Fed contracts, grants went to awardees owing nearly $1B in delinquent taxes: Treasury watchdog

The Golden Horseshoe is a weekly designation from Just The News intended to highlight egregious examples of wasteful taxpayer spending by the government. The award is named for the horseshoe-shaped toilet seats for military airplanes that cost the Pentagon a whopping $640 each back in the 1980s.

This week's Golden Horseshoe is awarded to an array of federal agencies for awarding billions in contracts and grants to organizations that owed nearly $1 billion in delinquent federal taxes, according to a new audit by the Treasury Inspector General for Tax Administration.

In a 14-month period, the federal government awarded 2.1 million contracts and grants worth over $30 billion to nearly 4,000 awardees which owed a combined $891 million in delinquent taxes.

"Between October 2018 and December 2019, the Federal Government awarded 2.1 million Federal contracts and grants to more than 83,000 awardees," the audit found. "Of these, 3,040 contractors received almost $10.2 billion in Federal contracts while owing $621.8 million in delinquent Federal taxes. In addition, 938 grantees received $22.7 billion in Federal grants while owing $269.2 million in delinquent Federal taxes."

The watchdog found that 45% of the 938 delinquent grantees were state, local and tribal agencies, municipal entities such as school districts or transit agencies, and colleges and universities.

Awardees are currently required to self-certify that they are not delinquent in taxes on the government site System for Award Management. But a sample of contractors found 93% inaccurately self-certified that they were not delinquent in tax payments.

The IRS was allocated $30 million by Congress to create an application called the Federal Contractor Tax Check System that would reveal if entities owed delinquent taxes. The agency set up a working group in October 2020 to implement the application and as of June 2022 has spent $8.54 million on design and implementation efforts.

"The IRS has designed a technical solution to build the FCTCS and plans a foundational release in November 2022 that automates the rules underlying the performance of a tax check for business taxpayers," the audit reports.

The IRS is "prohibited from disclosing taxpayer information for non-tax administration purposes, including other Federal agencies contracting activities and grant awards,"  IRS Chief Privacy Officer Robert Choi wrote in a memo to Deputy Inspector General Healther Hill. 

The IRS concurred with the inspector general's recommendation that the agency's deputy commissioner for operations support should "continue to prioritize the development of the FCTCS system" to determine entities that have seriously delinquent tax debt.