Waste of the Day: Throwback Thursday – Tax Breaks for 3 Year Olds

Topline: There are very few requirements to receive a Residential Clean Energy tax credit from the Internal Revenue Service. One, own a home. Two, install solar panels or another source of clean energy in the home.

Tax breaks went to non-homeowners

That was somehow too complicated for the IRS in 2011, when the agency awarded $1 billion of tax credits to people who did not own a house, including a 3-year-old child.

The tax breaks are listed in the “Wastebook” reporting published by the late U.S. Senator Dr. Tom Coburn. For years, these reports shined a white-hot spotlight on federal frauds and taxpayer abuses. 

Coburn, the legendary U.S. Senator from Oklahoma, earned the nickname “Dr. No” by stopping thousands of pork-barrel projects using the Senate rules. Projects that he couldn’t stop, Coburn included in his oversight reports.   

Coburn’s Wastebook 2011 included 100 examples of outrageous spending worth nearly $7 billion, including the tax credits for nonexistent homes — which would be worth $1.42 billion today.

Key facts: The Treasury Inspector General for Tax Administration found in a 2011 audit that 30% of the people claiming the clean energy tax credit “had no record of owning a home.”

Almost $500,000 went to prisoners, and $61,091 went to 100 children under the age of 18. It’s possible even more prisoners and kids received the tax credit. The inspector general only reviewed a random sample of records.

No way to verify qualifications

The IRS had no way to “verify whether individuals claiming Residential Energy Credits are entitled to them,” according to the audit. Tax officers did not even ask applicants to submit proof that they had bought solar panels. Following the audit, the IRS came up with the apparently novel idea of asking applicants to list the address of their house.

Home owners could claim credits for 30% of the cost of installing renewable energy sources, up to $1,500. The inspector general found 171 people who received more than $1,500 because the IRS did not use a computer code that would have automatically rejected claims above that amount.

Search all federal, state and local salaries and vendor spending with the world’s largest government spending database at OpenTheBooks.com. 

Background:  The IRS gave $5.8 billion of Residential Clean Energy credits to over 6.8 million people in 2009, the program’s first year. Joe Biden’s Inflation Reduction Act extended the program through 2034.

Summary: It doesn’t always take a complex scheme to defraud the government. Sometimes, pretending to own a house is all that’s needed.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com

This article was originally published by RealClearInvestigations and made available via RealClearWire.