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Audit Rates for Largest Corporations -- Wide Disparities Found for Different Industries

Banking, Credit and Insurance Corporations Get Far Less Scrutiny than Other Kinds of Businesses

Overall, While Controlling 90% of Corporate Assets and 87% of Corporate Incomes, Only About One Out of Three Large Corporations Were Audited

Syracuse, N.Y. — April 11 — When it comes to audits, large corporations providing the American people with investment advice, various kinds of banking and credit services and insurance are subject to a lot less IRS scrutiny than corporations in other businesses.

The sharply varied audit rates for the large corporations -- depending on the broad nature of their business activities -- are documented in three years of data obtained and analyzed by the Transactional Records Access Clearinghouse (TRAC).

Here are some highlights, all focusing on corporations with $250 million or more in assets:

    Less than one in five of the corporations categorized as providing financial service were audited during FY 2002, 2003 and 2004.

    When it came to big communications, technology and media corporations, more than three out of five were audited.

    For the retailing, food, pharmaceuticals and healthcare sector, four out of five large corporations were audited.

    But for the large corporations in either agriculture, mining and construction or in heavy manufacturing and transportation, the audit burden was even heavier, 100 percent.

Considered as a whole, for all the corporations with assets at or above $250 million, about one out of three were audited. However, while the corporations falling into this grouping are very few -- less than one percent of the corporate filings in the nation -- they controlled 90% of corporate assets and 87% of all corporate income.

The IRS data show that face-to-face audits for all corporations -- regardless of their size -- is far lower than for the big boys -- less than one out of a hundred. The data also show that such audits dropped by an additional 11% in the last year and that overall corporate rate of a decade ago was three times what it was last year.

While the audit rate for the corporations with $10 million or more in assets increased in the last year, the IRS now refuses to release previously-available data on the hours of audit. The absence of this data makes judging the intensity of the IRS corporate enforcement impossible.

Several other kinds of business enforcement activities by the IRS also have continued to slide, among them the following:

    Audit rates for the passthrough entities, partnerships and S-corporations dropped 30% in last year.

    Civil penalties and civil fraud filings against corporations, while always few in number, are today much lower than in the past. In FY 2004, civil tax fraud penalties were assessed against only 132 corporations. And negligence penalties were assessed against only 25 out of roughly 2.5 million corporations.

Also available is information about the changes in the audit rates for individual taxpayers, IRS collection activities, district-by-district data about the criminal enforcement actions of the IRS and agency staffing.

[For the latest comprehensive data about federal tax enforcement offered by the IRS go to http://trac.syr.edu/tracirs/. Until April 11, a password will be required. If you don't have a password or can't remember it call TRAC at 315-443-3563.]

(TRAC, associated with Syracuse University, is a non-partisan organization established in 1989 to provide the American people with comprehensive information about the operations of the federal government. Its operations have been supported by the university and a number of philanthropic organizations including the Knight Foundation, the Rockefeller Family Fund, the Open Society Institute, the Beldon Fund, and the New York Times Company Foundation.)

WWW: http://trac.syr.edu
E-mail: trac@syr.edu
Washington, D.C.: Suite 200, 1718 Connecticut Avenue, N.W., 20009
Tel. (202) 518-9020
Syracuse: 488 Newhouse II, Syracuse, NY 13244-2100
Tel. (315) 443-3563