Commissioner Everson has been boasting of an enhanced enforcement effort at the IRS (see my discussion, and doubts, at this November 21 posting), but the TRAC team at Syracuse has now posted information that suggests that audits of the 250 largest corporations, in terms of time committed, remain at just about the bottom of the trough reached in 2002, after some slight gains in 2004 and 2005. Yet those 250 largest corporations control the lion's share of resources and owe the lion's share of taxes.
The TRAC report, Easier Times for Biggest Corporations, is at this link. It is based on previously undisclosed data released to TRAC by the IRS as a result of the judge's order last April in TRAC's freedom of information suit in Seattle. TRAC focused on only the largest public corporations, to see whether the IRS is paying sufficient attention to audits in this area.
Although the number of the largest corporations is small, these giants are a very significant force in the American economy. In a recent year, for example, while filing only 0.2% of all corporate returns, these powerful organizations controlled 90% of all corporate assets and received 87% of all the corporate income. Id.
The report shows that "audit attention given those with $250 million or more in assets has substantially declined in the last five years." That is true whether you look at coverage time (the amount of time devoted to a audit) or coverage rates (the number of corporations subject to audit) have declined substantially. Coverage time has dropped from an average 1210 hours in 2002to an average 958 hours in 2006 (estimated based on six-months reported numbers)! Coverage rates today are about where they were in 2002--34.4% of the largest corporations subject to audit--which is considerably lower than the 50% coverage rate of 10 years ago. 
The graph (side), from the TRAC website, shows the steep decline, with 2004 and 2005's slightly higher audit rates a mere blip on the horizon.
In addition, TRAC reports that coordinated industry case (CIC) audits--the source of 90% of the IRS's audit findings of underreportings for the largest corporations--have similarly declined, from 58% in 2002 to 51% in 2006. Even those CIC audits that are conducted are conducted less intensely--down from an average of 1741 hours to an average of 1558 hours.
The TRAC report asks why results of enforcement show more tax collected, even with this weak enforcement effort. It could be that the enforcement is actually more efficient than it appears. Or, it may just mean that it has become relatively easier to find some of the misreported tax dollars, since so many more big corporate taxpayers are cheating.
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