Congresswoman Rosa DeLauro’s legislative effort to beef up investigations into corporate tax fraud failed in the House of Representatives earlier this month, but she said she plans to continue advocating for similar legislation when it goes before the Senate.
DeLauro cosponsored an amendment that would divert $75 million of the $100 million dollars from a proposed IRS precertification program affecting low income families to investigating tax fraud at the corporate level. Although all of the Democrats voted in favor of the legislation, DeLauro said the Republican majority prevented it from passing.
The IRS precertification program would change the process of applying for and receiving the Earned Income Tax Credit, or EITC. The EITC is a tax rebate aimed at low-income families. Currently, those who believe themselves eligible to receive EITC aid file for it on their tax returns and the aid is sent back to them.
The proposed IRS $100 million precertification program requires that applying families prove they are qualified for the aid before filing their taxes; otherwise, their EITC funding would be delayed indefinitely.
The Cooper-DeLauro-Kilpatrick Amendment would redirect $75 million of the $100 million the IRS has proposed be put into the IRS program. The $75 million would be used instead on supplemental audits in the detection of corporate fraud. Leslie Sillaman, a spokeswoman in DeLauro’s Washington office, said business underreporting is a more pressing issue.
“The government loses $6.5 billion dollars in tax revenue each year from corporations underreporting,” Sillaman said. “The IRS estimated that an additional $180 million dollars would be needed to fully review corporate America.”
Sillaman also noted that EITC noncompliance comprises less than 3 percent of America’s uncollected taxes each year.
In addition to attacking the necessity of the EITC precertification program, DeLauro also questioned the validity of the program’s premise. She said the IRS program would create a divide that would establish a dual set of standards for tax-paying Americans based on income, since other write-offs do not require precertification.
“If they’re going to go after fraud, they ought to be even-handed about it,” DeLauro said. “Those in support of the program seem to believe we should go after low-wage workers while overseas companies go scot-free.”
Although DeLauro conceded that the amendment would not solve the basic inequity of requiring some to go through precertification, she said she thought it was a move in the right direction.
On the other hand, David Migani, a certified public accountant at Beers, Hamerman and Company in New Haven, said he thought requiring low-income families to precertify before receiving EITC aid was fair given the nature of the program.
“Unlike people claiming self-reported deductions, EITC recipients get income credit even if they pay no taxes,” he said. “They’re getting something they don’t have to work for, and maybe they should be subject to some kind of precertification process.”
Migani agreed, however, that it would be difficult to perpetuate fraud in the EITC program because the government tracks income.
The IRS would not comment on its plans or position on the issue.