Recommendation: The Secretary of Defense should ensure that the DOD Chief Information Officer (CIO) develops an IT enterprise architecture which includes a transition plan that provides a road map for improving the department's IT and computing infrastructure, including for each of its business processes. (Recommendation 5)

Agency: Department of Defense: Office of the Secretary of Defense
Status: Open

Comments: In October 2019, the DOD CIO developed a report on the first increment of version 3 of the department's information enterprise architecture (IEA). The report includes high-level descriptions of the current and target architectures, and high-level plans and schedules for transitioning from the current to the target architecture. The report states that because of the incremental approach to developing the architecture, the plans and schedules are notional and depend on several factors over which the DOD CIO has limited or no control, such as funding and changing world events, priorities, and technology. The report also describes plans to integrate the IEA with the department's business enterprise architecture. However, the report did not define a specific time frame for integrating the architectures. According to the report, for the next increment of the architecture, the department plans to develop compliance criteria and plans for developing an ontology, database, and tool suite. The department did not provide a time frame for completing the next increment. We will continue to monitor the department's efforts to implement the recommendation.

Recommendation: The Secretary of Defense should ensure that the DOD CIO and Chief Management Officer work together to define a specific time frame for when the department plans to integrate its business and IT architectures and ensure that the architectures are integrated. (Recommendation 6)

Agency: Department of Defense: Office of the Secretary of Defense
Status: Open

Comments: In October 2019, the DOD CIO developed a report on the first increment of version 3 of its information enterprise architecture (IEA). The report described planned efforts related to integrating the IEA and the business enterprise architecture. However, the report did not define a specific time frame for when the department plans to integrate the architectures.

Recommendation: To help ensure DOD takes a strategic approach for its prototyping and innovation initiatives and overcomes funding and cultural barriers, the Secretary of Defense should direct the Assistant Secretary of Defense for Research and Engineering to develop a high-level DOD-wide strategy, in collaboration with the military services and other appropriate DOD components, to communicate strategic goals and priorities and delineate roles and responsibilities among DOD's prototyping and innovation initiatives.

Agency: Department of Defense
Status: Open

Comments: DOD concurred with our recommendation, but its progress on addressing it has stalled. In November 2019, DOD's Prototyping Guidebook indicated that the department was developing policy and strategy documents pertaining to prototyping. As part of this effort, the Office of the Undersecretary of Defense for Research and Engineering was drafting a broad DOD Research and Engineering strategy that would include strategies pertaining to prototyping and innovation and address this recommendation. As of August 2020, DOD had not published this strategy.

Recommendation: To improve the certification of adequate incremental development, the Secretaries of Defense, Education, Health and Human Services, and the Treasury should direct their CIOs to establish a department policy and process for the certification of major IT investments' adequate use of incremental development, in accordance with OMB's guidance on the implementation of the Federal Information Technology Acquisition Reform Act.

Agency: Department of Health and Human Services
Status: Open

Comments: The Department of Health and Human Services (HHS) concurred with our recommendation and has taken steps to establish a department policy and process for the certification of major IT investments' use of incremental development. Specifically, in September 2020, HHS officials reported that they have established a draft policy and anticipate publishing the finalized guidance by March 2021. We will continue to evaluate HHS's progress in implementing this recommendation.

Recommendation: To improve the certification of adequate incremental development, the Secretaries of Defense, Education, Health and Human Services, and the Treasury should direct their CIOs to establish a department policy and process for the certification of major IT investments' adequate use of incremental development, in accordance with OMB's guidance on the implementation of the Federal Information Technology Acquisition Reform Act.

Agency: Department of the Treasury
Status: Open

Comments: In September 2020, an official from the Department of the Treasury (Treasury) reported that the department had developed draft guidance to address our recommendation, but did not provide time frames for when the guidance would be finalized. Until the department establishes a CIO certification policy, Treasury will not be able to fully ensure adequate implement of, or benefit from, incremental development practices. We will continue to evaluate Treasury's progress in implementing this recommendation.

Recommendation: To promote retirement savings without creating permanent tax-favored accounts for a small segment of the population, Congress should consider revisiting the use of IRAs to accumulate large balances and consider ways to improve the equity of the existing tax expenditure on IRAs. Options could include limits on (1) the types of assets permitted in IRAs, (2) the minimum valuation for an asset purchased by an IRA, or (3) the amount of assets that can be accumulated in IRAs and employersponsored plans that get preferential tax treatment.

Agency: Congress
Status: Open

Comments: No legislation limiting account owner accumulations enacted as of February 2020. In its October 2014 report, GAO found that individuals with limited, occupationally related opportunities could engage in sophisticated investment strategies and accumulate considerable tax-preferred wealth in IRAs and subsequently suggested to Congress legislative options. The Senate Finance Committee held a hearing on a range of IRA policy issues in September 2014 for which GAO provided a statement for the record that covered preliminary data on IRA balances. The Setting Every Community Up for Retirement Enhancement Act of 2019, enacted in December 2019 as division O of the Further Consolidated Appropriations Act, 2020, amended a number of requirements related to retirement accounts (Public Law 116-94). For example, section 401 limits inherited beneficiaries' ability to continue tax deferral to 10 years beyond the account owner's death. This provision somewhat reduces the long-term financial benefits of accumulating large balances in IRA accounts. However the Act did not adopt any of the other limits identified in GAO's October 2014 report. Without legislation, the intended broad-based tax benefits of IRAs are likely to continue to be skewed toward a select group of individuals.

Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should work in consultation with the Department of the Treasury on a legislative proposal to expand the statute of limitations on IRA noncompliance to help IRS pursue valuation-related misreporting and prohibited transactions that may have originated outside the current statute's 3-year window.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's October 2014 recommendation on IRAs with large balances and said it had discussed the recommendation with Treasury's Office of Tax Policy and Benefits Tax Counsel. Consequently, IRS said Treasury is aware of IRS's willingness to support legislative efforts in this area. Ultimately, Treasury reviews all tax legislative proposals and presents the administration's tax proposals for congressional consideration. However, Treasury has not released a legislative proposal as of January 2020. GAO reported in January 2020 that IRS examination said the 3-year statute of limitations for assessing taxes owed remains an obstacle in pursuing noncompliance that may span the many years of an IRA investment.

Recommendation: To help taxpayers better understand compliance risks associated with certain IRA choices and improve compliance, the Commissioner of Revenue should, building on research data on IRAs holding nonpublic assets, identify options to provide outreach targeting taxpayers with nonpublic IRA assets and their custodians, such as reminder notices that engaging in prohibited transactions can result in loss of the IRA's tax-favored status.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS has taken some action to provide general outreach and as of January 2020 has ongoing compliance research that could inform additional opportunities to target outreach to taxpayers with nonmarketable IRA assets at greater risk of noncompliance, as GAO recommended in October 2014. In June 2016, IRS published information on IRS.gov outlining the new information to be reported for nonmarketable IRA assets and included a general caution that IRAs with nonmarketable investments or assets under direct taxpayer control may be subject to a heightened risk of committing prohibited transactions. This caution is similar to those that IRS added to its publications about IRA contributions and distributions. It is a step toward helping taxpayers better understand which investments pose greater risks. In February 2018, IRS completed its first analysis of new information about the amounts and types of nonpublic IRA assets from Form 5498 for tax year 2016 that was filed in 2017. In October 2019, IRS also completed an interim compliance research project examining a sample of tax returns to determine whether the beneficiary of the IRA caused his or her IRA to engage in a prohibited transaction. As of January 2020, IRS was conducting a new compliance research project examining IRAs holding certain nonpublic asset types. The compliance research began in February 2019 and is to be completed in January 2021. Unless IRS augments outreach based on reliable data about nonpublicly traded IRA investments, taxpayers at greater risk may not be able to ensure compliance with rules on prohibited transactions.

Recommendation: To enhance its oversight of drug shortages, particularly as the agency fine-tunes the manner in which it gathers data on shortages and transitions from its database to a more robust system, the Commissioner of FDA should conduct periodic analyses using the existing drug shortages database (and, eventually, the new drug shortages information system) to routinely and systematically assess drug shortage information, and use this information proactively to identify risk factors for potential drug shortages early, thereby potentially helping FDA to recognize trends, clarify causes, and resolve problems before drugs go into short supply.

Agency: Department of Health and Human Services: Food and Drug Administration
Status: Open

Comments: In September 2018, FDA told us that it was using its drug shortage data system, the "Shortage Tracker," to summarize information reported by manufacturers as the reasons for existing shortages. The agency indicated that it was developing a model that would factor in drug shortage data, warning signs identified through social media, and other factors to help identify early indicators that may predict future shortages. In July 2019, the agency indicated it could conduct periodic analyses of the causes of drug shortages. However, FDA had not yet proactively conducted any rigorous analyses of predictors of drug shortages to help recognize trends, clarify causes, and resolve problems before drugs go into short supply. In an August 2020 written response, FDA reported that it was undertaking modeling efforts to explore the feasibility of predicting future drug shortages using machine learning approaches. FDA planned to complete the initial modeling by fall 2020, at which time it would identify next steps. The agency indicated that the recommendation should remain open, and GAO will continue to monitor the implementation of this recommendation.

Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to define and implement a process, including defined criteria, for reselecting ongoing projects.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In March, 2017, IRS issued its Portfolio Investment Plan Process Description Manual for selecting and prioritizing new and ongoing operations support activities. The manual includes criteria for prioritizing selections; and provides for comparing assets against one another to create a prioritized portfolio; and ensuring executives' funding decisions are based upon the process for selecting and prioritizing activities. In March 2018, IRS updated the manual and also issued related detailed procedures. In May 2019, IRS stated that its Information Technology/Strategy and Planning group had developed a prioritization process and associated scoring criteria to help facilitate decision making for business systems modernization programs, projects, and capabilities. The agency noted that improvements were being made to the process and full implementation was anticipated for June 2019.In April 2020, IRS informed us that it had moved its target for fully implementing the recommendation to November 2020. We will continue to monitor IRS's efforts to implement the recommendation.

Recommendation: Should the program be extended beyond 2009, to ensure that the maximum amount of capital ends up in low-income community businesses, Congress may wish to consider offering grants to CDEs that would provide the funds to low-income community businesses. If it does so, Congress may wish to require Treasury to gather appropriate data to assess whether and to what extent the grant program increases the amount of federal subsidy provided to low-income community businesses compared to the NMTC; whether the grant program otherwise affects the success of efforts to assist low-income communities; and how costs for administering the program incurred by the CDFI Fund, CDEs, and investors would change. One option may be for Congress to set aside a portion of funds to be used as grants and a portion to be used as tax credit allocation authority under the current structure of the program in a future allocation round to facilitate comparison of the two program structures.

Agency: Congress
Status: Open

Comments: No legislative action has been identified as of March 2020. Section 141 of division Q of the Further Consolidated Appropriations Act, 2020, extended NMTC through 2020 (Public Law 116-94). However, this act did not offer grants in lieu of credits, as GAO suggested in January 2010. The Joint Committee on Taxation estimates the cost of this extension to be approximately $1.5 billion. Offering grants in lieu of NMTCs could result in a greater portion of the federal subsidy reaching low-income community businesses.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should issue regulations clarifying the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations.

Agency: Department of the Treasury
Status: Open

Comments: Treasury issued proposed regulations clarifying the definition of gross receipts on December 13, 2013 and solicited public comments. During the course of 2014, tax practitioners and business executives submitted comments criticizing the regulations and asking for them to be withdrawn. As of March 2020, Treasury has yet to issue final regulations that would include responses to these criticisms. The regulations would not become effective until the tax year beginning after the date on which the regulations are published in final form.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should provide additional guidance to more clearly identify what types of activities are considered to be qualified support activities.

Agency: Department of the Treasury
Status: Open

Comments: As of March 2020, Treasury has not issued regulations to clarify what types of activities are considered to be qualified support activities.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should provide additional guidance to more clearly identify when commercial production of a qualified product is deemed to begin.

Agency: Department of the Treasury
Status: Open

Comments: As of March 2020, Treasury has not issued regulations to more clearly identify when commercial production of a qualified product is deemed to begin.

Recommendation: In order to reduce economic inefficiencies and excessive revenue costs resulting from inaccuracies in the base of the research tax credit, Congress should consider eliminating the regular credit option for computing the research credit.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of December 2019, Congress had not enacted legislation to eliminate the regular computation option for the research tax credit or to add a minimum base to the ASC option, as GAO suggested in November 2009. The credit is designed to encourage business innovation by providing a subsidy for new research. Continued use of the regular computation credit option, which arbitrarily distributes subsidies across taxpayers, can distort investment decisions so that research spending and economic activity are not allocated to sectors that offer the highest returns to society. These misallocations may reduce economic efficiency and, thereby, diminish any economic benefits of the credit.

Recommendation: In order to reduce economic inefficiencies and excessive revenue costs resulting from inaccuracies in the base of the research tax credit, Congress should consider adding a minimum base to the ASC that equals 50 percent of the taxpayer's current-year qualified research expenses.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of December 2019, Congress had not enacted legislation to eliminate the regular computation option for the research tax credit or to add a minimum base to the ASC option, as GAO suggested in November 2009. The credit is designed to encourage business innovation by providing a subsidy for new research. Continued use of the regular computation credit option, which arbitrarily distributes subsidies across taxpayers, can distort investment decisions so that research spending and economic activity are not allocated to sectors that offer the highest returns to society. These misallocations may reduce economic efficiency and, thereby, diminish any economic benefits of the credit. Adding a minimum base for the ASC would reduce the revenue cost of the credit without affecting the average incentive it provides for research.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by updating the historical base period that regular credit claimants use to compute their fixed base percentages.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken by Congress to update the historical base period that regular credit claimants use to compute their fixed base percentages.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by eliminating base period recordkeeping requirements for taxpayers that elect to use a fixed base percentage of 16 percent in their computation of the credit.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken to eliminate base period recordkeeping requirements for taxpayers that elect to use a fixed base percentage of 16 percent in their computation of the credit.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by clarifying for Treasury its intent regarding the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations. In particular it may want to consider clarifying that the regulations generally excluding transfers between members of controlled groups apply to both gross receipts and QREs and specifically clarifying how it intended sales by domestic members to foreign members to be treated. Such clarification would help to resolve open controversies relating to past claims, even if the regular credit were discontinued for future years.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken by Congress to clarify for Treasury its intent regarding the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations. In particular, it may want to consider clarifying that the regulations generally excluding transfers between members of controlled groups apply to both gross receipts and QREs and specifically clarifying how it intended sales by domestic members to foreign members to be treated. Such clarification would help to resolve open controversies relating to past claims, even if the regular credit were discontinued for future years.