TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

MILLIONS OF DOLLARS IN POTENTIALLY ERRONEOUS QUALIFIED PLUG-IN ELECTRIC DRIVE
MOTOR VEHICLE CREDITS CONTINUE TO BE CLAIMED USING INELIGIBLE VEHICLES

Final Report issued on September 30, 2019

Highlights of Reference Number:  2019-30-072 to the Commissioner of Internal Revenue.

IMPACT ON TAXPAYERS

The Energy Improvement and Extension Act of 2008 created the Qualified Plug‑In Electric Drive Motor Vehicle Credit (hereafter Plug-In Credit).  The American Recovery Act of 2009 later amended the credit for vehicles purchased after December 31, 2009.  These credits, of up to $7,500, help taxpayers offset the purchase of a qualifying plug-in electric drive vehicle.

WHY TIGTA DID THE AUDIT

This audit was initiated to assess whether the IRS is adequately considering returns with the Plug-In Credit for examination.

WHAT TIGTA FOUND

The IRS does not have effective processes to identify and prevent erroneous claims for the Plug-In Credit.  As a result, taxpayers received millions of dollars in potentially erroneous Plug‑In Credits.  Based on our analysis of Plug‑In Credits claimed and received during Processing Years 2014 through 2018, TIGTA identified:

·   16,510 tax returns for which taxpayers received approximately $73.8 million in Plug-In Credits *******************************************************2************************************************************** ****************************2******************

·   1,509 tax returns for which taxpayers received more than $8 million in Plug-In Credits *****************************************************************2************************************************************

·   68 tax returns for which taxpayers received approximately $1 million Plug-In Credits ********************2**********************

Additionally, IRS examiners are generally not reviewing questionable claims for the Plug-In Credit during examination when IRS filtering does not identify the credit.

WHAT TIGTA RECOMMENDED

TIGTA made four recommendations to the IRS to improve the detection and prevention of erroneous Plug-In Credit claims, including that the IRS use the Vehicle Identification Numbers reported by taxpayers to identify improper credit claims.

IRS management agreed with all four recommendations and plans to take appropriate corrective actions.  These actions include using data analytics to determine the extent of noncompliance.  These results will be used to initiate the appropriate compliance activities.  The IRS will also develop a new audit lead sheet to assist examiners with auditing the Plug-in Credit.  Lastly, the IRS will initiate a recovery program for potentially erroneous Plug-in Credits identified in TIGTA’s report.

 

Redaction Legend:

2 = Law Enforcement Techniques/ Procedures and Guidelines for Law Enforcement Investigations or Prosecutions.

 

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2019reports/201930072fr.pdf.

 

Phone Number   /  202-622-6500

E-mail Address  /  TIGTACommunications@tigta.treas.gov

Website             /  https://www.treasury.gov/tigta