A new report finds that the majority of financial institutions and companies that received funds from the Troubled Asset Relief Program have resolved the unpaid federal taxes they had owed.
Some companies that received federal funds under the TARP owed taxes at the time they received funding, according to a new
According to TIGTA's report, the IRS faced several challenges in determining the taxes owed by companies receiving TARP funds, including identifying and tracking unpaid tax debts across the thousands of separate but related taxable entities operating domestically and overseas. The large number of subsidiaries owned or controlled by financial institutions in the TARP overwhelmed the ability of IRS computer programs to identify and track unpaid tax debts across the thousands of separate but related taxable entities.
All recipients of federal funds, including TARP participants, must meet their federal tax obligations," said TIGTA Inspector General J. Russell George in a statement. "Going forward, it is important that the IRS closely monitor the net operating losses many TARP participants will be claiming for 2008 and 2009."
In addition, the IRS will need to ensure that TARP participants follow appropriate tax laws when claiming refunds for losses and paying any taxes due as a result of IRS audits.
Recent tax law changes allow businesses to use losses to claim refunds for taxes paid in the previous five years when they were profitable. TARP participants were specifically excluded from taking advantage of new tax incentives that allow businesses to use losses, although they can still use net operating losses to claim refunds for taxes paid in the two years previous to incurring the net operating loss.
House Ways and Means Oversight Subcommittee Chairman John Lewis, D-Ga., first examined this issue at a March 19, 2009, hearing where he revealed that, out of the top 23 TARP recipients, 13 of them owed more than $220 million in unpaid federal taxes. At the hearing, Lewis called for a comprehensive audit of the institutions.
I thank TIGTA for examining this issue, he said in a statement. It is important for taxpayers to know that the Congress and the Administration are working together to oversee the TARP recipients. To maintain public confidence, we must ensure that those who benefit from federal programs timely pay their fair share of taxes.
TIGTA did not make any recommendations in this report, and the IRS did not provide any comments on a draft of the report.