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agency to determine eligibility. For instance, $404,578 in energy tax credits were approved for prison inmates and underage applicants.
Prisoners who were incarcerated for the entire year — and thus not likely to have bought and installed energy-saving equipment — received $343,487 in federal credits. In addition, 100 energy tax credit recipients in the audit turned out to be under 18, too young to execute legally binding contracts for renovations and unlikely to own a home. Nearly onethird of the underage credit recipients were younger than 14, and the youngest was just 3.
In a statement, J. Russell George, the Treasury’s inspector general for tax administration, said: “I am troubled by the IRS’ continued failure to develop appropriate verification methods for distributing Recovery Act credits.”
The energy tax credits were expanded under the 2009 economic stimulus law and are a key policy initiative of the Obama administration.
The IRS’ problems handling big housing-related tax credit programs are not limited to energy conservation. In a report last fall, the Treasury inspector general’s office found that the IRS had been unable to distinguish between applications for first-time home buyer tax credits for properties purchased during 2008 and those for 2009. The distinction between the two years is significant because buyers in 2008 were entitled only to a $7,500 credit that had to be repaid over 15 years. Buyers who sought credits during 2009, by contrast, could claim up to $8,000 and were not required to repay the money to the government.
The same investigation found that the IRS had approved hundreds of home-purchase tax credits from applicants who were using the Social Security numbers of dead people. Under the 2008 program, auditors identified 1,326 individuals who claimed more than $10 million in credits for home purchases that occurred after the claimant’s recorded date of death. More than 900 of the claimants had been dead for at least half a year.
The IRS denied 528 of the claims, auditors found, but it approved 798 others for credits. In its response to the earlier investigation, the IRS said it would audit the 798 questionable returns.
