Employees Who Qualify for Security Clearances Owe $85M in Back Taxes

Some 8,400 federal employees and contractors who went through background checks for security clearances owe cumulatively about $85 million in unpaid federal taxes, according to the Government Accountability Office.

This amounts to 3.4 percent of the civilian executive branch employees and contractors who received clearances from 2006 through 2011, about 4,700 of whom were full-time agency employees, the watchdog found. Some 4,200 of them are already on a payment plan to achieve balance with the Internal Revenue Service.

“Federal law does not expressly prohibit an individual with unpaid federal taxes from being granted a security clearance,” GAO wrote in a report requested by Sens. Tom Coburn, R-Okla.; Orrin Hatch, R-Utah; and Susan Collins, R-Maine, and House Ways and Means Committee Chairman Rep. Dave Camp, R-Mich. “However, tax debt does pose a potential vulnerability that must be considered in making a broader determination of whether an applicant should be granted a security clearance.”

GAO’s investigation of applicants for secret and top-secret-level security clearances focused on civilians at the Homeland Security, State and Energy departments, not on the Defense Department or Intelligence Community. “Our review did not include the review of confidential clearance holders or public trust positions,” the report said. It examined clearance data from the Office of Personnel Management’s Central Verification System database, though policy on clearances is the responsibility of the Office of the Director of National Intelligence.

The missing $85 million in back taxes among security clearance holders is only a fraction of the tax gap that the IRS estimated in 2012 at $364 billion. But agencies, despite having established mechanisms for identifying unpaid tax debts, demonstrated shortcomings in their investigative tools such as relying too much on applicant self-reporting and credit reports that state whether the IRS has filed a lien on the taxpayer.

“There is no process to detect unpaid federal tax debts accrued after an individual has been favorably adjudicated unless it is self-reported, reported by a security manager due to garnishment of wages, or discovered during a clearance renewal or upgrade,” auditors said. About three-quarters of the tax debtors took on the debt after approval of a security clearance, which may be good for 10 years.

To improve the thoroughness of the background checks, GAO recommended that ODNI study the feasibility of allowing agencies to routinely obtain federal debt information from the Treasury Department while adjudicating clearance applicants, as well as for monitoring current clearance holders' tax-debt status. ODNI, DHS and OPM agreed with GAO's recommendation.

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