Bramwell’s Lunch Beat: GAO Sheds Light on IRS Budget Woes

IRS revokes group’s tax exemption over anti-Clinton statements
Gregory Korte of the USA Today reported on Monday that the IRS has revoked the tax-exempt status of a conservative-aligned charity, the Patrick Henry Center for Individual Liberty, for engaging in political activity as far back as the 2004 presidential election – including statements opposing Hillary Clinton for president.

According to a written determination released by the IRS on April 18, the Manassas, Virginia-based organization “has shown a pattern of deliberate and consistent intervention in political campaigns” and made “repeated statements supporting or opposing various candidates by expressing its opinion of the respective candidate’s character and qualifications,” the article stated.

Although the name of the group was redacted from the determination, the facts of the case match statements made by the Patrick Henry Center’s founder, Gary Aldrich, a former FBI agent. A separate IRS notice confirms that the Patrick Henry Center’s tax exemption was revoked in February.

Korte wrote that Aldrich did not return phone calls or e-mails seeking comment.

Watchdog: Budget and staffing cuts hurting IRS performance
A report released yesterday by the US Government Accountability Office (GAO) shows that annual funding for the IRS has declined by about 6.6 percent since fiscal year 2010 and that “the resulting imbalance between service and demand has adversely affected operations,” Josh Hicks of the Washington Post reported.

Total IRS appropriations from Congress totaled about $12.15 billion for fiscal 2010, compared to roughly $11.3 billion for this year.

The report also said IRS performance levels for enforcement and taxpayer services have “decreased or fluctuated” since 2009, during which time the agency lost the equivalent of about 8,000 full-time employees, Hicks wrote. The GAO found that the average wait time for telephone service has nearly doubled since 2009, rising from 8.8 minutes to 16.8 minutes as of March.

President Obama’s 2015 budget proposal asks Congress to fund the IRS at a level of $12.5 billion, which would represent an increase of more than 3 percent compared to this year.

GAO: IRS can make improvements without new funding
But as Bernie Becker of The Hill wrote yesterday, the GAO says the IRS can do more within its current funding constraints, including spelling out more clearly the agency’s goals for answering taxpayer questions on the phone, such as appropriate wait times.

“Additional funding is not the only solution,” the report said, according to the article.

The GAO also suggested the IRS more deeply examine its enforcement programs, to see which bring back the most revenues per dollar spent, and craft a long-term strategic plan for online services.

Airlines rank ahead of IRS in customer satisfaction
From Charisse Jones in today’s USA Today: “For the second year in a row, airlines earned a score of 69 out of 100 points, according to the American Customer Satisfaction Index travel report. That is among the lowest of any industry or agency, hovering above only the IRS, subscription television providers, and social media sites.”

Click here to download the report.

Amazon sales take a hit in states with online tax
In one of the first efforts to quantify the impact of states accruing more tax revenue from web purchases, researchers at Ohio State University published a paper this month that found sales dropped for Amazon when the online charge was introduced, Adam Satariano of Bloomberg reported today.

In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent, according to the report titled The ‘Amazon Tax’.

Satariano noted that Amazon has enjoyed an edge against brick-and-mortar retailers because consumers didn’t have to pay a sales tax for purchases from the e-commerce site, yet that has eroded as states, including California and Texas, have unveiled the levies.

“There is no ambiguity,” Brian Baugh, one of the report’s authors from Ohio State’s Fisher College of Business, said in an interview with Bloomberg. “It has been their competitive advantage.”

Amazon and other online retailers have fought some efforts to implement the taxes, with the US Supreme Court in December rejecting an appeal by the company to rule against a New York law forcing it to collect money from customers. New York and others have said the push to tax Amazon is an effort to treat online and brick-and-mortar retailers equally.

Will sales taxes doom Amazon?
Bloomberg View columnist Matthew C. Klein believes that imposing state and local sales taxes on Amazon purchases would be good for municipal budgets and help level the playing field for other online retailers, but do little for brick-and-mortar establishments.

He cited the results of the Ohio State research paper, which found that retailers competing with Amazon had their sales increase by 3.4 percent, with much of those gains coming from greater online purchases rather than more buying from stores. Amazon's competitors also saw sales increase by 9.2 percent when shoppers were spending $300 or more. Klein noted that shoppers also shifted their spending to vendors on the Amazon Marketplace, almost none of which collect tax but all of which pay fees to Amazon. These smaller operators experienced sales increases of 15.2 percent overall and 60.5 percent for big-ticket items.

“The question is whether years of tax subsidies for Amazon ultimately benefited the rest of us by nurturing a company with the resources to invest in new products, distribution channels, and lower prices,” Klein wrote. “Would online shopping have taken off without the tax benefit?”

Quick Links:

  • Baker Tilly manages to get half of audits right, per UK regulator (Going Concern)
  • Here’s how this Deloitte consultant gets away with working 3 days a week (Going Concern)
  • UK tax authorities question banks on VAT swindlers (Bloomberg)
  • US Department of Justice v KPMG: Document shows “too few to fail” was opening premise (re: The Auditors)
  • What investors can do to minimize taxes next year (Wall Street Journal)
  • Big firms fill funding gap (Wall Street Journal)
  • Court decision makes a mess of conflict-minerals rule (CFO)
  • Production Tax Credit is common-sense policy (The Hill)
  • States: Spike in tax fraud against doctors (Krebs on Security)
  • The misleading debate about the corporate income tax (Forbes)
  • Puerto Rico woos rich with hefty tax breaks (MarketWatch)
  • Taxpayers hit twice by fast-food pay practices: Report (The Fiscal Times)
  • James Franco’s ex-manager, accounting firm sued for diverting actor’s commissions (Variety)

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