Applying Agreed-Upon Procedures
Fiscal Year 2009 Highway Trust Fund Excise Taxes Gao ID: GAO-10-93R November 5, 2009The Government Accountability Office (GAO) has performed the procedures to which we agreed upon to perform and with which you concurred, solely to assist your office in ascertaining whether the net excise tax revenue distributed to the Highway Trust Fund (HTF) for the fiscal year ended September 30, 2009, is supported by the underlying records. GAO evaluated fiscal year 2009 activity affecting excise tax distributions to the HTF. GAO 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 (AICPA).
Based on a compilation of Internal Revenue Service's (IRS) quarterly certifications, Department of the Treasury's Office of Tax Analysis's (OTA) estimations, and adjustments, the amount of net excise taxes distributed to the Highway Trust Fund (HTF) in fiscal year 2009 was $34,943,799,000.
GAO-10-93R, Applying Agreed-Upon Procedures: Fiscal Year 2009 Highway Trust Fund Excise Taxes
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GAO-10-93R:
United States Government Accountability Office:
Washington, DC 20548:
November 5, 2009:
The Honorable Calvin L. Scovel III:
Inspector General:
Department of Transportation:
Subject: Applying Agreed-Upon Procedures: Fiscal Year 2009 Highway
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 Highway Trust Fund (HTF) for the fiscal year
ended September 30, 2009, is supported by the underlying records. As
agreed with your office, we evaluated fiscal year 2009 activity
affecting excise tax distributions to the HTF.
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 HTF during fiscal year 2009, (2) the Internal
Revenue Service's (IRS) quarterly HTF receipt certifications during
fiscal year 2009, (3) the Department of the Treasury's Financial
Management Service adjustments to HTF excise tax distributions during
fiscal year 2009, (4) the Department of the Treasury's Office of Tax
Analysis's (OTA) process for estimating excise tax amounts to be
distributed to the HTF for the fourth quarter of fiscal year 2009, (5)
adjustments to the HTF for tax on kerosene used in aviation during
fiscal year 2009, and (6) the amount of net excise taxes distributed to
the HTF during fiscal year 2009. 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 HTF during fiscal year
2009. 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 28, 2009.
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, 2009.
This report is intended solely for the use of the Office of Inspector
General of the 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:
[End of section]
Enclosure: Highway Trust Fund Excise Tax Procedures and Results:
I. Procedures on Transactions That Represent the Underlying Basis of
Amounts Distributed to the Highway Trust Fund (HTF) in Fiscal Year
2009:
A. Nonstatistical selection of tax returns from the quarters ended June
30, 2008,[Footnote 1] and September 30, 2008[Footnote 2]
1. For each of the quarters ending June 30, 2008, and September 30,
2008, select the 30 largest excise tax returns containing excise taxes
related primarily to the HTF and the Airport and Airway Trust Fund
(AATF) 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
HTF and the AATF 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, 2008, was approximately $9.5 billion or 69
percent of the total recorded tax liability amount of $13.7 billion for
all excise tax returns for the quarter. Of these 30 returns, 20
contained primarily HTF-related tax liabilities and 10 contained
primarily AATF-related tax liabilities.
The total tax liability amount related to the 30 returns from the
quarter ended September 30, 2008, was approximately $9.2 billion or 69
percent of the total recorded tax liability amount of $13.4 billion for
all excise tax returns for the quarter. Of these 30 returns, 20
contained primarily HTF-related tax liabilities and 10 contained
primarily AATF-related tax liabilities.
2. For each of the 40 returns related primarily to the HTF from the
quarters ended June 30, 2008, and September 30, 2008, perform the
following procedures:[Footnote 5]
(a) Compare the assessment amounts for abstracts[Footnote 6] 60 and 62
from the tax return to IRS's master file for agreement.
Description of Findings and Results:
The assessment amounts for abstracts 60 and 62 on the tax return agreed
with the master file for all 40 returns.
(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 assessment amounts for the selected abstracts were mathematically
correct on all 40 returns.
(c) Calculate the prorated collection amount for the selected abstracts
based on information from the master file and compare this amount to
the amount in the 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 the Collection Certification
System audit files for all 40 returns.
B. Statistical selection of attribute and monetary unit samples (MUS)
from the quarters ended December 31, 2008, and March 31, 2009:
1. Sampling and other procedures:
(a) Compare excise tax collections from the master file with excise tax
collections from the Collection Certification System audit files for
the first two quarters of fiscal year 2009 to determine if they
materially agree.[Footnote 8]
Description of Findings and Results:
Excise tax collections from the master file materially agreed with the
Collection Certification System for the first two quarters of fiscal
year 2009.
(b) Compare excise tax collections from the master file with excise tax
collections from IRS's general ledger for the first 9 months of fiscal
year 2009 to determine if they materially agree.[Footnote 9]
Description of Findings and Results:
The amount of excise tax collections from the master file was 1.63
percent less than the amount of excise tax collections recorded in the
general ledger for the first 9 months of fiscal year 2009, which
exceeded the 1 percent materiality defined for this procedure.
(c) Select a random attribute sample of 78 excise tax returns from the
master file.[Footnote 10] Compare assessment and receipt information
for each return from the master file to the Collection Certification
System.
Description of Findings and Results:
For all 78 returns, assessment and receipt information from the master
file agreed with the information in the Collection Certification
System.
(d) Sum the prorated collections for selected abstracts[Footnote 11]
from the 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 the
audit files into the following distinct populations: (1) HTF, (2) AATF,
and (3) other excise tax abstracts. 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 $364
million, and an expected aggregate error amount of $109 million.
[Footnote 13]
Description of Findings and Results:
Use of MUS with a confidence level of 80 percent, a tolerable
misstatement of $364 million, and an expected aggregate error amount of
$109 million resulted in a sample of 90[Footnote 14] prorated
collections for the HTF for the first two quarters of fiscal year 2009.
(f) Select samples of prorated excise tax collections from the two non-
HTF populations. 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 $118 million, and an expected
aggregate error amount of $35 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 HTF and the
AATF.[Footnote 16]
Description of Findings and Results:
Use of MUS with a confidence level of 80 percent, a tolerable
misstatement of $118 million, and an expected aggregate error amount of
$35 million resulted in a sample of 61[Footnote 17] prorated
collections for the AATF for the first two quarters of fiscal year
2009.
A random attribute sample of 45 items was selected from the population
of prorated tax collections related to all excise taxes other than the
HTF and the AATF.
2. Procedures on transactions:
(a) For each prorated excise tax collection sampled from the HTF
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 master file for
each of the 90 sampled items.
* Calculate the assessment amount on the tax return for the sampled
item to determine whether the amount is mathematically correct.
Description of Findings and Results:
The assessment amount on the tax return was mathematically correct for
89 of the 90 sampled items. For one sample item involving abstract 62
for the quarter ended March 31, 2009, a taxpayer reported an assessment
amount of $32,614,638 on its tax return. However, based on the number
of gallons reported by the taxpayer, the assessment amount should have
been $34,084,865, a difference of $1,470,227.
* Calculate the prorated collection amount for the sampled item based
on information from the master file and compare this amount to the
amount in the Collection Certification System audit files for
agreement.
Description of Findings and Results:
The independently calculated prorated collection amount agreed with the
amount in the Collection Certification System audit files for 89 of the
90 sampled items. As discussed previously, a taxpayer miscalculated the
assessment amount on its tax return for one sampled item involving
abstract 62 for the quarter ended March 31, 2009. The taxpayer
underreported the assessment amount by $1,470,227. As a result of the
taxpayer error, the prorated collection amount for abstract 62 was
understated by $513,228. Additionally, this error resulted in a
$501,720 overstatement of the prorated collection amount for abstract
60. Since IRS compiles the amounts of various prorated excise taxes in
its certification to the HTF, the error resulted in the HTF receiving
$10,775 less in excise tax distributions than it should have for the
quarter ended March 31, 2009.[Footnote 18]
Although IRS identified the error and obtained an amended return from
the taxpayer, it was unable to record the correction to the taxpayer's
master file account module[Footnote 19] until August 2009. This was
after the cut-off date for IRS's excise tax certification to the HTF
for the quarter ended March 31, 2009. However, the correction was
included in IRS's excise tax certification to the HTF for the quarter
ended June 30, 2009. Since IRS's excise tax certification for the
quarter ended June 30, 2009, is included in determining excise tax
distributions to the HTF for fiscal year 2009, the error had no net
effect on the dollar amount of excise tax distributions to the HTF for
fiscal year 2009.
(b) Inspect the tax returns and master file information for the two
samples of prorated collections from the non-HTF populations to
determine if they contain any HTF excise tax collections.
Description of Findings and Results:
The two samples of prorated collections from the non-HTF populations
did not contain any HTF 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 2009, the net most likely
error was ($2.3 million) with an upper error limit of $215 million at
the 80 percent confidence level.
II. Procedures on IRS's Quarterly HTF Receipt Certifications:
Perform the following procedures on IRS's HTF receipt certifications
for the quarters ended September 30, 2008; December 31, 2008; March 31,
2009; and June 30, 2009:
A. Inspect the certification letters[Footnote 20] 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 diesel fuel tax (abstract 60) and
gasoline tax (abstract 62)[Footnote 21] from the certification letters
back to the Report of Excise Tax Collection[Footnote 22] and the
Treasury 90 Report[Footnote 23] for agreement.
Description of Findings and Results:
The certified amounts for diesel fuel tax (abstract 60) and gasoline
tax (abstract 62) 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 diesel fuel tax
(abstract 60) and gasoline tax (abstract 62) for agreement with the
applicable laws.
Description of Findings and Results:
The distribution rates used by IRS for diesel fuel tax (abstract 60)
and gasoline tax (abstract 62) 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 24]
collections from prior quarters.
Description of Findings and Results:
The Report of Excise Tax Collection used in the certification for the
quarters ended September 30, 2008; December 31, 2008; and March 31,
2009, did not contain significant collections from prior quarters.
For the quarter ended June 30, 2009, the Report of Excise Tax
Collection used in the certification contained approximately $275
million from prior quarters. Due to taxpayer errors and delays by IRS
in posting tax return information to taxpayer master file account
modules, four large-dollar excise tax returns containing primarily HTF
excise taxes were omitted from IRS's excise tax certification to the
HTF for the quarter ended March 31, 2009.
Although IRS eventually posted the return to the taxpayers' master file
account modules, this was not done in time for the return information
to be included in IRS's excise tax certification to the HTF for the
quarter ended March 31, 2009. Since IRS's excise tax certifications to
the HTF for the quarters ended March 31, 2009, and June 30, 2009, are
both used in determining fiscal year 2009 excise tax distributions to
the HTF, this had no effect on excise tax distributions to the HTF for
fiscal year 2009.
G. Trace heavy vehicle use tax amounts from the Highway Account
certification letters to the master file and Treasury 90 Report.
[Footnote 25]
Description of Findings and Results:
The heavy vehicle use tax amounts from the Highway Account
certification letters agreed with the master file and Treasury 90
Report for all four quarters.
III. Procedures on Financial Management Service Adjustments:
Perform the following procedures on Financial Management Service (FMS)
adjustments to HTF excise tax distributions for the quarters ended
September 30, 2008; December 31, 2008; March 31, 2009; and June 30,
2009:
A. Calculate the FMS adjustment amounts based on the Office of Tax
Analysis (OTA) transfer forms[Footnote 26] 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. For the Highway Account, the adjustment amounts were[Footnote
27]
* ($149,862,000) for the quarter ended September 30, 2008;
* ($136,806,000) for the quarter ended December 31, 2008;
* ($509,330,000) for the quarter ended March 31, 2009; and:
* ($1,177,611,000) for the quarter ended June 30, 2009.
For the Mass Transit Account, the adjustment amounts were:
* ($26,282,000) for the quarter ended September 30, 2008;
* ($23,667,000) for the quarter ended December 31, 2008;
* ($55,872,000) for the quarter ended March 31, 2009; and:
* ($137,034,000) for the quarter ended June 30, 2009.
IV. Procedures on Excise Tax Distributions to the HTF for the Quarter
Ended September 30, 2009:
A. Determine if OTA's process for identifying and incorporating the
effect of new legislation on excise tax receipts into its trust fund
estimates[Footnote 28] was in place during the quarter ended September
30, 2009.
Description of Findings and Results:
OTA's process for identifying and incorporating into its trust fund
estimates the effect of new legislation on excise tax receipts was in
place during the quarter ended September 30, 2009. OTA prepares a tax
rate table to capture information relating to legislation that affects
tax rates, tax basis, accounts, and deposit rules in effect during the
quarter.
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 HTF for the quarter ended September 30, 2009.
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 HTF for
the quarter ended September 30, 2009, were mathematically correct.
D. Trace the transfer amounts for diesel fuel tax (abstract 60),
gasoline tax (abstract 62), and heavy vehicle use tax[Footnote 29] from
the transfer forms back to the related source documents[Footnote 30]
for agreement.
Description of Findings and Results:
The transfer amounts for diesel fuel tax (abstract 60), gasoline tax
(abstract 62), and heavy vehicle use tax from the transfer forms agreed
with the related source documents for the quarter ended September 30,
2009.
V. Other Procedures:
A. Determine if adjustments to the HTF for tax on kerosene used in
aviation were made during fiscal year 2009 and calculate the adjustment
amounts to determine if they were mathematically correct.[Footnote 31]
Description of Findings and Results:
Adjustments to the HTF for tax on kerosene used in aviation were made
during fiscal year 2009 and were mathematically correct. For the
Highway Account, the adjustment amounts were[Footnote 32]:
* ($175,148,000) for the quarter ended September 30, 2008;
* ($146,149,000) for the quarter ended December 31, 2008;
* ($130,115,000) for the quarter ended March 31, 2009;
* ($133,812,000) for the quarter ended June 30, 2009; and:
* ($158,292,000) for the quarter ended September 30, 2009.
For the Mass Transit Account, the adjustment amounts were:
* ($23,365,000) for the quarter ended September 30, 2008;
* ($19,497,000) for the quarter ended December 31, 2008;
* ($17,358,000) for the quarter ended March 31, 2009;
* ($17,851,000) for the quarter ended June 30, 2009; and:
* ($21,116,000) for the quarter ended September 30, 2009.
B. Using IRS's quarterly certifications, OTA's estimated distributions,
and any adjustments, compile and report the amount of net excise taxes
and penalties[Footnote 33] distributed to the HTF in fiscal year 2009.
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
distributed to the HTF in fiscal year 2009 was $34,943,799,000.
[End of section]
Footnotes:
[1] In October 2008, the Internal Revenue Service (IRS) completed its
certification of excise tax distributions to the HTF for the quarter
ended June 30, 2008, and the Department of the Treasury's Financial
Management Service (FMS) recorded the corresponding adjustment to
transfer funds between the general fund and the trust fund. HTF
administrators recorded the adjustment amount on the HTF financial
statements for fiscal year 2008.
[2] The IRS certification of excise tax distributions and corresponding
FMS adjustment for the quarter ended September 30, 2008, were completed
in February 2009 and thus affected distributions to the HTF during
fiscal year 2009.
[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] These procedures encompassed approximately $13.4 billion in
prorated collections affecting distributions to the HTF. 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 Collection
Certification System 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.
[6] 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 Form 720 and are used by the taxpayer to report excise
tax assessments. If the return was related to the HTF, we selected (1)
diesel fuel tax (abstract 60) and (2) gasoline tax (abstract 62). 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). 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 84 percent of the total amount certified to the HTF and over 94
percent of the total amount certified to the AATF for the quarters
ended June 30, 2008, and September 30, 2008.
[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, 2008, and March 31, 2009.
[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 2009 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 2009.
[10] For this sample, if one or no errors were found in testing 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) diesel fuel tax (abstract 60), (2)
gasoline tax (abstract 62), (3) tax on transportation of persons by air
(abstract 26), (4) tax on the use of international air travel
facilities (abstract 27), (5) tax on transportation of property by air
(abstract 28), and (6) tax on kerosene for use in commercial aviation
(abstract 77). The tax amounts for the two HTF-related abstracts made
up over 91 percent of the total amount certified to the HTF, and the
tax amounts for the four AATF-related abstracts made up over 98 percent
of the total amount certified to the AATF for the quarters ended
December 31, 2008, and March 31, 2009.
[12] The Report of Excise Tax Collection contains prorated collections,
classified by abstracts, which serve as the basis for IRS's quarterly
trust fund certifications.
[13] The $364 million tolerable misstatement represents approximately 1
percent of the net excise tax revenue distributed to the HTF in fiscal
year 2008. The expected aggregate error amount of $109 million
represents approximately 30 percent of the tolerable misstatement
amount.
[14] The planned sample size using MUS was 135 items. MUS selects
dollars versus specific transaction items by dividing the population of
prorated excise tax collections by dollar intervals. The dollar
interval for the HTF was $133 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 $266 million would cover two dollar intervals, but
represent one sample item. Because large-dollar items cover more than
one interval, the 90 unique sampled transactions selected represented
135 dollar intervals.
[15] The $118 million tolerable misstatement represents approximately 1
percent of the net excise tax revenue distributed to the AATF in fiscal
year 2008. The expected aggregate error amount of $35 million
represents approximately 30 percent of the tolerable misstatement
amount.
[16] For this sample, if no errors were found in testing 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 116 items. As explained in
footnote 14, MUS selects dollars instead of specific transaction items
by dividing the population of prorated excise tax collection by dollar
intervals. The dollar interval for AATF was $43 million. Because large-
dollar items cover more than one interval, the 61 unique sampled
transactions selected represented 116 dollar intervals.
[18] The net effect of the understatement to abstract 62 and the
overstatement to abstract 60 was an understatement to prorated
collections of $11,508. The effect on distributions to the HTF is less
than the total amount of the understated prorated collections because
not the entire amount of the prorated collection for each type of tax
is certified and distributed to the HTF. For example, $0.183 of the
$0.184 collected on each gallon of gasoline is certified and
distributed to the HTF.
[19] A taxpayer may have multiple accounts and account modules within
IRS's master files. Each unique account is identified by a taxpayer
identification number (i.e., social security number or an employer
identification number). Each account contains unique modules identified
by the specific tax period (e.g., year, quarter) and tax type (e.g.,
excise tax, individual tax, payroll tax, etc.).
[20] IRS prepares two certification letters for the HTF each quarter:
one for the Highway Account and the other for the Mass Transit Account.
[21] The certified amounts for diesel fuel tax (abstract 60) and
gasoline tax (abstract 62), along with the heavy vehicle use tax
(traced separately), made up over 92 percent of the total amount
certified to the HTF for the quarters ended September 30, 2008;
December 31, 2008; March 31, 2009; and June 30, 2009.
[22] IRS uses data from two of these reports, covering sequential
processing intervals, for each quarterly certification. 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. The two 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.
[23] The Treasury 90 Report summarizes excise tax credit information
and is produced quarterly by IRS service center campus systems. IRS has
seven service center campuses that receive and process tax returns and
payments.
[24] For this procedure, "significant" is defined as $185 million,
which represents approximately 2 percent of the total amount certified
to the HTF for each of the quarters ended September 30, 2008; December
31, 2008; March 31, 2009; and June 30, 2009.
[25] These taxes, which go to the HTF, are reported on Form 2290 and
are not included in the Collection Certification System.
[26] The transfer forms denote the amounts estimated by OTA for
transferring excise taxes to the trust funds.
[27] A positive amount indicates that the FMS adjustment increased
excise taxes distributed to the account. A negative amount, shown in
parentheses, indicates that the FMS adjustment decreased excise taxes
distributed to the account.
[28] OTA makes semimonthly estimates of excise tax collections for
transfer to trust funds. There are five semimonthly estimates for the
quarter ended September 30, 2009, which affect fiscal year 2009
distributions to the HTF.
[29] The OTA estimated transfer amounts for diesel fuel tax (abstract
60), gasoline tax (abstract 62), and heavy vehicle use tax made up over
92 percent of the total amount transferred to the HTF for the fourth
quarter of fiscal year 2009.
[30] 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.
[31] 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 this refund is transferred from the
HTF to the general fund. The amount of the kerosene tax collected from
the taxpayer, net of refunds, is transferred from the HTF to the AATF.
[32] The adjustments for the quarters ended September 30, 2008;
December 31, 2008; March 31, 2009; and June 30, 2009, were included in
the IRS receipt certifications, and the adjustment for the quarter
ended September 30, 2009, was included in the OTA estimates. The
adjustment amounts, shown in parentheses, represent excise taxes
transferred from the HTF to the AATF and general fund.
[33] Section 868 of Pub. L. No. 108-357 (Oct. 22, 2004), Dedication of
Revenues from Certain Penalties to the Highway Trust Fund, requires
that certain fuel-related penalties, which are assessed and collected
by IRS, be distributed to the HTF. IRS began including such amounts in
its quarterly certification to the HTF for the quarter ended September
30, 2008. However, such penalties represent less than 0.06 of one
percent of the amount certified to the HTF each quarter.
[End of section]
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