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The IRS has illegally given 57 contracts to 17 companies that owed back taxes or had a felony conviction in 2012 and 2013, according to a newly released report from the Treasury Inspector General for Tax Administration (TIGTA).

According to the report, the IRS does not have effective controls in place to ensure they did not award contracts to corporations that had federal tax debt or a felony conviction. As the report finds:

“the IRS was not in compliance with Department of the Treasury implementing guidance which required COs to obtain a self-certification from corporations as to whether they have certain Federal tax debt and/or felony convictions prior to awarding contracts with FYs 2012 and 2013 appropriated funds.”

This has occurred because the IRS has failed to establish a definition of “federal tax debt” and does not perform any reviews to determine whether contractors are in compliance. As a result, TIGTA’s review identified ZERO contracts that contained the required contract clause and certification guidelines. TIGTA estimates at least 94 percent of contracts are awarded without adhering to this law. As the report states:

“Our review identified zero contracts in which the CO inserted the required contract clause and obtained the required representation and certification prior to contract award. This resulted in a 94 percent error rate….We are 95 percent confident that between 3,738 and 3,970 new contracts (from a population of 3,970) awarded to corporations during our audit period were done so without inserting the required contract clause and obtaining required representation and certification prior to award.”

As a result, TIGTA identified 17 corporations that received 57 contracts valued at $18.8 million despite having outstanding tax debt or a felony conviction.

In its response to TIGTA, the IRS asserted that it was “appropriate” to award these contracts to the companies, despite being prohibited by federal law from using funds in this manner.