Your Money: Billions in Stimulus Funds Paid to Tax Delinquent Contractors

May 24, 2011 12:18pm

ABC News’ Devin Dwyer (@devindwyer) reports: The federal government awarded $24 billion in Recovery Act funds to contractors and vendors who owe millions in unpaid taxes, a new Government Accountability Office report has found. 

The nonpartisan watchdog agency reported Tuesday that at least 3,700 recipients owed more than $750 million combined in unpaid federal taxes as of Sept. 30, 2009.  They represent 5 percent of all recipients of the so-called stimulus funds. 

“For many years now, we’ve known that a small percentage of federal contractors and grantees who get paid with taxpayer dollars shirk their responsibility to pay their taxes,” said Democratic Sen. Carl Levin of Michigan. “Now the executive branch should get on with it and actually debar the worst of the tax cheats from the contractor workforce.”

Levin, who chairs the Senate Permanent Investigations Committee, plans to hold a hearing on the report this afternoon. 

“That such a huge amount of the stimulus money went to known tax cheats should be a wakeup call for Congress,” said Republican Sen. Tom Coburn of Oklahoma, the committee’s ranking member.   

The GAO said their report likely underestimates the total amount of unpaid taxes owed by stimulus recipients.  Federal law does not require government agencies to check the tax compliance of prospective grantees. 

The report singled out 15 cases of “abusive or potentially criminal activity” for further investigation by the IRS. 

One nonprofit health care organization reportedly owes $4 million in payroll taxes and has repeatedly submitted “dishonored checks” to the IRS to pay the bill.   An unnamed security company, which received over $100,000 in Recovery Act funds and still owes more than $9 million in taxes, reportedly paid debts to other creditors but not the IRS and has repeatedly violated federal labor laws. 

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