No Tax Returns for You, Dark Money Groups Say

Eighteen of 106 social-welfare nonprofits that we identified as having spent money on elections in 2010 would not provide us with tax documents.

Πηγή: ProPublica
By Kim Barker
August 22 2012

It was mid-July and I had come to Hilltop Public Solutions because Jessie Bradley, a partner with the consulting firm, appeared to run two social-welfare nonprofits out of its Washington, D.C., office.

ProPublica was preparing a story about how such groups – also known as 501(c)(4)s for their section of the tax code – were pouring money into elections. The nonprofits run by Bradley, Economy Forward and the Citizens for Strength and Security Action Fund, or CSS Action Fund, had spent more than $3 million supporting Democrats in 2010, records showed.

I wanted the groups’ tax returns and the applications they had submitted to get IRS recognition of their tax-exempt status. The law requires 501(c)(4)s to make these forms available for inspection immediately if someone requests them in person or to provide them by mail within 30 days.

When I reached the office suite listed as Hilltop’s headquarters, however, it turned out to be a law firm.

The firm’s receptionist said Hilltop was located in an inaccessible area of the building and called Bradley to convey my request.

Bradley said she was busy.

The receptionist asked if I could meet with someone else. “She hung up on me,” the secretary said, putting down the phone.

Bradley wasn’t the only one who refused to provide ProPublica with these crucial records, in which social-welfare groups set down, under penalty of perjury, their revenue, spending and involvement with political activities.

Eighteen of 106 social-welfare nonprofits that we identified as having spent money on elections in 2010 would not provide us with these documents, despite repeated requests and reminders that they were legally obligated to do so.

Some groups promised to provide the records, but never did. Others wouldn’t even tell us their addresses, so we couldn’t ask for them in person. (ProPublica got the tax returns from CSS Action Fund and Economy Forward from the IRS. Available records show they never applied to the agency to be recognized as tax-exempt.)

Several groups offered reasons why they couldn’t gather the documents, at least not right away: A death in the family. A wife with cancer.

“It’s the middle of August,” said Neil Corkery of The Annual Fund. “Everyone’s on vacation.”

Corkery later had the group’s tax return sent to ProPublica, but it was missing a breakdown of the group’s $2.7 million in grants, some of which went to other social-welfare nonprofits heavily involved in politics. Corkery never responded to a request for The Annual Fund’s application for recognition, or to questions about whether the group filed one. Though listed as the person keeping the group’s records on its tax return, Corkery said he was no longer really involved with The Annual Fund.

Thorney Lieberman of the West Virginia Conservative Foundation said he couldn’t provide records for the group right away because he was out of town.

“If it’s a public record, then shouldn’t it be available online?” he asked.

Sure—if the nonprofit or Guidestar, which tracks charities, puts it there. Guidestar had a copy of the West Virginia Conservative Foundation’s tax return but not its application for recognition. Regardless, the group is required to provide documents when requested.

Lieberman asked me to send an email requesting the records. He never responded. Or supplied the address of the West Virginia Conservative Foundation, which reported spending more than $630,000 on political ads in 2010 to the Federal Election Commission. (That’s 97 percent of the group’s expenditures in 2010, according to its tax return.)

The Foundation for a Secure and Prosperous America—which spent more than $111,000 on ads in 2010—also didn’t respond to a request for its application for IRS recognition. Lawyer Scott Thomas, a former FEC chairman who is now with Dickstein Shapiro LLP in Washington D.C., said the associate that advised the group on the filing had just left the firm. Thomas said he couldn’t find a copy of the group’s application.

“I’ve explained the obligation to make a copy available if requested,” Thomas wrote in an email. Neither he nor the group responded to a follow-up email.

Chris Carmouche of GrassTops USA said in mid-May that he was out of the country but would be willing to “talk about” ProPublica’s request for records when he returned later in the month.

But Carmouche never called or responded to a note left at his front door. The IRS couldn’t locate 2009 or 2010 tax returns for GrassTops, which says in daily emails that its mission is to “wage web warfare against the liberal establishment.”

The IRS says that citizens who are rejected from seeing tax returns or applications shouldwrite to complain about the offending nonprofit, which can be fined $20 a day, up to$10,000 maximum, as long as the failure continues.

And we’re considering it.

But despite all the rejection, ProPublica has a message for the groups that have not yet supplied us with tax returns and applications for recognition: You have one more chance. Feel free to send them along.

US Report: Millions mistakenly claim education tax credit

Πηγή: Washington Post
By Ed O’Keefe

Oct 21 2011

Millions of American taxpayers may have erroneously claimed an education tax credit last year that was designed to provide relief as part of the Obama administration’s economic stimulus program, according to a new federal watchdog report disputed by the Internal Revenue Service.

As many as 2.1 million taxpayers may have erroneously claimed a total of $3.2 billion by taking advantage of the American Opportunity Tax Credit, which provides up to $2,500 in relief for a college student paying tuition and related expenses. The tax credit, once known as the Hope Scholarship Credit, was expanded as part of the 2009 economic stimulus program.

Graphic


Into the U.S. tax code, break by break: Explore the 172 tax breaks currently on the books

According to a report by the Treasury Inspector General for Tax Administration released Thursday, 1.7 million taxpayers received $2.6 billion in education credits that appear to be erroneous based on IRS records.

More than 370,900 ineligible individuals also received an estimated $550 million in credits despite not attending classes for the required amount of time or because they were ineligible postgraduate students, the report said. Another 63,700 taxpayers received $88.4 million in credits while also being claimed as a dependent or spouse on another person’s tax return, it said.

And the report said 250 prisoners used the tax credit and received a total of $255,879.

The IRS disputed the findings, noting that some of the 1.7 million allegedly ineligible taxpayers could claim the credit without filing a tuition statement, known as Form 1098-T.

“We recognize that there will be incorrect claims and we will take steps to correct them,” IRS spokesman Terry Lemons said in an interview.

The education tax credit “is making a difference for 9 million students and their families every year,” Lemons said. “We think it’s misleading for TIGTA to say that the problems are of this scope.”

The report said that the IRS as of July had concluded that 72 percent of about 1,400 high-risk claims that were reviewed were erroneous. The IRS conceded that those numbers were likely to rise.

Taxpayers found to have erroneously claimed the credit could face an audit and have to pay interest and penalties, Lemons said, adding that they may file an amended tax return.

TIGTA, which tracks IRS operations, and other federal watchdogs are required by law to monitor spending tied to the $819 billion economic stimulus program. In recent months, other watchdog reports have faulted federal agencies for slowing the distribution of stimulus dollars and stimulus recipients for failing to pay hundreds of millions of dollars in unpaid taxes.

FACT CHECK: Are rich taxed less than secretaries?

President Barack Obama gestures while speaking in the Rose Garden of the White House in Washington, Monday, Sept. 19, 2011. (AP Photo/Evan Vucci)

Πηγή: AP
By STEPHEN OHLEMACHER

Sep. 20 2011

WASHINGTON (AP) -- President Barack Obama makes it sound like there are millionaires all over America paying taxes at lower rates than their secretaries.

"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," Obama said Monday. "That's pretty straightforward. It's hard to argue against that."

The data tells a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.

In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the "Buffett rule," named for billionaire investor Warren Buffett.

The rule says, "People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

The latest IRS data is a few years older - and it's limited to federal income taxes - but it shows much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.

Obama's claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.

With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress' official scorekeeper on revenue issues.

The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.

"People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out," said Roberton Williams, a senior fellow at the Tax Policy Center. "People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we're getting, which is also the case."

Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.

"So it really depends on what is your profession, where's the source of your income, what's the specific circumstances you face, and the averages won't really capture that," Geithner said.

Software that predicts the future: Does it really help?

Shelley Metzenbaum, associate director of performance and personnel management at OMB, speaks at a conference in Washington, D.C. (Army Times Publishing Co.)

Πηγή: Federal Times
By SEAN REILLY
Sep. 18 2011

For the IRS, a type of software known as predictive analytics may offer one means of deciding which taxpayers most likely warrant an audit. The U.S. Postal Service's inspector general has just begun using analytics to identify high-risk contracts. And at least one agency is exploring the technology as a means of predicting which of its employees will be retiring soon.

The approach, heavy on mathematical modeling and long employed by business, is drawing increased attention from government, both to boost efficiency and as a way of making better use of its vast stocks of data to help predict the future.

"Potentially, it's dynamite," Richard Huang, an information technology specialist at the Veterans Affairs Department said last week.

But the return on investment is not easy to measure. Even some vendors worry that the software's potential may be overhyped in some cases.

"It still requires common sense and hard work," said John Elder, chief scientist at Elder Research, a data-mining consultant that helped to organize a conference last week on the government's use of predictive analytics software.

Predictive analytics can be useful to an agency "savvy enough to know how to use them and apply them," said Douglas Samuelson, president of InfoLogix, a Virginia consulting firm. "Unfortunately, in some agencies, you don't get to making better decisions; you're too busy trying to get to any decision."

Predictive analytics in essence means crunching data from past events to predict future behavior. The technique is widely employed by credit card companies to target fraud; supermarket shoppers encounter it when a cash register spits out a coupon that — based on warehoused information about individual purchasing habits — pitches discounts for products they're likely to buy.

While no one tracks federal spending on analytics, contractors report a surge in interest.

At North Carolina-based SAS, for example, government customers make up its second biggest software revenue stream, although still well behind clients in the financial service industry.

One fan is the White House Office of Management and Budget, which is encouraging agencies to use analytics to improve results for taxpayers, communities and businesses. Shelley Metzenbaum, associate director for performance and personnel management, said OMB is working to identify and share effective analytics practices.

Other factors are also driving interest in this emerging technology. For one thing, agencies have been gradually automating more of their administrative operations in the last decade, meaning they are accumulating large volumes of electronic data that they can now subject to analysis. In addition, ever-tightening budgets are pressing agencies to do better at prioritizing where they direct their time and resources — something at which predictive analytics is especially helpful.

Also, one high-profile federal program — the Recovery Accountability and Transparency (RAT) Board, created two years ago to monitor hundreds of billions of dollars in grants, loans and other spending under the stimulus bill — has applied predictive analytics with much success.

Instead of resorting to traditional "pay and chase" methods of pursuing fraud after the fact, the RAT Board fashioned a new model that mines information from an array of databases to ferret out problem contractors and head off bad behavior from the start.

So far, the recovery program has been largely scandal-free, prompting a bipartisan push for its expansion to other areas of federal spending, something President Obama has started exploring.
Seeing success

At the IRS, which processed almost 231 million income tax returns last year, "technology is changing how we can do business," Patricia McGuire, the agency's deputy director of research analysis and statistics, said at last week's conference.

In a pilot project started last year, the IRS is using analytics to better focus its audits on taxpayers most likely to owe money than those already obeying the law. The process of determining where to aim the agency's audit teams is complex, involving risk scores, algorithms and statistical modeling. So far, however, the project has registered drops in "non-productive" audits of up to 50 percent, said John Kam, a senior analyst at IRS.

The Securities and Exchange Commission, which is picking up a bundle of new regulatory responsibilities under the Dodd-Frank financial overhaul approved last year, has a similar need to choose wisely where it directs its resources.

The agency has roughly 600 examiners to oversee some 11,000 private-sector investment advisers, said Harvey Westbrook, assistant director of SEC's Office of Quantitative Research in the Division of Risk, Strategy, and Financial Innovation.

"Analytics really help allocate your manpower resources much more effectively," Westbrook said. Some big investments will be needed to keep building on those initiatives, he said.

The cost for these software products is a challenge, said Ed Slevin, director of the Computer-Assisted Assessment Techniques Division at the Education Department's Office of Inspector General. Another is assembling and compiling the data.

For one federal project aimed at predicting retention in an agency's workforce, more than 7 million rows of data covering three years of payroll and other records on more than 100,000 employees were needed, said Dave Vennergrund, director of business analytics at Delta Solutions and Technologies. He declined to name the agency at his customer's direction.

Also key is ensuring that the final product is tailored to the needs of users. At the Postal Service IG's office, which recently rolled out a new system that assigns risk-based scores to thousands of contracts, investigators can access the information simply by clicking on a map of the United States.

"Understand the power of visualization," said Bryan Jones, director of the data mining group in the IG's Office of Investigations. "If we can't translate it easily to our users, we've wasted a lot of time and a lot of effort and a lot of money."