Applying Agreed-Upon Procedures
Fiscal Year 2010 Airport and Airway Trust Fund Excise Taxes Gao ID: GAO-11-120R November 4, 2010We have performed the procedures, which we agreed to perform and with which the Department of Transportation's Inspector General concurred, solely to assist the Inspector General's office in ascertaining whether the net excise tax revenue distributed to the Airport and Airway Trust Fund (AATF) for the fiscal year ended September 30, 2010, is supported by the underlying records. As agreed with the Inspector General's office, we evaluated fiscal year 2010 activity affecting excise tax distributions to the AATF. We conducted the engagement in accordance with U.S. generally accepted government auditing standards, which incorporate certain financial audit and attestation standards established by the American Institute of Certified Public Accountants. The Department of Transportation's Inspector General Office is responsible for the adequacy of these agreed-upon procedures to meet the office's objectives, and we make no representation in that respect. The procedures we agreed to perform were related to (1) transactions that represent the underlying basis of amounts distributed from the general fund to the AATF during fiscal year 2010, (2) the Internal Revenue Service's (IRS) quarterly AATF excise tax receipt certifications prepared during fiscal year 2010, (3) the U.S. Department of the Treasury's Financial Management Service adjustments to AATF excise tax distributions during fiscal year 2010, (4) the U.S. Department of the Treasury's Office of Tax Analysis's (OTA) estimates of excise tax amounts to be distributed to the AATF for the fourth quarter of fiscal year 2010, (5) adjustments to the AATF for tax on kerosene used in aviation during fiscal year 2010, and (6) the amount of net excise taxes distributed to the AATF during fiscal year 2010.
The total tax liability amount related to the 30 returns from the quarter ended June 30, 2009, was approximately $9.1 billion or 72 percent of the total recorded tax liability amount of $12.7 billion for all excise tax returns for the quarter. Of these 30 returns, 9 contained primarily AATF-related tax liabilities and 21 contained primarily HTF-related tax liabilities. The total tax liability amount related to the 30 returns from the quarter ended September 30, 2009, was approximately $9.2 billion or 71 percent of the total recorded tax liability amount of $12.9 billion for all excise tax returns for the quarter. Of these 30 returns, 9 contained primarily AATF-related tax liabilities and 21 contained primarily Highway Trust Fund (HTF)-related tax liabilities. Excise tax collections from IRS's master file materially agreed with IRS's Collection Certification System for the first two quarters of fiscal year 2010. The U.S. Department of the Treasury's Financial Management Service (FMS) adjustment amounts for all four quarters were mathematically correct. OTA prepared a tax rate table to capture information concerning tax rates, tax basis, accounts, and deposit rules in effect during the quarter. OTA used the rate table in preparing the five semimonthly estimates that affect fiscal year 2010 distributions to the AATF. Adjustments to the AATF for tax on kerosene used in aviation were made during fiscal year 2010 and were mathematically correct. Based on a compilation of IRS's quarterly certifications, OTA's estimations, and adjustments, the amount of net excise taxes that should have been distributed to the AATF in fiscal year 2010 was $10,612,953,000.
GAO-11-120R, Applying Agreed-Upon Procedures: Fiscal Year 2010 Airport and Airway Trust Fund Excise Taxes
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November 4, 2010:
The Honorable Calvin L. Scovel III:
Inspector General:
U.S. Department of Transportation:
Subject: Applying Agreed-Upon Procedures: Fiscal Year 2010 Airport and
Airway Trust Fund Excise Taxes:
Dear Mr. Scovel:
We have performed the procedures described in the enclosure to this
letter, which we agreed to perform and with which you concurred, solely
to assist your office in ascertaining whether the net excise tax
revenue distributed to the Airport and Airway Trust Fund (AATF) for the
fiscal year ended September 30, 2010, is supported by the underlying
records. As agreed with your office, we evaluated fiscal year 2010
activity affecting excise tax distributions to the AATF.
We conducted the engagement in accordance with U.S. generally accepted
government auditing standards, which incorporate certain financial
audit and attestation standards established by the American Institute
of Certified Public Accountants.
You are responsible for the adequacy of these agreed-upon procedures to
meet your objectives, and we make no representation in that respect.
The procedures we agreed to perform were related to (1) transactions
that represent the underlying basis of amounts distributed from the
general fund to the AATF during fiscal year 2010, (2) the Internal
Revenue Service's (IRS) quarterly AATF excise tax receipt
certifications prepared during fiscal year 2010, (3) the U.S.
Department of the Treasury's Financial Management Service adjustments
to AATF excise tax distributions during fiscal year 2010, (4) the U.S.
Department of the Treasury's Office of Tax Analysis's (OTA) estimates
of excise tax amounts to be distributed to the AATF for the fourth
quarter of fiscal year 2010, (5) adjustments to the AATF for tax on
kerosene used in aviation during fiscal year 2010, and (6) the amount
of net excise taxes distributed to the AATF during fiscal year 2010.
The enclosure provides more detail on the agreed-upon procedures and
our results.
We were not engaged to perform, and did not perform, an examination,
the objective of which would have been to express an opinion on the
amount of net excise taxes distributed to the AATF during fiscal year
2010. Accordingly, we do not express such an opinion. Had we performed
additional procedures, other matters might have come to our attention
that we would have reported to you. We completed the agreed-upon
procedures on October 27, 2010.
We provided a draft of this letter, along with the enclosure, to IRS
and OTA officials for review and comment. IRS agreed with the results
and findings presented in the enclosure. OTA agreed with the results
and findings presented in the enclosure relating to its
responsibilities, that is, the procedures performed in the estimation
process for the quarter ended September 30, 2010.
This report is intended solely for the use of the Office of Inspector
General of the U.S. Department of Transportation and should not be used
by those who have not agreed to the procedures or have not taken
responsibility for the sufficiency of the procedures for their
purposes. However, the report is a matter of public record, and its
distribution is not limited. The report is available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If you have any questions concerning this report, please contact me at
(202) 512-3406 or sebastians@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report.
Sincerely yours,
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
Enclosure:
Airport and Airway Trust Fund Excise Tax Procedures and Results:
I. Procedures on Transactions That Represent the Underlying Basis of
Amounts Distributed to the Airport and Airway Trust Fund (AATF) in
Fiscal Year 2010:
A. Nonstatistical selection of tax returns from the quarters ending
June 30, 2009,[Footnote 1] and September 30, 2009[Footnote 2]
1. For each of the quarters ending June 30, 2009, and September 30,
2009, select the 30 largest excise tax returns containing excise taxes
related primarily to the AATF and the Highway Trust Fund (HTF) on the
basis of total tax liability amount[Footnote 3] from the Internal
Revenue Service's (IRS) master file.[Footnote 4]
Description of Findings and Results:
We selected the 30 largest excise tax returns related primarily to the
AATF and the HTF from each of the two quarters for testing. The
selection was based on the total tax liability amount and type of taxes
owed for each return from IRS's master file.
The total tax liability amount related to the 30 returns from the
quarter ended June 30, 2009, was approximately $9.1 billion or 72
percent of the total recorded tax liability amount of $12.7 billion for
all excise tax returns for the quarter. Of these 30 returns, 9
contained primarily AATF-related tax liabilities and 21 contained
primarily HTF-related tax liabilities.
The total tax liability amount related to the 30 returns from the
quarter ended September 30, 2009, was approximately $9.2 billion or 71
percent of the total recorded tax liability amount of $12.9 billion for
all excise tax returns for the quarter. Of these 30 returns, 9
contained primarily AATF-related tax liabilities and 21 contained
primarily HTF-related tax liabilities. Of the 60 returns selected from
these two quarters, 18 contained primarily AATF-related tax
liabilities, and 42 contained primarily HTF-related tax liabilities.
2. For each of the returns related primarily to the AATF, perform the
following procedures:
(a) Compare the assessment amounts for tax on transportation of persons
by air, tax on use of international air travel facilities, and tax on
transportation of property by air, abstracts[Footnote 5] 26, 27, and 28
respectively, from the tax return to IRS's master file for agreement.
Description of Findings and Results:
The assessment amount for tax on transportation of persons by air, tax
on the use of international air travel facilities, and tax on
transportation of property by air, abstracts 26, 27, and 28
respectively on the tax return, agreed with the master file for all 18
returns containing primarily AATF-related tax liabilities.
(b) Calculate the assessment amounts on the tax return for the selected
abstracts to determine whether they are mathematically correct.
Description of Findings and Results:
The taxpayers' calculations for the selected abstracts were
mathematically correct on all 18 returns containing primarily AATF-
related tax liabilities.
(c) Calculate the prorated collection amount[Footnote 6] for the
selected abstracts based on information from IRS's master file and
compare this amount to the amount in IRS's Collection Certification
System audit files[Footnote 7] for agreement.
Description of Findings and Results:
The independently calculated prorated collection amounts for the
selected abstracts agreed with amounts in IRS's Collection
Certification System audit files for all 18 returns containing
primarily AATF-related tax liabilities.
B. Statistical selection of attribute and monetary unit samples (MUS)
from the quarters ended December 31, 2009, and March 31, 2010:
1. Sampling and other procedures:
(a) Compare excise tax collections from IRS's master file with excise
tax collections from IRS's Collection Certification System audit files
for the first two quarters of fiscal year 2010 to determine if they
materially agree.[Footnote 8]
Description of Findings and Results:
Excise tax collections from IRS's master file materially agreed with
IRS's Collection Certification System for the first two quarters of
fiscal year 2010.
(b) Compare excise tax collections from IRS's master file with excise
tax collections from IRS's general ledger for the first 9 months of
fiscal year 2010 to determine if they materially agree.[Footnote 9]
Description of Findings and Results:
Excise tax collections from IRS's master file materially agreed with
IRS's general ledger for the first 9 months of fiscal year 2010.
(c) Select a random attribute sample of 78 excise tax returns from
IRS's master file.[Footnote 10] Compare assessment and receipt
information for each return from IRS's master file to IRS's Collection
Certification System for agreement.
Description of Findings and Results:
For all 78 returns, assessment and receipt information from IRS's
master file agreed with the information in IRS's Collection
Certification System.
(d) Sum the prorated collections for selected abstracts[Footnote 11]
from IRS's Collection Certification System audit files and compare
these amounts to amounts in the Report of Excise Tax
Collection[Footnote 12] to determine if the Collection Certification
System properly summarized the prorated collections.
Description of Findings and Results:
The Collection Certification System properly summarized the prorated
collections for all of the selected abstracts. Prorated collections
from the audit files for the selected abstracts agreed with the
corresponding amounts in the Report of Excise Tax Collection.
(e) Separate the total population of prorated collections from IRS's
Collection Certification System audit files into the following distinct
populations: (1) AATF, (2) HTF, and (3) other excise tax abstracts. Use
MUS to select a sample of prorated excise tax collections from the AATF
population using a confidence level of 80 percent, a tolerable
misstatement of $106 million, and an expected aggregate error amount of
$32 million.[Footnote 13]
Description of Findings and Results:
Use of MUS with a confidence level of 80 percent, a tolerable
misstatement of $106 million, and an expected aggregate error amount of
$32 million resulted in a sample of 66[Footnote 14] prorated
collections for the AATF for the first two quarters of fiscal year
2010.
(f) Select samples of prorated excise tax collections from the two non-
AATF populations. Use MUS to select a sample of prorated excise tax
collections from the HTF population using a confidence level of 80
percent, a tolerable misstatement of $349 million, and an expected
aggregate error amount of $105 million.[Footnote 15] Select a random
attribute sample of 45 items from the population of prorated tax
collections related to all excise taxes other than the AATF and the
HTF.[Footnote 16]
Description of Findings and Results:
Use of MUS with a confidence level of 80 percent, a tolerable
misstatement of $349 million, and an expected aggregate error amount of
$105 million resulted in a sample of 94[Footnote 17] prorated
collections for the HTF for the first two quarters of fiscal year 2010.
A random attribute sample of 45 items was selected from the population
of prorated tax collections related to all excise taxes other than the
AATF and the HTF.
2. Procedures on transactions:
For each prorated excise tax collection sampled from the AATF
population:
* Compare the assessment amount for the sampled item from the tax
return to IRS's master file for agreement.
Description of Findings and Results:
The assessment amount on the tax return agreed with the assessment
amount recorded in IRS's master file for each of the 66 sampled items.
* Calculate the assessment amount on the tax return for the sampled
item to determine whether it is mathematically correct.
Description of Findings and Results:
The assessment amount on the tax return was mathematically correct for
each of the 66 sampled items.
* Calculate the prorated collection amount for the sampled item based
on information from IRS's master file and compare this amount to the
amount in IRS's Collection Certification System audit files for
agreement.
Description of Findings and Results:
The independently calculated prorated collection amount agreed with the
amount in IRS's Collection Certification System audit files for each of
the 66 sampled items.
(b) Inspect the tax returns and master file information for the two
samples of prorated collections from the non-AATF populations to
determine if they contain any AATF excise tax collections.
Description of Findings and Results:
The two samples of prorated collections from the non-AATF populations
did not contain any AATF excise tax collections.
(c) Evaluate the results of conducting steps (a) and (b).
Description of Findings and Results:
For the first two quarters of fiscal year 2010, the net most likely
error was $0 with an upper error limit of $61 million at the 80 percent
confidence level.
II. Procedures on IRS's Quarterly AATF Excise Tax Receipt
Certifications:
Perform the following procedures on IRS's AATF excise tax receipt
certifications for the quarters ended September 30, 2009, December 31,
2009, March 31, 2010, and June 30, 2010:
A. Inspect the certification letters for authorizing signatures.
Description of Findings and Results:
The certification letters for all four quarters had authorizing
signatures.
B. Inspect the certification letters and supporting worksheets to
determine if evidence exists that they were reviewed by the supervisor
or another analyst.
Description of Findings and Results:
There was evidence that the supervisor or another analyst reviewed the
certification letters and supporting worksheets for all four quarters.
C. Calculate the totals on the certification letters to determine if
they are mathematically correct.
Description of Findings and Results:
The totals on the certification letters for all four quarters were
mathematically correct.
D. Trace the certified amounts for tax on transportation of persons by
air (abstract 26), tax on the use of international air travel
facilities (abstract 27), tax on transportation of property by air
(abstract 28), and tax on kerosene for use in commercial aviation
(abstract 77)[Footnote 18] from the certification letters back to the
Report of Excise Tax Collection[Footnote 19] and the Treasury 90
Report[Footnote 20] for agreement.
Description of Findings and Results:
The certified amounts for tax on transportation of persons by air
(abstract 26), tax on the use of international air travel facilities
(abstract 27), tax on transportation of property by air (abstract 28),
and tax on kerosene for use in commercial aviation (abstract 77) from
the certification letters agreed with the related Report of Excise Tax
Collection and the Treasury 90 Report for all four quarters.
E. Compare the distribution rates used by IRS for tax on transportation
of persons by air (abstract 26), tax on the use of international air
travel facilities (abstract 27), tax on transportation of property by
air (abstract 28), and tax on kerosene for use in commercial aviation
(abstract 77) for agreement with the applicable laws.
Description of Findings and Results:
The distribution rates used by IRS for tax on transportation of persons
by air (abstract 26), tax on the use of international air travel
facilities (abstract 27), tax on transportation of property by air
(abstract 28), and tax on kerosene for use in commercial aviation
(abstract 77) agreed with the applicable laws in effect during all four
quarters.
F. Inspect the Report of Excise Tax Collection used in the
certification to determine if it contains significant[Footnote 21]
collections from prior quarters.
Description of Findings and Results:
The Report of Excise Tax Collection used in the certification for all
four quarters did not contain significant collections from prior
quarters.
G. For the quarter ended June 30, 2010, only, inquire with IRS whether
any excise tax returns from its list of the largest excise taxpayers
were omitted from the certification.[Footnote 22] For any such returns
that were omitted but were subsequently received by IRS, report the
total amount of AATF-related tax collections from these tax returns.
For any such returns that were omitted and where IRS has not yet
received these, report the average amount of AATF-related tax
collections from the taxpayer(s) based on the previous four quarters.
Description of Findings and Results:
According to IRS, no tax returns from its list of the largest excise
taxpayers were omitted from its certification for the quarter ended
June 30, 2010.
III. Procedures on Financial Management Service Adjustments:
Perform the following procedures on the Financial Management Service
(FMS) adjustments to AATF excise tax distributions for the quarters
ended:
September 30, 2009, December 31, 2009, March 31, 2010, and June 30,
2010:
A. Calculate the FMS adjustment amounts based on the Office of Tax
Analysis (OTA) transfer forms[Footnote 23] and IRS certification
letters to determine if they are mathematically correct.
Description of Findings and Results:
The FMS adjustment amounts for all four quarters were mathematically
correct. These amounts were[Footnote 24]
* ($68,270,000) for the quarter ended September 30, 2009;
* ($147,428,000) for the quarter ended December 31, 2009;
* $53,720,000 for the quarter ended March 31, 2010; and:
* $211,151,000 for the quarter ended June 30, 2010.
IV: Procedures on Excise Tax Distributions to the AATF for the Quarter
Ended September 30, 2010:
A. Determine if OTA prepares a tax rate table to capture information
concerning tax rates, tax basis, accounts, and deposit rules in effect
during the quarter ended September 30, 2010, and whether OTA uses this
rate table in its trust fund estimates[Footnote 25] for the quarter.
Description of Findings and Results:
OTA prepared a tax rate table to capture information concerning tax
rates, tax basis, accounts, and deposit rules in effect during the
quarter. OTA used the rate table in preparing the five semimonthly
estimates that affect fiscal year 2010 distributions to the AATF.
B. Inspect the transfer forms and supporting schedules to determine if
there is evidence of review.
Description of Findings and Results:
There was evidence that another OTA economist reviewed the transfer
forms and supporting schedules affecting distributions from the general
fund to the AATF for the quarter ended September 30, 2010.
C. Calculate the totals on the transfer forms to determine if they are
mathematically correct.
Description of Findings and Results:
The totals on the transfer forms affecting distributions to the AATF
for the quarter ended September 30, 2010, were mathematically correct.
D. Trace the transfer amounts for tax on transportation of persons by
air (abstract 26), tax on the use of international air travel
facilities (abstract 27), tax on transportation of property by air
(abstract 28), and tax on kerosene for use in commercial aviation
(abstract 77)[Footnote 26] from the transfer forms back to the related
source documents[Footnote 27] for agreement.
Description of Findings and Results:
The transfer amounts for tax on transportation of persons by air
(abstract 26), tax on the use of international air travel facilities
(abstract 27), tax on transportation of property by air (abstract 28),
and tax on kerosene for use in commercial aviation (abstract 77) from
the transfer forms agreed with the related source documents for the
quarter ended September 30, 2010.
V. Other Procedures:
A. Determine if IRS and OTA made adjustments to the AATF for tax on
kerosene used in aviation during fiscal year 2010, and calculate the
adjustment amounts to determine if they were mathematically
correct.[Footnote 28]
Description of Findings and Results:
Adjustments to the AATF for tax on kerosene used in aviation were made
during fiscal year 2010 and were mathematically correct. These amounts
were[Footnote 29]
* $98,700,000 for the quarter ended September 30, 2009;
* $43,210,000 for the quarter ended December 31, 2009;
* $46,099,000 for the quarter ended March 31, 2010;
* $39,764,000 for the quarter ended June 30, 2010; and:
* $86,866,000 for the quarter ended September 30, 2010.
B. Using IRS's quarterly certifications, OTA's estimated distributions,
and any adjustments, compile and report the amount of net excise taxes
distributed to the AATF in fiscal year 2010.
Description of Findings and Results:
Based on a compilation of IRS's quarterly certifications, OTA's
estimations, and adjustments, the amount of net excise taxes that
should have been distributed to the AATF in fiscal year 2010 was
$10,612,953,000.
(196215):
[End of section]
Footnotes:
[1] In October 2009, the Internal Revenue Service (IRS) completed its
certification of excise tax distributions to the AATF for the quarter
ended June 30, 2009, and the U.S. Department of the Treasury's
Financial Management Service (FMS) recorded the corresponding
adjustment to transfer funds between the general fund and the trust
fund. Administrators of the Federal Aviation Administration (FAA)
recorded the adjustment amount on FAA's financial statements, which
include AATF data, for fiscal year 2009.
[2] The IRS certification of excise tax distributions and corresponding
FMS adjustment for the quarter ended September 30, 2009, were completed
in February 2010, and thus affected distributions to the AATF during
fiscal year 2010.
[3] Although the certifications are based on amounts collected, we used
the tax liability amounts to identify the taxpayers paying the largest
amounts of excise taxes. These taxpayers generally pay their excise
taxes in full each quarter.
[4] The master file is a detailed database containing taxpayer
information.
[5] The abstract numbers identify the tax type (e.g., gasoline and
ticket tax) and are used as the basis for determining the distribution
of the excise taxes to the various trust funds. Abstract numbers are
preprinted on the Form 720, Quarterly Federal Excise Tax Return, and
are used by the taxpayer to report excise tax assessments. If the
return was related to the AATF, we selected (1) tax on transportation
of persons by air (abstract 26), (2) tax on the use of international
air travel facilities (abstract 27), and (3) tax on transportation of
property by air (abstract 28). If the return was related to the HTF, we
selected (1) diesel fuel tax (abstract 60) and (2) gasoline tax
(abstract 62). The tax amounts related to the selected abstracts for
each trust fund are the largest tax amounts reported on the taxpayer's
excise tax return and made up over 92 percent of the total amount
certified to the AATF and over 87 percent of the total amount certified
to the HTF for each of the quarters ended June 30, 2009, and September
30, 2009, respectively.
[6] These procedures encompassed approximately $3.8 billion in prorated
collections affecting distributions to the AATF. IRS certifies to trust
funds the amount of excise taxes collected. Because taxpayers have
sometimes not fully paid their tax liability, IRS must allocate the
amount of payments actually received among the different excise taxes
reported on the taxpayers' returns. IRS's Collection Certification
System prorates a taxpayer's payments proportionately among all taxes
reported as owed on the tax return. For example, if a corporation
reports that it owes $4 million for gasoline tax, $2 million for diesel
fuel tax, and $1 million for kerosene tax on its Form 720, Quarterly
Federal Excise Tax Return, but has paid IRS only $3.5 million at the
time IRS performs its certification, the program prorates the $3.5
million in the following manner: $2 million to gasoline tax, $1 million
to diesel fuel tax, and $500,000 to kerosene tax.
[7] The Collection Certification System produces what IRS refers to as
audit files. These audit files contain the individual prorated
collections by abstract and taxpayer identification number. The
certified amounts to the trust funds are calculated by subtracting
credits from prorated collections and then multiplying the difference
by the applicable trust fund distribution rates.
[8] For the purpose of this procedure, "material" is defined as 1
percent of the excise tax collections for the quarters ended December
31, 2009, and March 31, 2010.
[9] This is a reconciliation of all excise tax collections that posted
to the master file and general ledger during the first 9 months of
fiscal year 2010 and is not limited to the first two quarters. For the
purpose of this procedure, "material" is defined as 1 percent of the
excise tax collections for the first 9 months of fiscal year 2010.
[10] For this sample, if one or no errors were found in our comparison
of the 78 items, we would be 90 percent confident that the error rate
in the population would not exceed 5 percent.
[11] The selected abstracts are (1) tax on transportation of persons by
air (abstract 26), (2) tax on the use of international air travel
facilities (abstract 27), (3) tax on transportation of property by air
(abstract 28), (4) tax on kerosene for use in commercial aviation
(abstract 77), (5) diesel fuel tax (abstract 60), and (6) gasoline tax
(abstract 62). The tax amounts for the four AATF-related abstracts made
up over 97 percent of the total amount certified to the AATF, and the
tax amounts for the two HTF-related abstracts made up over 92 percent
of the total amount certified to the HTF for the quarters ended
December 31, 2009, and March 31, 2010.
[12] The Report of Excise Tax Collection contains prorated collections,
classified by abstracts, that serve as the basis for IRS's quarterly
trust fund certifications.
[13] The $106 million tolerable misstatement represents approximately 1
percent of the net excise tax revenue distributed to the AATF in fiscal
year 2009. The expected aggregate error amount of $32 million
represents approximately 30 percent of the tolerable misstatement
amount.
[14] The planned sample size using MUS was 133 items. MUS selects
dollars versus specific transaction items by dividing the population of
prorated excise tax collections by dollar intervals. The dollar
interval for AATF was $38 million. Accordingly, any item with a dollar
value equal to or exceeding the interval would be selected, whereas
items less than the interval might not be selected. For example, an
item of $78 million would cover two dollar intervals, but represent one
sample item. Because large-dollar items cover more than one interval,
the 66 unique sampled transactions selected represented 133 dollar
intervals.
[15] The $349 million tolerable misstatement represents approximately 1
percent of the net excise tax revenue distributed to the HTF in fiscal
year 2009. The expected aggregate error amount of $105 million
represents approximately 30 percent of the tolerable misstatement
amount.
[16] For this sample, if no errors were found in performing procedures
on the 45 items, we would be 90 percent confident that the error rate
in the population would not exceed 5 percent.
[17] The planned sample size using MUS was 142 items. As explained in
footnote 14, MUS selects dollars instead of specific transaction items
by dividing the population of prorated excise tax collections by dollar
intervals. The dollar interval for HTF was $127 million. Because large-
dollar items cover more than one interval, the 94 unique sampled
transactions selected represented 142 dollar intervals.
[18] The certified amounts for tax on transportation of persons by air
(abstract 26), tax on the use of international air travel facilities
(abstract 27), tax on transportation of property by air (abstract 28),
and tax on kerosene for use in commercial aviation (abstract 77) made
up over 96 percent of the total amount of excise tax receipts certified
by IRS to the AATF for each quarter in fiscal year 2010.
[19] The Report of Excise Tax Collection is produced by the Collection
Certification System. Collections are classified by abstract on the
report when the related Form 720 tax return has been posted to IRS's
master file during the processing interval covered by the report. IRS
uses data from three of these reports, covering sequential processing
intervals, for each quarterly certification. The three reports used may
contain collections related to prior quarters that IRS certifies as
part of the current quarter's collections because the related return
was not posted to the master file until the processing intervals
covered by these reports.
[20] The Treasury 90 Report summarizes excise tax credit information
and is produced quarterly by IRS service center campus systems. IRS has
six service center campuses that receive and process tax returns and
payments.
[21] For this procedure, "significant" is defined as $55 million. This
represents approximately 2 percent of the total amount of excise tax
receipts IRS certified to the AATF for each quarter of fiscal year
2010.
[22] IRS maintains a listing of approximately 150 taxpayers that
comprise its largest excise taxpayers. To help ensure that tax return
data for the largest excise taxpayers are included in each quarterly
excise tax certification, IRS tracks the receipt of these returns and
contacts these taxpayers when necessary.
[23] The transfer forms denote the amounts estimated by OTA for
transferring excise taxes to the trust funds.
[24] A positive amount indicates that the FMS adjustment increased
excise taxes distributed to the trust fund. A negative amount, shown in
parentheses, indicates that the FMS adjustment decreased excise taxes
distributed to the trust fund.
[25] OTA makes semimonthly estimates of excise tax collections for
transfer to trust funds. There are five semimonthly estimates for the
quarter ended September 30, 2010, which affect fiscal year 2010
distributions to the AATF.
[26] The OTA estimated transfer amounts for tax on transportation of
persons by air (abstract 26), tax on the use of international air
travel facilities (abstract 27), tax on transportation of property by
air (abstract 28), and tax on kerosene for use in commercial aviation
(abstract 77) made up over 96 percent of the total amount transferred
to the AATF for the fourth quarter of fiscal year 2010.
[27] The source documents include the IRS report of excise taxes used
to derive the percentages applied to reported receipts, the Daily
Treasury Statement, the Monthly Treasury Statement, and the excise tax
rate table.
[28] Section 11161 of Pub. L. No. 109-59 (Aug. 10, 2005), Treatment of
Kerosene for Use in Aviation, taxes all kerosene taxpayers at the
standard kerosene rate, unless a taxpayer had removed the kerosene from
a refinery or terminal directly into an aircraft's fuel tank and thus
qualified for the lower aviation kerosene tax rate. Amounts received
under the standard kerosene tax are initially deposited in the HTF. If
a taxpayer subsequently used the kerosene in aviation, the taxpayer is
eligible for the lower tax rate associated with aviation kerosene and
can request a refund. The amount of the kerosene tax collected from the
taxpayer, net of refunds, is transferred from the HTF to the AATF.
[29] The adjustments for the quarters ended September 30, 2009;
December 31, 2009; March 31, 2010; and June 30, 2010, were included in
the IRS receipt certifications, and the adjustment for the quarter
ended September 30, 2010, was included in the OTA estimates. The
adjustment amounts represent excise taxes transferred to the AATF from
the HTF.
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