Tax Liabilities | The Contracting Education Academy

February 26, 2016 By AMK

Effective today, COs prohibited from making awards to companies with felonies or delinquent taxes

The Federal Acquisition Regulation has been updated to “prohibit the Federal Government from entering into a contract with any corporation having a delinquent Federal tax liability or a felony conviction under any Federal law, unless the agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the Government.”

This rule takes effect February 26, 2016.

Contractors responding to federal solicitations are now required to state in their offers to the government whether they are a corporation with: 1) a delinquent federal tax liability or 2) a felony conviction under federal law. When an offeror provides “an affirmative response” in connection with either of these representations, the contracting officer (CO) is required to request additional information from the offeror and to notify the “agency official responsible for initiating debarment or suspension action.”

The new rule further provides that the contracting officer “shall not make an award to the corporation unless an agency suspending or debarring official has considered suspension or debarment of the corporation and determined that this further action is not necessary to protect the interests of the Government.”

The implementing clause can be found at FAR 52.209-5 – Certification Regarding Responsibility Matters.

April 7, 2015 By AMK

Congress wants contractors to pay their taxes — here’s how

A new bill introduced last week is the latest attempt to prevent tax delinquents from winning federal contracts — or competing for government work at all.

This is the second bill attempting to force contractors to pay their taxes — a nearly identical bill was introduced in the last Congress. It comes despite existing acquisition provisions that require contractors to disclose any tax debts before they bid for work.

“Legislation that codifies, clarifies, and offers minimally invasive improvements to the Federal Acquisition Regulation could be beneficial,” said Alan Chvotkin, executive vice president and general counsel at the Professional Services Council, in testimony submitted for a hearing before the House Committee on Oversight and Government Reform’s government operations panel. “However, such legislation must be tailored carefully to avoid creating new challenges or points of confusion.”

In a nutshell, the latest bill states that any executive agency issuing a solicitation for a contract in an amount greater than the simplified acquisition threshold — currently $150,000 — must require all offerors to certify they have no so-called seriously delinquent tax debt. They also must authorize the Treasury Department to disclose information about that seriously delinquent tax debt.

Keep reading this article at: http://www.bizjournals.com/washington/blog/fedbiz_daily/2015/03/the-hill-wants-to-get-governmentcontractors-to-pay.html?page=all

December 30, 2013 By AMK

Vendors doing business with IRS owe nearly $600M in back taxes

Some 1,168 businesses that sell products and services to the Internal Revenue Service owe a combined $589 million in delinquent taxes, auditors found.

Federal law — as updated in the 2012 Consolidated Appropriations Act — forbids agencies from signing contracts with companies with unpaid federal tax liabilities, but the IRS’ system of controls, while effective much of the time, is not fool-proof, according to the report released Wednesday by the Treasury Inspector General for Tax Administration.

“When the IRS conducts business with vendors that do not comply with federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws,” said J. Russell George, Treasury Inspector General for Tax Administration.

The IRS in the past has resisted TIGTA’s recommendation that it conduct an annual check on contractor tax records. And though the agency’s use of its Master Vendor File is generally effective, auditors recently found that the IRS has not checked the General Services Administration’s Excluded Parties List System. The agency improperly awarded four new contracts or exercised additional option years on existing contracts, valued at $2.6 million, to three vendors that were suspended from doing business with the government, the auditors found.

Keep reading this article at: http://www.govexec.com/contracting/2013/12/vendors-doing-business-irs-owe-nearly-600m-back-taxes/75665

March 15, 2012 By AMK

Contractors seek voice in how to collect back taxes

The days of the federal government awarding large contracts to tax-delinquent contractors may be numbered and industry believes they should have a say about the new policy aimed at singling them out.

As required by the 2011 Three Percent Withholding Repeal and Job Creation Act, the Treasury Dept. is evaluating how well contractors are meeting current requirements to certify whether they have delinquent tax debts, reports the Federal Times.

But in a recent letter to Treasury Secretary Timothy Geithner, the Professional Services Council asked the Treasury Dept. to begin a dialogue with the contracting community on “how best to capture and use information about contractors that owe taxes,” the publication said.

Recently, five Washington Technology Top 100 contractors were singled out for paying more for lobbying Congress than on their federal income taxes, according to the U.S. Public Interest Research Group’s “Dirty Thirty” list that call outs Fortune 500 companies that “spend big on lobbying and avoid taxes.”

— by Washington Technology staff, Feb. 28, 2012 at http://washingtontechnology.com/articles/2012/02/28/agg-tax-delinquent-contractors-treasury-dept.aspx?s=wtdaily_290212.

May 12, 2011 By AMK

IRS delays contractor tax withholding

The Internal Revenue Service is pushing off an unpopular requirement that the government withhold a percentage of its payments to most contractors for tax purposes.

The final rule, published in Monday’s (5/9/2011) Federal Register, delays a mandate that federal, state and local governments with expenditures of more than $100 million withhold 3 percent of payments for products and services worth more than $10,000, including nonconfidential or classified contracts, grants to for-profit companies, and farm and Medicare payments. The requirement, scheduled to take effect on Jan. 1, 2012, now will be delayed to apply to payments on new contracts made after Dec. 31, 2012. The rule will affect all contracts starting Dec. 31, 2013.

The requirement, included in the 2005 Tax Increase Prevention and Reconciliation Act to ensure that individuals and companies with outstanding tax debts do not receive new payments from the federal government, would closely mirror the withholding system on individual salaries and wages. The government would set aside 3 percent of the gross payments and the information and funds would then be transmitted to the IRS. At the end of the year, the amount withheld would be credited toward taxes owed.

Lawmakers earlier this year proposed repealing the controversial provision, and Obama administration officials in March expressed support for delaying the requirement while agencies prepare to implement the change.

Critics have suggested that the provision is unnecessarily burdensome during an economic downturn, noting that other measures exist to ensure contractor tax compliance.

“This is an 11th-hour quasi-reprieve from a temporary tax increase that would have eliminated jobs and helped only the IRS,” said Phil Bond, president and chief executive officer of TechAmerica, a technology-based trade association. “It is a scheme to force companies to pay taxes in advance and then wait for the IRS to send them a refund a year later. A one-year extension of the withholding and reporting requirements is a significant, positive development but far from a solution.”

Roger Jordan, vice president of government relations at the Professional Services Council, a contractor trade group, on Monday also applauded the delay but called the requirement itself “bad policy.”

“The withholding requirement would significantly reduce companies’ cash flow at a time when the current economic environment is already squeezing their ability to meet operating expenses,” he said. “While it’s appropriate to focus on how to ensure that any tax liabilities government contractors and other organizations owe are properly collected, other regulations have been implemented in recent years that effectively ensure contractors are meeting their tax obligations.”

– by Emily Long – GovExec.com – May 9, 2011 – at http://www.govexec.com/story_page_pf.cfm?articleid=47769&printerfriendlyvers=1

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