by the IRS.

When a discrepancy occurs, the tax return is sent to an IRS tax examiner, who looks for obvious input errors or misplaced entries. If the examiner cannot resolve the issue, a notice is sent to the taxpayer asking for additional information or saying the AMT calculation was incorrect.

TIGTA reviewed a random sample of 52 tax returns filed in 2006 on which IRS computers identified a discrepancy. In all 52 cases, computer checks correctly identified a discrepancy, and the cases were correctly sent to tax examiners for further review. However, the examiners did not follow procedures when resolving 11 of the 52 cases. Of the 11 cases, three resulted in the examiners incorrectly computing the amount of tax owed.

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