Congress updated the statutory framework for performance management  in the federal government, the Government Performance and Results Act  of 1993 (GPRA), with the GPRA Modernization Act of 2010 (GPRAMA). Both acts require agencies to set goals and measure and report the  performance of their programs. Although IRS is the federal  agency responsible for administering tax expenditures, it is not  responsible for the program areas targeted by many tax expenditures. The information available at IRS is generally limited by the Paperwork  Reduction Act to data used for tax administration, not for performance  evaluation. Information for Almost $500 Billion of Tax Expenditures Is Not Collected on Tax Forms

Of the 163 tax expenditures identified by Treasury for tax year 2011,  102, or 63 percent, were not on a tax return, information return, or other  tax form; or they were on these tax forms but did not have their own line  item, as shown in table 1. For these tax expenditures, the tax forms do  not capture information on who claimed the tax expenditures and how  much they claimed. An example of a tax expenditure not on a tax form is  the exclusion of interest on life insurance savings where the taxpayer is  not asked to report the amount of the exclusion anywhere on a tax form,  while an example of a tax expenditure without its own line item is the  credit for holding clean renewable energy bonds where the credit is  aggregated with other credits on a single line item. For some tax expenditures, IRS data limitations can be remedied to some  extent by information available from other federal agencies. Case Studies of Comparable Outlay and Tax Expenditure Programs Show Differences in Data Available for Measuring Performance

After reviewing the GPRAMA-mandated cross-agency priority (CAP)  goals established by OMB and federal agencies, we chose four outlay  programs—three addressing energy efficiency and one addressing job  training—that  we considered to be comparable to certain tax  expenditures based on their similar purposes. Table 2 provides  descriptions of these tax expenditures and comparable outlay programs. As shown in table 4, DOE and DOL produced performance measures and  goals for outlay programs in their annual reports but did not do so for the  comparable tax expenditures. Agency Comments and Our Evaluation

The IRS provided technical comments after viewing a draft of this report,  which we incorporated as appropriate. Appendix I: Scope and Methodology

To determine what Internal Revenue Service (IRS) data are available for  evaluating tax expenditures, we used 173 tax expenditures for fiscal year  2011 that were developed by the Department of the Treasury (Treasury)  and reported by the Office of Management and Budget (OMB) in  Analytical Perspectives, Budget of the United States Government, Fiscal  Year 2012. During our matching, we identified 10 tax expenditures that we did not  include in our analysis because (1) they were not available in tax year  2011, such as the Hope Tax Credit which was temporarily replaced by the  American Opportunity Tax Credit; (2) some but not all parts of the tax  expenditure were on a tax form, such as the Exclusion of Benefits and  Allowances to Armed Forces Personnel where only the combat pay  portion was reported on a tax form—Form W-2 (Wage and Tax  Statement); and (3) where reporting of the tax expenditure was optional,  such as Employer Plans on Form W-2. We identified their performance measures  and goals, as well as the data they used to evaluate and assess these  outlay programs.
Why GAO Did This Study

By one measure, tax expenditures resulted in an estimated $1 trillion of revenue forgone by the federal government in fiscal year 2011. GAO has recommended greater scrutiny of tax expenditures, as periodic reviews could help determine how well specific tax expenditures achieve their goals and how their benefits and costs compare to those of other programs with similar goals. To assist with this, GAO recently issued a guide ( GAO-13-167SP ) for evaluating the performance of tax expenditures. GAO was asked to identify data needed for evaluating tax expenditures and its availability. This report: (1) determines the information available from IRS for evaluating tax expenditures; and (2) compares, for a few case studies, the information identified by federal agencies for evaluating outlay programs with similar purposes to tax expenditures. To address these objectives, GAO analyzed 173 tax expenditures, and information from IRS tax forms, federal agency performance reports, and prior GAO reports.

What GAO Found

Internal Revenue Service (IRS) data are not sufficient for identifying who claims a tax expenditure and how much they claim for $492 billion or almost half the dollar value of all tax expenditures that GAO examined. Such basic data are not available at IRS for tax expenditures because they do not have their own line item on a tax form. This included $102 billion of tax expenditures that were not on tax forms, such as the exclusion of interest on life insurance savings, and $390 billion of tax expenditures that were on tax forms but did not have their own line items, such as the credit for holding clean renewable energy bonds which is aggregated with other credits on a single line item.
In four cases in which the Office of Management and Budget (OMB) identified outlay programs and comparable tax expenditure programs that shared similar purposes, the related agencies produced performance measures and goals only for the outlay programs and not for the comparable tax expenditures. For example, OMB identified the Alternative Technology Vehicle Credit as having a comparable purpose to the Department of Energy (DOE) Vehicle Technologies outlay program--both are intended to create more fuel efficient modes of transportation. DOE produced a performance measure and goal for the outlay program--petroleum consumption reduced by 570 million gallons per year by 2011--as required under the provisions of the Government Performance and Results Act of 1993 and the Government Performance and Results Act Modernization Act of 2010. However, DOE did not produce measures and goals for the comparable tax expenditure as neither act requires DOE or other federal agencies to do so. Although IRS is responsible for administering these tax expenditures, it is required by law, unless otherwise directed by Congress, to collect only data which are required for administration of the tax code. GAO has recommended that the agencies responsible for tax expenditures be identified and the lack of credible performance data be addressed.

What GAO Recommends

GAO made no recommendations in this report. IRS provided technical comments that were incorporated as appropriate.