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RCED-83-1 1 (1982-12-02)

handle is hein.gao/gaobabmsh0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE V P WASHINGTON, D.C. 20548 Resources, COMMUNITY AND ECONOMIC DEVELOPMENT DIVISJON DECEMBER 2,1982 B-2 08806 The Honorable Roscoe L. Egger, Jr. Commissioner of Internal Revenue Department of the Treasury Dear Mr. Egger: Subject: Possibility of Improper Geothermal Energy Tax Credit Claims (GAO/RCED-83-1) The General Accounting Office has for some time been con- ducting reviews dealing with energy tax credits. As part of these reviews, we recently identified a potential problem that could be costing the U.S. Treasury several millions in lost individual income tax revenue Specificallv, Internal Revenue Service (IRS) statistics indicate that taxpayers may be improperly claiming residential energy tax credits for geothermal energy expendi- tures (hereafter referred to as geothermal energy tax credits). These tax credits have been claimed by taxpayers residing either in States without geothermal resources as defined by IRS, or in States with such resources but at depths too great to be econom- ically useful. Without an examination of individual tax returns, it is not possible to prove that improper tax credit claims have been made. We believe, however, that there are sufficient indications of a potential problem to warrant your attention and action. BACKGROUND The Energy Tax Act of 1978 (P.L. 95-618, Nov. 9, 1978) pro- vides a residential energy tax credit for certain energy conserv- ing and renewable energy source expenditures made in connection with a taxpayer's principal residence. The credit applies to expenditures on energy-conserving items such as insulaticn and storm windows, as well as to investments in solar, wind, and geo- thermal energy property, categorized as renewable energy source property. In this latter case, the act provided that a credit may be claimed for 30 percent of the first $2,000 of expenditures and 20 percent of the next $8,000 of expenditures up to a max- imum credit of $2,200 for expenditures made after April 19, 1977, and before January 1, 1986. Subsequently, the Crude Oil Windfall Profit Tax Act of 1980 (P.L. 96-223, Acr. 2, 1980), expanded the renewable energy credit to 40 percent of $10,000 in expenditures 0 A40-JL (307220)

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