Obama opposes ban on contracts with tax-delinquent contractors

Obama administration officials are concerned that a Senate appropriations bill would hinder agencies’ ability to make informed decisions about contracting with tax-delinquent companies.

The administration agrees that a provision in the Senate’s fiscal 2012 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act (H.R. 2112) combats waste and fraud in the government marketplace. However, officials warn that the bill, as it reads currently, would hurt contracting decisions.

Like a version recently passed by the House, the Senate bill would prohibit agencies from awarding contracts to  companies with unpaid federal taxes. But the Senate version would go further by barring the award of a contract or grant worth more than $5 million if a company cannot certify it has paid its taxes in the last three years or has not been convicted of a tax-related crime. A company cannot even have received a notice of an unpaid tax assessment in the previous three months, unless it's being paid off.

“As written, the provision would deny agencies the ability to make informed decisions about contracts, grants, and other federal assistance,” according to an Oct. 17 statement of administration policy. “It thus risks causing unintended consequences that could translate into unwarranted penalties on businesses and unjustified costs on taxpayers.”

In 2010, President Barack Obama moved against contractors who don’t pay their taxes. He called on officials at Treasury Department, IRS, and the Office of Management and Budget to find ways to share more information across departmental lines to keep tax delinquents out of the federal marketplace. This summer the president launched the Campaign to Cut Waste, led by the vice president, which coincides with the emphasis on doing business with contractors of good standing.

Tax delinquent contractors are a problem. In May, the Government Accountability Office reported that at least 3,700 federal contractors that received economic stimulus law funds owe $757 million in unpaid federal taxes.

The Senate has been considering the bill, but has not passed it yet. The House passed its version in June.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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