Tax News

CCH (cch.taxgroup.com) reports:

  Contractors with unpaid federal tax debts would be prohibited from doing business with the U.S. government under a measure offered by Rep. Brad Ellsworth, D-Ind., that was unanimously approved by House lawmakers on April 14. The House passed the Contracting and Tax Accountability Act (HR 4881), a bill that would withhold federal contracts from businesses and organizations that fail to file tax returns or are delinquent on their taxes. A companion measure (Sen 2519) has been introduced in the Senate by Sen. Barack Obama, D-Ill.

  The bill is largely symbolic, noted Rep. Tom Davis, R-Va., since the Bush administration is currently finalizing a regulation that would require federal contractors and grantees to certify that they have not been notified by the IRS of liability for delinquent taxes. The proposed regulation would also include the failure to pay taxes as a specific cause for a company to be barred from receiving federal contracts, Davis noted.

  In addition, the federal contractor provision was already signed into law for one year as part of last year's omnibus budget agreement. But, Ellsworth said, HR 4881 is necessary to make the change permanent for all federal contracts and grants. He noted that, according to the Government Accountability Office, more than $5 billion in unpaid federal taxes are owned by federal contractors.

  "I don't think it's too much to ask companies that receive millions, sometimes billions, in taxpayer dollars "to pay their federal taxes like ordinary citizens do, Ellsworth said. "Not only do these bad actors cheat our government of tax revenue, they also gain an unfair advantage over businesses that are doing the right thing."

  The bill requires contract and grant applicants to give contracting officers permission to check their tax status. The bill would only affect contractors with seriously delinquent tax debts, which is defined as outstanding debts for which a public notice of lien has been filed. The definition also excludes tax debt that is being repaid under an installment agreement and tax debt for which a collection due process hearing has been requested, Ellsworth explained.

  By Stephen K. Cooper, CCH News Staff