Tuesday, October 20, 2015

Pay Your Taxes or Don't Get a Contract

The Department of Defense yesterday issued a directive that prohibits the award of any contract using Fiscal Year 2016 funds to firms with unpaid delinquent tax liabilities or a felony conviction under Federal law.

The definition of "unpaid delinquent tax liabilities" reads:
Has any unpaid Federal tax liability that has been assessed, for which all judicial and administrative remedies have been exhausted or have lapsed, and that is not being paid in a timely manner pursuant to an agreement with the authority responsible for collecting the tax liability, where the awarding agency is aware of the unpaid tax liability, unless the agency has considered suspension or debarment of the corporation and made a determination that this further action is not necessary to protect the interests of the Government.
So, how is the contracting officer going to know that an offeror or prospective contractor has any unpaid delinquent tax liabilities? Do they have a pipeline into the Internal Revenue Service? Well, no. Not yet anyway. Contracting officers are going to find out because prospective contractors must now certify or represent that they do not have any delinquent unpaid federal taxes.

There is a new provision that will be included in all solicitations that require contractors to "represent" that they do or do not have any unpaid delinquent federal tax liabilities. That provision is located in DoD FAR Supplement 252.209-7991.

Presumably this prohibition applies only to contracts awarded by the Department of Defense.


  1. Thanks for the insights. Do you know whether and to what extent this extends to foreign taxes?

  2. Applies only to Federal taxes, not foreign or any state income taxes.