Tax Debt: Some Combined Federal Campaign Charities Owe Payroll and Other Federal Taxes Page: 4 of 25
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are abusing the federal tax system; and (3) OPM screens charities for
federal tax problems before allowing them to be listed with the CFC.
As you know, to qualify as exempt from federal income taxes, an
organization must meet the requirements set forth in the Internal Revenue
Code3 and formally receive tax-exemption designation under 501(c)(3) to
participate in the CFC. Regardless of tax-exempt status, all employers are
required to withhold from their employees' wages payroll taxes for Social
Security and Medicare and other taxes. Willful failure to remit payroll
taxes is a felony under U.S. law.4
To determine whether and to what extent CFC 501(c)(3) charities had
unpaid payroll and other federal taxes, we obtained and analyzed IRS
unpaid tax debt data as of September 30, 2005. We matched organizations
with unpaid tax debts to the CFC's list of charities that participated in the
2005 campaign.5 To further analyze abuse of the federal tax system by
selected charities, their directors, or senior officers, we applied certain
criteria-the amount of outstanding tax debt, the number and age of
reporting periods for which taxes were due, and the type of outstanding
tax-to select 15 organizations for detailed audit and investigation. For
these 15 organizations, we reviewed tax records and performed additional
searches of criminal, financial, and other public records.
To determine whether OPM screens organizations for federal tax problems
before allowing them to be listed with the CFC, we identified the legal
criteria for doing so and gained an understanding of the screening process
through meetings with OPM's Office of CFC Operations and others
responsible for processing applications. To test OPM's process of
screening for legitimate charities, we created a fictitious charity and
applied to three large campaigns in various parts of the country. We also
matched the CFC's list of charities that participated in the 2005 campaign
against the list of all tax-exempt organizations identified by the IRS to
3 26 U.S.C. 501(c)(3).
4 26 U.S.C. 7202.
5 The campaign cycle for CFC consists of a 2-year reporting period, which marks the
beginning of a campaign and the end of a campaign. Most campaigns will begin operation
on or about March 15 of the first year of the campaign and end around March 14 2 years
later, depending on the final disbursement for the campaign. For example, March 15, 2005,
begins the fall 2005 campaign and March 14, 2007, marks the end of the fall 2005 campaign.
Typically, the annual campaign runs for a 6-week period from September 1 through
December 15. Actual dates may vary from one campaign to another.GAO-06-755T
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United States. Government Accountability Office. Tax Debt: Some Combined Federal Campaign Charities Owe Payroll and Other Federal Taxes, text, May 25, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc294529/m1/4/: accessed March 28, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.