Committee On Homeland Security And Government Affairs Unanimously Passes Coleman Amendment That Combats Federal Tax Cheats. . .

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENT AFFAIRS UNANIMOUSLY PASSES COLEMAN AMENDMENT THAT COMBATS FEDERAL TAX CHEATS AND CURBS ABUSE OF GOVERNMENTAL FUNDS

June 22nd, 2005 - Washington, D.C. - The Homeland Security and Government Affairs Committee unanimously approved an amendment proposed by Senator Norm Coleman, Chairman of the Permanent Subcommittee on Investigations (PSI), to the "Purchase Card Waste Elimination Act" (S. 457) that addresses two key problems identified during two separate PSI hearings on governmental fraud. Senator Coleman's amendment, cosponsored by Senators Carl Levin (D- MI) and Daniel Akaka (D- HI), will make it easier for the IRS and the Federal Management Service (FMS) to collect unpaid taxes from federal contractors and requires the General Services Administration (GSA) to provide an annual travel report to Congress to monitor federal travel for potential fraud, waste and abuse. This bill will now head to the Senate floor for consideration.

"My amendment will bring us one step closer to ending waste, fraud, and abuse in Government," said Senator Coleman. "The widespread tax cheating by federal contractors must end. But for this to happen we need to close the loopholes and give federal agencies the tools they need to identify tax cheats. It is equally important to root out the improper use of travel funds by government officials."

On June 16th, Senator Coleman convened a PSI hearing based on a Government Accountability Office (GAO) report that revealed 33,000 federal contractors at civilian departments and agencies owe $3.3 billion in unpaid taxes. During the hearing, FMS Commissioner Richard L. Gregg noted that FMS cannot levy contractor payments made with government purchase cards because FMS sends payments to banks that have already paid the contractor. As a solution, Senator Coleman's amendment would require the General Services Administration to develop the procedures to subject purchase card payments to the Federal Payment Levy Program. These contractors would then be paid in a manner that would permit the collection of unpaid taxes.

On November 6, 2003, Sen. Coleman held a PSI hearing revealing that the Department of Defense has been wasting millions of taxpayer dollars by flouting DOD travel guidelines and routinely booking top dollar first and business class airline tickets. Testimony during the hearing indicated that in 2001 and 2002 the Department of Defense had spent $123.8 million on first and business class travel and that 73 percent of this travel was not properly authorized or justified, resulting in a loss of millions of dollars. The Office of Management and Budget requires all federal agencies to annually report their first class travel to GSA in order to monitor travel for potential abuse. However, $120.9 million of the $123.8 million that DOD spent was for business class travel which is not reported. To curb this abuse, Coleman's amendment requires GSA to provide an annual travel report that includes both first and business class airline travel and further requires that the report be furnished to the Senate Homeland Security and Governmental Affairs Committee and the House Government Reform Committee to closely monitor federal travel for potential abuse.

"A good example of abuse our investigation discovered was one DOD traveler who spent $9,500 on a business class ticket which could have been purchased for $2,500 in coach class," Senator Coleman added. "Because this traveler used business class it would not have been reported. My amendment seeks to change this, while at the same time making the process more transparent."

Last year, Senator Coleman requested that the IRS, Financial Management Service, the Department of Defense and other affected agencies establish the Federal Contractor Tax Compliance Task Force, which would identify and resolve problems that frustrated the Federal Payment Levy Program. Coleman's request came after a GAO report was release that identified 27,000 Defense contractors who owe a total of $3 billion in unpaid taxes. As a direct result of the Task Force's efforts, tax levy collections from Defense contractors have increased dramatically from a mere $680,000 in 2003 to more than $11.5 million in the first seven months of this year. At that rate, the government will recover $17.25 million in unpaid taxes by the end of 2005, an increase of more that 2,500% in just two years.

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