In a particularly eye-catching portion of the report, the inspector general’s office notes that “Under current law, the IRS could only address these claims after the returns are filed and examined and it issues notices of deficiency to the taxpayers, as appropriate.
“The IRS does not have the legal authority to deny biofuel tax credits or otherwise enforce the registration requirements on taxpayers who are not eligible to receive the credits at the time a tax return is filed.”
A federal audit of 124 U.S. taxpayers claiming biofuel tax credits revealed that as many as 42 of them – or roughly one-third – failed to submit the proper paperwork and should not have been given the credits.
The erroneous claims captured by the sample, which included credits for so-called alternative fuels and biodiesel, total $30.3 million out of the approximately $252 million in credits claimed by the sample taxpayers.
The most egregious scheme – carried out under the guise of a Utah biodiesel company, Washakie Renewable Energy – resulted in an erroneous IRS payout of more than $511 million in tax credits.