**GAO-07-1090T**                      Published: Jul 24, 2007. Publicly Released: Jul 24, 2007.                  

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## Highlights

As of September 2006, nearly 1.8 million entities were recognized as tax exempt organizations by the Internal Revenue Service (IRS). As such, they do not have to pay federal income taxes. Exempt organizations are still required to remit amounts withheld from employees' wages for federal income tax, Social Security and Medicare, as well as other taxes. Previous GAO work identified numerous government contractors, Medicare providers, and charities participating in the Combined Federal Campaign (CFC) with billions in unpaid federal taxes. Today's testimony, based on a report that we are releasing today, summarizes the results of work we performed at the request of Representative Ramstad, Ranking Member of the Subcomitte on Oversight, Committee on Ways and Means, to audit exempt organizations. Specifically, this testimony covers whether and to what extent (1) exempt organizations have unpaid federal taxes, including payroll taxes; (2) selected case study organizations and their executives are involved in abusive or potentially criminal activity; and (3) exempt organizations with unpaid federal taxes received direct grants from certain federal agencies. GAO reviewed unpaid taxes and exempt organization data from IRS and selected 25 case studies for audit and investigation. GAO also reviewed data from 3 major grant disbursement systems.

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## Topics

Tax Policy and Administration

Criminal activitiesDebtDelinquent taxesFederal grantsFederal taxesPayroll deductionsTax administrationTax evasionTax exempt organizationsTax exempt statusTax nonpaymentTax return auditsVoluntary compliancePayroll taxesWaste, fraud, and abuse