[House Report 110-578]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 110-578
======================================================================
CONTRACTING AND TAX ACCOUNTABILITY ACT OF 2008
_______
April 10, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Waxman, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 4881]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom was
referred the bill (H.R. 4881) to prohibit the awarding of a
contract or grant in excess of the simplified acquisition
threshold unless the prospective contractor or grantee
certifies in writing to the agency awarding the contract or
grant that the contractor or grantee has no seriously
delinquent tax debts, and for other purposes, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 3
Legislative History.............................................. 4
Section-by-Section............................................... 5
Explanation of Amendments........................................ 6
Committee Consideration.......................................... 6
Rollcall Votes................................................... 6
Application of Law to the Legislative Branch..................... 6
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 6
Statement of General Performance Goals and Objectives............ 6
Constitutional Authority Statement............................... 6
Federal Advisory Committee Act................................... 7
Unfunded Mandates Statement...................................... 7
Committee Estimate............................................... 7
Earmark Identification........................................... 7
Budget Authority and Congressional Budget Office Cost Estimate... 7
Changes in Existing Law Made by the Bill, as Reported............ 9
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Contracting and Tax Accountability Act
of 2008''.
SEC. 2. GOVERNMENTAL POLICY.
It is the policy of the United States Government that no Government
contracts or grants should be awarded to individuals or companies with
seriously delinquent Federal tax debts.
SEC. 3. PROHIBITION ON AWARDING OF CONTRACTS TO DELINQUENT FEDERAL
DEBTORS.
Section 3720B of title 31, United States Code, is amended--
(1) in the section heading, by adding at the end ``OR
CONTRACTS'';
(2) by adding at the end the following:
``(c)(1) Unless this subsection is waived by the head of a Federal
agency, a person who has a seriously delinquent tax debt shall be
proposed for debarment from any contract awarded by the Federal
Government.
``(2) The head of any Federal agency that issues an invitation for
bids or a request for proposals for a contract in an amount greater
than the simplified acquisition threshold (as defined in section 4(11)
of the Office of Federal Procurement Policy Act (41 U.S.C. 401(11))
shall require each person that submits a bid or proposal to submit with
the bid or proposal a form--
``(A) certifying that the person does not have a seriously
delinquent tax debt; and
``(B) authorizing the Secretary of the Treasury to disclose
to the head of the agency information limited to describing
whether the person has a seriously delinquent tax debt.
``(3) The Secretary shall make available to all Federal agencies a
standard form for the certification and authorization described in
paragraph (2).
``(4) Not later than 270 days after the date of enactment of this
subsection, the Federal Acquisition Regulation shall be revised to
incorporate the requirements of this subsection.
``(5) For purposes of this subsection:
``(A) The term `contract' means a binding agreement entered
into by a Federal agency for the purpose of obtaining property
or services, but does not include--
``(i) a contract designated by the head of the agency
as assisting the agency in the performance of disaster
relief authorities; or
``(ii) a contract designated by the head of the
agency as necessary to the national security of the
United States.
``(B)(i) The term `person' includes--
``(I) an individual;
``(II) a partnership; and
``(III) a corporation.
``(ii) A partnership shall be treated as a person with a
seriously delinquent tax debt if such partnership has a partner
who--
``(I) holds an ownership interest of 50 percent or
more in that partnership; and
``(II) who has a seriously delinquent tax debt.
``(iii) A corporation shall be treated as a person with a
seriously delinquent tax debt if such corporation has an
officer or a shareholder who--
``(I) holds 50 percent or more, or a controlling
interest that is less than 50 percent, of the
outstanding shares of corporate stock in that
corporation; and
``(II) who has a seriously delinquent tax debt.
``(C)(i) The term `seriously delinquent tax debt' means an
outstanding debt under the Internal Revenue Code of 1986 for
which a notice of lien has been filed in public records
pursuant to section 6323 of such Code.
``(ii) Such term does not include--
``(I) a debt that is being paid in a timely manner
pursuant to an agreement under section 6159 or section
7122 of such Code; and
``(II) a debt with respect to which a collection due
process hearing under section 6330 of such Code, or
relief under subsections (a), (b), or (f) of section
6015 of such Code, is requested or pending.''.
SEC. 4. PROHIBITION ON AWARDING OF GRANTS TO DELINQUENT FEDERAL
DEBTORS.
(a) In General.--The head of any Executive agency that offers a grant
in excess of an amount equal to the simplified acquisition threshold
(as defined in section 4(11) of the Office of Federal Procurement
Policy Act (41 U.S.C. 401(11)) may not award such grant to any person
unless such person submits with the application for such grant a form--
(1) certifying that the person does not have a seriously
delinquent tax debt; and
(2) authorizing the Secretary of the Treasury to disclose to
the head of the Executive agency information limited to
describing whether the person has a seriously delinquent tax
debt.
(b) Release of Information.--The Secretary shall make available to
all Executive agencies a standard form for the certification and
authorization described in subsection (a)(2).
(c) Revision of Regulations.--Not later than 270 days after the date
of the enactment of this section, the Director of the Office of
Management and Budget shall revise such regulations as necessary to
incorporate the requirements of this section.
(d) Definitions and Special Rules.--For purposes of this section:
(1) Person.--
(A) In general.--The term ``person'' includes--
(i) an individual;
(ii) a partnership; and
(iii) a corporation.
(B) Treatment of certain partnerships.--A partnership
shall be treated as a person with a seriously
delinquent tax debt if such partnership has a partner
who--
(i) holds an ownership interest of 50 percent
or more in that partnership; and
(ii) who has a seriously delinquent tax debt.
(C) Treatment of certain corporations.--A corporation
shall be treated as a person with a seriously
delinquent tax debt if such corporation has an officer
or a shareholder who--
(i) holds 50 percent or more, or a
controlling interest that is less than 50
percent, of the outstanding shares of corporate
stock in that corporation; and
(ii) who has a seriously delinquent tax debt.
(2) Executive agency.--The term ``executive agency'' has the
meaning given such term in section 4 of the Office of Federal
Procurement Policy Act (41 U.S.C. 403).
(3) Seriously delinquent tax debt.--
(A) In general.--The term ``seriously delinquent tax
debt'' means an outstanding debt under the Internal
Revenue Code of 1986 for which a notice of lien has
been filed in public records pursuant to section 6323
of such Code.
(B) Exceptions.--Such term does not include--
(i) a debt that is being paid in a timely
manner pursuant to an agreement under section
6159 or section 7122 of such Code; and
(ii) a debt with respect to which a
collection due process hearing under section
6330 of such Code, or relief under subsections
(a), (b), or (f) of section 6015 of such Code,
is requested or pending.
Purpose and Summary
H.R. 4881, the Contracting and Tax Accountability Act of
2008, was introduced by Rep. Brad Ellsworth and Rep. Edolphus
Towns, the Chairman of the Subcommittee on Government
Management, Organization, and Procurement, on December 19,
2007. H.R. 4881 establishes a process through which persons
with seriously delinquent federal tax debts may be prohibited
from receiving federal contracts and grants.
Background and Need for Legislation
Contractors owe the federal government billions of dollars
in delinquent taxes, and the Contracting and Tax Accountability
Act is designed to mandate that tax compliance be a
prerequisite for receiving a federal contract. In 2004 and
2005, GAO reported that government contractors owed over $5
billion in unpaid federal taxes.
According to the GAO, the contractors are typically
closely-held businesses with unpaid payroll and corporate
income taxes. These payroll taxes include amounts withheld from
employee wages for Social Security, Medicare, and individual
income taxes, but never remitted to the Internal Revenue
Service (IRS). Many of the contractors have repeatedly failed
to fulfill their tax obligations and have delinquencies that
extend over multiple tax periods. GAO also identified instances
in which companies that are delinquent in their taxes have won
contracts by submitting lower offers than companies that comply
with tax obligations.
This bill will encourage contractors wishing to do business
with the government to comply with the nation's tax laws,
thereby reducing the level of tax delinquencies and promoting
compliance. This bill will also afford companies that do comply
with tax responsibilities a fair opportunity to compete for
contracts.
Legislative History
H.R. 4881 was introduced by Reps. Ellsworth and Towns on
December 19, 2007, and referred to the Committee on Oversight
and Government Reform.
H.R. 4881 combines elements of two other bills on
contractor tax compliance: H.R. 1870, the Contractor Tax
Enforcement Act, which was introduced by Rep. Towns on April
17, 2007, and H.R. 1986, the Federal Contractor Accountability
Act of 2007, which was introduced by Rep. Ellsworth on April
20, 2007.
The Subcommittee on Government Management, Organization,
and Procurement held a hearing on H.R. 1870 and H.R. 1986 on
April 19, 2007. The witnesses were Paul A. Denett,
Administrator for Federal Procurement Policy, Office of
Management and Budget; Russell George, Treasury Inspector
General for Tax Administration, Internal Revenue Service; and
Gregory D. Kutz, Managing Director, Forensic Audits and Special
Investigations, U.S. Government Accountability Office.
The Subcommittee on Government Management, Organization,
and Procurement held a hearing on H.R. 4881 on February 27,
2008. The witnesses were Paul A. Denett, Administrator for
Federal Procurement Policy, Office of Management and Budget;
John Hutton, Director, Acquisition and Sourcing Management,
U.S. Government Accountability Office; Marcia Madsen, Chair,
Acquisition Advisory Panel; Scott Amey, General Counsel,
Project on Government Oversight; and Alan Chvotkin, Senior Vice
President and Counsel, Professional Services Council.
The Subcommittee on Government Management, Organization,
and Procurement held a markup to consider H.R. 4881 on March
11, 2008, and ordered the bill to be reported, as amended, by
voice vote. The Committee on Oversight and Government Reform
held a markup to consider H.R. 4881 on March 13, 2008, and
ordered the bill to be reported by voice vote.
Section-by-Section
Section 1: Short title
The short title of the bill is the Contracting and Tax
Accountability Act of 2007.
Section 2: Governmental policy
This section states that the policy of the United States is
that no government contracts or grants should be awarded to
individuals or companies with seriously delinquent Federal tax
debts.
Section 3: Prohibition on awarding of contracts to delinquent federal
debtors
This section establishes procedures through which persons
with seriously delinquent tax debts may be debarred from
federal contracts. It requires that bids or proposals for
federal contracts include a certification that the person does
not have a seriously delinquent tax debt and an authorization
to verify this certification with the Secretary of the
Treasury. It requires the Secretary of the Treasury to develop
a standard form, and the Federal Acquisition Regulation to be
revised to require the certification and authorization.
``Contract'' is defined as a binding agreement entered into
by a federal agency for the purpose of obtaining property or
services. Contracts designated as necessary to disaster relief
or national security are exempted from the requirements of this
section.
A ``person'' subject to the requirements of this section
includes an individual; a partnership; a corporation; a
partnership in which a partner with an ownership interest of 50
percent or more has a seriously delinquent tax debt; and a
corporation in which an officer or shareholder who holds 50
percent or more, or a controlling interest that is less than 50
percent of the outstanding shares of corporate stock in that
corporation has a seriously delinquent tax debt.
``Seriously delinquent tax debt'' is defined as an
outstanding debt under the Internal Revenue Code of 1986 for
which a notice of lien has been filed in public records. The
term excludes tax debt that is being repaid pursuant to an
installment agreement and tax debt for which a collection due
process hearing or innocent spouse relief has been requested.
Section 4: Prohibition on awarding of grants to delinquent federal
debtors
This requires that grant applications include a
certification that the person does not have a seriously
delinquent tax debt and an authorization to verify this
certification with the Secretary of the Treasury. It requires
the Secretary of the Treasury to develop a standard form, and
the Director of the Office of Management and Budget to issue
regulations to require the certification and authorization.
A ``person'' subject to the requirements of this section
includes an individual; a partnership; a corporation; a
partnership in which a partner with an ownership interest of 50
percent or more has a seriously delinquent tax debt; and a
corporation in which an officer or shareholder who holds 50
percent or more, or a controlling interest that is less than 50
percent, of the outstanding shares of corporate stock in that
corporation has a seriously delinquent tax debt.
``Seriously delinquent tax debt'' is defined as an
outstanding debt under the Internal Revenue Code of 1986 for
which a notice of lien has been filed in public records. The
term excludes tax debt that is being repaid pursuant to an
installment agreement and tax debt for which a collection due
process hearing or innocent spouse relief has been requested.
Explanation of Amendments
The following amendments were adopted in the Subcommittee
on Government Management, Organization, and Procurement:
Mr. Towns offered an amendment in the nature of a
substitute. The amendment clarified that the requirements of
section 3 apply only to contracts in an amount exceeding the
simplified acquisition threshold, and made technical
corrections.
The Towns amendment in the nature of a substitute passed by
voice vote.
Committee Consideration
On Thursday, March 13, 2008, the Committee met in open
session and favorably ordered H.R. 4881 to be reported to the
House by a voice vote.
Rollcall Votes
No rollcall votes were held.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to terms and conditions of
employment or access to public services and accommodations. The
bill does not relate to employment or access to public services
and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report, including promoting fairness in federal
procurement.
Constitutional Authority Statement
Under clause 3(d)(1) of rule XIII of the Rules of the House
of Representatives, the Committee must include a statement
citing the specific powers granted to Congress to enact the law
proposed by H.R. 4881. Article I, Section 8, Clause 18 of the
Constitution of the United States grants the Congress the power
to enact this law.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandates Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement on
whether the provisions of the report include unfunded mandates.
In compliance with this requirement the Committee has received
a letter from the Congressional Budget Office included herein.
Earmark Identification
H.R. 4881 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4881. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 4881 from the Director of
the Congressional Budget Office:
April 10, 2008.
Hon. Henry A. Waxman,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4881, the
Contracting and Tax Accountability Act of 2008.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Peter R. Orszag.
Enclosure.
H.R. 4881--Contracting and Tax Accountability Act of 2008
Summary: H.R. 4881 would prohibit federal agencies from
awarding contracts to persons or companies that have failed to
pay their federal taxes. Additionally, under the bill, certain
contractors and grantees that receive federal funds would have
to certify that they do not have federal tax debt, and the
Internal Revenue Service (IRS) would be authorized to confirm
or refute those claims for the federal agencies involved.
CBO estimates that implementing H.R. 4881 would cost $5
million in 2009 and $14 million over the 2009-2013 period,
assuming appropriation of the necessary amounts. The Joint
Committee on Taxation (JCT) estimates that the legislation
would have a negligible effect on revenues. H.R. 4881 contains
no intergovernmental or private-sector mandates as defined in
the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4881 is shown in the following table.
The cost of this legislation falls within budget function 800
(general government).
------------------------------------------------------------------------
By fiscal year, in millions of
dollars--
---------------------------------------
2009 2010 2011 2012 2013
------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level... 5 3 2 2 2
Estimated Outlays............... 5 3 2 2 2
------------------------------------------------------------------------
Basis of estimate: For this estimate, CBO assumes that the
bill will be enacted near the start of fiscal year 2009, that
the necessary funds will be provided for each year, and that
spending will follow historical patterns for similar programs.
According to the Office of Management and Budget and the
General Services Administration, the government currently
collects information on contractors and grants through a
variety of databases. In addition, the IRS has a database
regarding tax liens and already provides tax-debt information
to the Treasury Department's Offset Program, which withholds or
reduces certain federal payments to collect delinquent tax and
nontax debt owed to federal agencies. Using that information,
CBO estimates that updating and combining the databases to meet
the bill's requirements would cost about $5 million in 2009 and
$14 million over the 2009-2013 period. This would include costs
to create regulations, provide training to federal employees,
and update and maintain the databases.
Intergovernmental and private-sector impact: H.R. 4881
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Federal costs: Matthew Pickford;
Impact on state, local, and tribal governments: Elizabeth Cove;
Impact on the private sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic, existing law in which no change is proposed
is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
Subtitle III--FINANCIAL MANAGEMENT
* * * * * * *
CHAPTER 37--CLAIMS
* * * * * * *
SUBCHAPTER II--CLAIMS OF THE UNITED STATES GOVERNMENT
* * * * * * *
Sec. 3720B. Barring delinquent Federal debtors from obtaining Federal
loans or loan insurance guarantees or contracts
(a) * * *
* * * * * * *
(c)(1) Unless this subsection is waived by the head of a
Federal agency, a person who has a seriously delinquent tax
debt shall be proposed for debarment from any contract awarded
by the Federal Government.
(2) The head of any Federal agency that issues an invitation
for bids or a request for proposals for a contract in an amount
greater than the simplified acquisition threshold (as defined
in section 4(11) of the Office of Federal Procurement Policy
Act (41 U.S.C. 401(11)) shall require each person that submits
a bid or proposal to submit with the bid or proposal a form--
(A) certifying that the person does not have a
seriously delinquent tax debt; and
(B) authorizing the Secretary of the Treasury to
disclose to the head of the agency information limited
to describing whether the person has a seriously
delinquent tax debt.
(3) The Secretary shall make available to all Federal
agencies a standard form for the certification and
authorization described in paragraph (2).
(4) Not later than 270 days after the date of enactment of
this subsection, the Federal Acquisition Regulation shall be
revised to incorporate the requirements of this subsection.
(5) For purposes of this subsection:
(A) The term ``contract'' means a binding agreement
entered into by a Federal agency for the purpose of
obtaining property or services, but does not include--
(i) a contract designated by the head of the
agency as assisting the agency in the
performance of disaster relief authorities; or
(ii) a contract designated by the head of the
agency as necessary to the national security of
the United States.
(B)(i) The term ``person'' includes--
(I) an individual;
(II) a partnership; and
(III) a corporation.
(ii) A partnership shall be treated as a person with
a seriously delinquent tax debt if such partnership has
a partner who--
(I) holds an ownership interest of 50 percent
or more in that partnership; and
(II) who has a seriously delinquent tax debt.
(iii) A corporation shall be treated as a person with
a seriously delinquent tax debt if such corporation has
an officer or a shareholder who--
(I) holds 50 percent or more, or a
controlling interest that is less than 50
percent, of the outstanding shares of corporate
stock in that corporation; and
(II) who has a seriously delinquent tax debt.
(C)(i) The term ``seriously delinquent tax debt''
means an outstanding debt under the Internal Revenue
Code of 1986 for which a notice of lien has been filed
in public records pursuant to section 6323 of such
Code.
(ii) Such term does not include--
(I) a debt that is being paid in a timely
manner pursuant to an agreement under section
6159 or section 7122 of such Code; and
(II) a debt with respect to which a
collection due process hearing under section
6330 of such Code, or relief under subsections
(a), (b), or (f) of section 6015 of such Code,
is requested or pending.
* * * * * * *
ADDITIONAL VIEWS OF RANKING MEMBER TOM DAVIS
H.R. 4881 would subject any firm that has a seriously
delinquent tax debt--defined to mean any time the Internal
Revenue Service has filed a tax lien against the company--to a
debarment proceeding with the aim of preventing the firm from
obtaining a government contract or grant.
Potential contractors and grant recipients must certify
that the company does not have any ``seriously delinquent tax
debt'' in order to be eligible for federal grants and
contracts.
This is a reasonable requirement.
In fact, the Administration is currently finalizing a
regulation that would require federal contractors and grantees
to certify, among other things, 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 debarred from receiving
federal contracts.
Since the issue addressed in H.R. 4881 is already being
addressed through the regulatory process it is not totally
clear to me what we are accomplishing with this legislation,
Nevertheless I have no real objection and therefore supported
the legislation in Committee.
I do hope, however, that the majority would spend more time
on matters that would address the problems facing the
acquisition system like providing our acquisition workforce
with better tools and training. H.R. 4881 does nothing to
improve our ability to obtain the best value goods and services
so urgently needed to operate our government. It will not
remedy poorly defined requirements or provide us with a
sufficient number of federal acquisition personnel with the
right skills to select the best contractor and manage
performance.
Tom Davis.