Tax Policy

In response to a congressional request, GAO provided information on: (1) the number and characteristics of taxpayers using business energy investment tax credits; (2) the types of energy properties for which credits are being claimed; and (3) the administrative problems that the Internal Revenue Service has encountered.

GAO found that: (1) corporations with assets of $250 million or more claimed 83 percent of the estimated $401 million claimed in energy tax credits; (2) in about 70 percent of the cases where corporations with assets of less than $250 million claimed energy tax credits, the credit claimed was $5,000 or less; (3) the average tax credit large corporations claimed was $517,500; (4) large corporations accounted for 91 percent of the approximately $24 billion tax liability of the corporations sampled; (5) 91 percent of the estimated $4 billion that corporations invested in energy property was for alternative energy property, specially defined energy property, or recycling equipment; (6) revenue agents recommended disallowance of $81.4 million of the $97.3 million in tax credits claimed for tax years 1978 through 1982; (7) the majority of recommended disallowances involved noncorporate taxpayers and were based on revenue agents' determinations that the investments were abusive tax shelters; (8) the remaining disallowances generally involved questions of whether eligibility criteria were met; and (9) most of the recommended disallowances had not been agreed to by the taxpayers and are subject to change if successfully appealed.