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Too Big To Audit? Large Partnerships Escape IRS Scrutiny, GAO Reports


Too Big To Audit? Large Partnerships Escape IRS Scrutiny, GAO Reports
May 2, 2014 – 1:14 PM
By Barbara Hollingsworth

( – In 2011, while the Internal Revenue Service (IRS) was busy scrutinizing the tax-exempt status of 100 percent of Tea Party groups and other conservative non-profits, the tax agency did not audit a single high-value electing large partnership (ELP) with more than $100 million in assets.

That’s according to a preliminary report released to Congress by the Government Accountability Office (GAO) April 17th. (See GAO.pdf)

An ELP is a business entity with more than 100 partners and more than $100 million in assets that is required to file a 1065-B tax return every year. They include large private equity firms, hedge funds and oil and gas partnerships.

“No partnerships that filed a Form 1065-B from tax years 2002 to 2011 had their tax return audited and closed by IRS from fiscal years 2007 to 2013,” a footnote on page 14 of the GAO report stated.

Jim White, a spokesman for GAO, confirmed that no ELPs were audited by the IRS between 2007 and 2013, the last year statistics are available. However, he pointed out that there were only 15 ELPs out of 105 filing 1065-B returns nationwide in 2011 that met the $100 million asset threshold.

Another 2,211 partnerships filed under IRS Form 1065 in 2011, “but only 20 audits (or less than one percent) were closed that year,” White told, acknowledging that “this is a very low audit rate.”

White noted that GAO is doing a follow-up and “will be asking the IRS a number of questions to try to better understand” the tax agency’s audit decisions.