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May 7, 2013
On April 15, the House of Representatives honored Tax Day by approving a measure that will ensure the hard-earned money we hand over to the federal government every year will not, in turn, be handed over to contractors who are not paying their taxes.
By a vote of 407 to 0, the House passed the Contracting and Tax Accountability Act of 2013 (H.R. 882), introduced by Reps. Jason Chaffetz (R-Utah) and Jackie Speier (D-Calif.). The bill requires companies and individuals seeking contracts above $150,000 to certify that they don’t have “seriously delinquent” federal tax debts. Contractors would also be required to authorize the Treasury Department to disclose their tax information to the head of the contracting agency. Certification of a seriously delinquent tax debt would be considered definitive proof of non-responsibility by the agency, which could then initiate a suspension or debarment proceeding against that company or individual.
Tax-delinquent contractors are a problem for several reasons, the most obvious of which is that they starve the government of needed revenue. The Government Accountability Office (GAO) estimates that federal contractors owe more than $7 billion in federal taxes. The GAO also found that contractors with unpaid federal taxes have an unfair competitive advantage over tax compliant contractors, and the Treasury Inspector General for Tax Administration reported that contractors with unpaid tax liabilities are more likely to perform poorly or default on contracts.
For the last several years, the executive branch has taken steps to fix this problem. In 2008, the government revised the Federal Acquisition Regulation (FAR) to require those bidding on contracts to certify they have no delinquent federal tax debts exceeding $3,000 for the previous three years. In 2010, President Obama issued a directive ordering the Treasury Department and other agencies to strengthen procedures to ensure that tax-delinquent contractors are not awarded contracts. By codifying the FAR certification provision, the Contracting and Tax Accountability Act would help achieve the goals of President Obama’s 2010 directive.
This is the fourth attempt by Congress to pass this common-sense contracting reform, which the Project On Government Oversight has long supported. Here’s hoping that the fourth time’s a charm.
Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.
Topics: Contract Oversight
Authors: Neil Gordon
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