Tuesday, April 10, 2018

Validating Self-Certifications of No Outstanding Tax Liabilites

It is well established that Government contractors must be "responsible" and there is a self-certification requirement to indicate that there are no outstanding income tax liabilities. This self-certification has been abused because everyone knows that there is no way to positively validate such a certification. The Defense Department, for example, cannot run over to the IRS to validate a self-certification.

But can an IRS contracting officer obtain information available only to the IRS?

Now they can.

It is in the interest of the Government to only award contracts to entities that are responsible and law abiding. FAR 9.104 requires contracting officers to perform a responsibility determination prior to each contract award by using the standards listed in FAR 9.104-1, as well as consider information submitted by the contractor and information they research or acquire from other sources.

The IRS (Internal Revenue Service) administers the Internal Revenue Code. Since fiscal year 2012, language in various appropriations acts have prohibited the Government under various conditions from using appropriated funds to enter into a contract with a prospective contractor unless the prospective contract certifies in writing that it has not been notified of any unpaid Federal tax assessment.

For purposes of tax administration, the IRS has access to taxpayer return information that is not otherwise available to other Federal Agencies. The Treasury Department has determined that an IRS contractor's compliance with the tax laws is a tax administration matter. The tax code authorizes the IRS to disclose a taxpayer's return information to such person(s) as the taxpayer may designate in a consent to such disclosure. In many cases, however, the official signing a contract proposal on behalf of an offeror will not be an official to whom the IRS is authorized to disclose the offeror's tax information. Thus, in order to ensure that the IRS is authorized to discuss the offeror's own tax information with an authorized official of the offer, a consent to disclosure is required. This consent to disclosure must be in the form of a separate written document pertaining solely to the authorized disclosure and must be signed and dated by an authorized person.

With this in mind the Treasury Department has amended its regulations (DTARs or Department of the Treasury Acquisition Regulations) to establish policies and procedures that facilitate successful, timely, and economical execution of IRS contractual actions in compliance with the FAR and various appropriation restrictions. Specifically, the interim rule established an express requirement for IRS contracting officers to use taxpayer return information that is available only to IRS to perform a tax check on the apparent successful offeror for purposes of determining eligibility to enter into a contract with the IRS.

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