Thousands of DOD clearance holders owe federal taxes

A new government audit determined that about 83,000 Defense Department employees and contractors with security clearances owed unpaid federal tax debt totaling more than $730 million. About half of those who owed the taxes were federal employees.

The numbers, contained in a July 28 report issued by the Government Accountability Office, said the employees and contractors in question held or were determined eligible for secret, top secret, or sensitive compartmented information (SCI) clearances, or related interim clearances. The debt cited in the report was current as of June 30, 2012.

"As part of this work, GAO also identified individuals with unpaid tax debts who also had access to classified information," the report said. "GAO found that about 26,000 of the 83,000 DOD employees and contractors with eligibilities who owed taxes (about 31 percent) had access to classified information, and they owed about $229 million in federal taxes as of June 2012."

According to DOD officials, "access" first requires eligibility for a clearance, but also requires a “need-to-know." Individuals who have access to classified information pose a greater risk because they have more opportunity to actually compromise that information than someone who only is eligible to access it, DOD told GAO.

That risk is a key consideration in clearance decision-making, the report said, noting that "federal regulations state that an individual who is financially overextended is at risk of having to engage in illegal acts to generate funds, and that adjudicating officials must weigh an individual’s inability or unwillingness to satisfy debts, such as federal tax debts, as they relate to an individual’s financial and personal conduct when making the security-clearance determination."

According to IRS data, about 34,000 of the 83,000 with tax debt in fact did have repayment plans with the IRS as of June 30, 2012. GAO said that DOD reported about 3.2 million of its civilian and military employees and contractors held or were approved for clearances during the time frame for the analysis, which was Jan. 1, 2006, to Dec. 31, 2011.

GAO—while it offered no recommendations on the matter—cited the government's ongoing work to address the issue.

GAO noted that officials from an Office of the Director of National Intelligence interagency working group that has been pursuing a comprehensive tax compliance monitoring solution stated in June 2014 that "due to the legal and logistical challenges of obtaining sufficient federal tax compliance information" from the Treasury Department's debt management system, "the working group began exploring additional sources of information, including information on tax filing as well as tax debt status, to provide automated federal tax-compliance checks for the purposes of investigating and adjudicating clearance applicants, as well as for ongoing monitoring of current clearance holders’ tax-debt status."

As of October 2013, more than 5.1 million civilian and military employees and contractors held a security clearance, according to ODNI.