H. Rept. 113-35 - 113th Congress (2013-2014)

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[House Report 113-35]
[From the U.S. Government Publishing Office]

113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     113-35




 April 12, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


   Mr. Issa, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 882]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 882) 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 without amendment and 
recommend that the bill do pass.


Committee Statement and Views....................................     2
Section-by-Section...............................................     4
Explanation of Amendments........................................     5
Committee Consideration..........................................     5
Application of Law to the Legislative Branch.....................     5
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     5
Statement of General Performance Goals and Objectives............     5
Duplication of Federal Programs..................................     5
Disclosure of Directed Rule Making...............................     5
Federal Advisory Committee Act...................................     5
Unfunded Mandate Statement.......................................     6
Earmark Identification...........................................     6
Committee Estimate...............................................     6
Budget Authority and Congressional Budget Office Cost Estimate...     6

                     Committee Statement and Views

                          PURPOSE AND SUMMARY

    H.R. 882 is designed to ensure federal tax compliance for 
both government contractors and grantees. The federal 
government spends more than $1 trillion in contracts and grants 
annually (in fiscal year 2012, $514 billion in contracts and 
$536 billion in grants).\1\ It is important to ensure that the 
federal contracts and grants, funded by the taxpayers, are only 
awarded to responsible businesses and individuals.
    \1\Source: USASpending.gov.
    This bill requires that the head of any executive agency 
that issues a solicitation for a contract, or that offers a 
grant, in an amount greater than the simplified acquisition 
threshold (currently set at $150,000) require each person 
submitting a bid or proposal or grant application to: (1) 
certify that such person does not have a seriously delinquent 
tax debt; and (2) authorize the Secretary of the Treasury to 
disclose information limited to describing whether such person 
has a seriously delinquent tax debt. Affirmative self-
certification of a seriously delinquent tax debt is considered 
to be definitive proof that the person is not a responsible 
party or is a high-risk applicant for the pending contract or 
grant action.
    This bill requires contractors and grantees found to have a 
``seriously delinquent tax debt''--whether they be identified 
via self-certification or by the Treasury verification--to be 
proposed for debarment consideration, unless waived by the 
agency head.
    ``Seriously delinquent tax debt'' is defined in the bill as 
an outstanding tax debt for which a notice of lien has been 
filed in public records. Exempted from such definition are: (1) 
tax debts that are being paid in a timely manner under an 
approved installment agreement; and (2) debts for which a 
collection due process hearing has been requested or is 


    The Government Accountability Office (GAO) has reported 
that thousands of government contractors had substantial 
amounts of unpaid federal taxes. Specifically, about 27,000 
defense contractors, 33,000 civilian agency contractors, and 
3,800 General Services Administration contractors owed about $3 
billion, $3.3 billion, and $1.4 billion in unpaid taxes, 
respectively.\2\ Many of the contractors have repeatedly failed 
to fulfill their tax obligations and have delinquencies that 
extend over multiple tax periods. GAO also reported that tens 
of thousands of recipients of federal grant and direct 
assistance programs collectively owed $790 million in federal 
taxes as of September 30, 2006.\3\ This figure, according to 
GAO, is likely substantially understated because GAO's analysis 
excluded the 80 percent of federal grants that are directly 
given to state and local governments which, in turn, disburse 
the grants to the ultimate recipients. Furthermore, in its 
April 2011 report, GAO found that at least 3,700 Recovery Act 
contract and grant recipients owed more than $750 million in 
known unpaid federal taxes while receiving over $24 billion in 
Recovery Act funds.\4\ This represented nearly 5 percent of the 
contractors and grant recipients in the Recovery.gov database 
at the time.
    \2\See GAO-07-742T; ``TAX COMPLIANCE: Thousands of Federal 
Contractors Abuse the Federal Tax System''; April 19, 2007.
    \3\See GAO-08-31; ``TAX COMPLIANCE: Federal Grant and Direct 
Assistance Recipients Who Abuse the Federal Tax System''; November 
    \4\See GAO-11-485; ``RECOVERY ACT: Thousands of Recovery Act 
Contract and Grant Recipients Owe Hundreds of Millions in Federal 
Taxes''; April 2011.
    In response to the GAO reports and Congressional attention, 
in April 2008, the Federal Acquisition Regulation (FAR) was 
revised requiring, for any contracts over the simplified 
acquisition threshold; (1) offerors certify tax delinquency 
status; and (2) where an offeror indicates the existence of 
``an indictment, charge, conviction, or civil judgment, or 
Federal tax delinquency in an amount that exceeds $3,000'' an 
agency suspension and debarment official is notified.\5\ The 
Administration, in January 2010, published a memorandum pushing 
for enhanced tax compliance requirements by tasking the 
Commissioner of Internal Revenue with conducting a review of 
self-certifications submitted pursuant to the 2008 FAR 
amendment.\6\ This bill would codify the FAR changes and 
provide a means to verify the contractor's self-certification.
    \5\Federal Acquisition Regulation 9.104-5, Certification regarding 
responsibility matters.
    \6\See generally ``Memorandum for the Heads of Executive 
Departments and Agencies,'' January 20, 2010. http://
    The bill defines ``seriously delinquent tax debt'' as an 
outstanding tax debt for which a ``notice of lien has been 
filed in public records.''
    The committee believes the bill sufficiently protects 
honest and responsible small businesses and individuals. Under 
the Internal Revenue Code, referenced in the bill (26 U.S.C. 
6320), a written notice is provided within five business days 
after the filing of a notice of lien. This official and 
legally-sufficient notice is either: (1) given in person; (2) 
left at the dwelling or usual place of business of such person; 
or (3) sent by certified or registered mail to such person's 
last known address. If a small business, for instance, missed 
this individual notice, they could check public records easily 
accessible to the general public. Similar notice requirements 
exist before any levy is made on any property or right to 
    \7\See generally 26 U.S.C. Sec. 6330.
    This bill provides broad exceptions for debts being paid in 
a timely manner, and debts in which a due process hearing has 
been requested or is pending. An alleged tax delinquent 
business or individual may request a hearing or appeal at the 
time of the notice of lien or levy. The committee is also aware 
that the Internal Revenue Service typically does not file 
notices of federal tax liens on amounts less than $10,000.\8\
    \8\See http://www.irs.gov/Businesses/Small-Businesses-&-Self-
    Under the statute, a ``responsible'' contractor must 
possess ``a satisfactory record of integrity and business 
ethics.''\9\ The Committee believes that it is not unreasonable 
to ask that a responsible business, expecting to be awarded a 
contract or grant valued at more than $150,000 (i.e., current 
simplified acquisition threshold), be aware of its federal tax 
liability or an official written notice or public record 
against its property.
    \9\See generally 41 U.S.C. Sec. 113.

                          LEGISLATIVE HISTORY

    An identical version of this bill (H.R. 829), including an 
amendment offered by Rep. Speier, was adopted by the Oversight 
and Government Reform Committee during the 112th Congress. 
Similar measures were introduced in the 110th and 111th 
Congresses, by then-Senator Barack Obama.\10\
    \10\S. 2519, ``Contracting and Tax Accountability Act of 2007.''


Section 1. Short title

    Provides the title ``Contracting and Tax Accountability Act 
of 2013.''

Section 2. Governmental policy

    Provides the policy of the United States Government that no 
government contract or grant should be awarded to an individual 
or company with seriously delinquent federal tax debts.

Section 3. Disclosure and evaluation of contract offers from delinquent 
        federal debtors

    Requires that a solicitation for a contract larger than 
$150,000 (i.e., the simplified acquisition threshold) require 
that each offeror submit: (1) a certification that the offeror 
does not have a ``seriously delinquent tax debt''; and (2) a 
waiver of privacy to allow verification of such self-
certification using the Treasury tax data.
    Subsection (b) creates a presumption that the affirmative 
certification of ``seriously delinquent tax debt'' be 
definitive proof that the offeror is not a responsible source 
to do business with the federal government.
    Subsection (c) requires that an offeror with a ``seriously 
delinquent tax debt,'' deduced either by self-certification or 
by Treasury verification, be referred to the agency's 
suspension and debarment office for a formal adjudication, 
unless the head of an agency executes a written waiver. In case 
of a waiver, the head of the agency is required to notify 
Congress within 30 days with the relevant information. The term 
``propose'' in this bill has a meaning distinct from what is 
called ``a notice of proposed debarment'' in the FAR.\11\
    \11\Federal Acquisition Regulation 9.406-3, Procedures. (c) Notice 
of proposal to debar.

Section 4. Disclosure and evaluation of grant applications from 
        delinquent federal debtors

    Provides reciprocal requirements for grants, except that 
instead of banning grantees with a seriously delinquent tax 
debt from receiving a grant, they are instead placed in the 
``high risk'' category, triggering enhanced reporting and 

Section 5. Definitions and special rules

    The term ``seriously delinquent tax debt'' is defined as 
``an outstanding tax debt under the Internal Revenue Code of 
1986 for which a notice of lien has been filed in public 
records.'' Exceptions are provided for debts being paid in a 
timely manner and debts in which a due process hearing has been 
requested or is pending. Also exempts a grant entitlement 
program applicant.

Section 6. Effective date

    Applies to contracts and grants awarded on or after the 
date occurring 270 days after enactment of this Act.

                       Explanation of Amendments

    No amendments were offered to H.R. 882.

                        Committee Consideration

    On March 20, 2013, the Committee met in open session and 
ordered reported favorably the bill, H.R. 882, by voice vote, a 
quorum being present.

              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 the terms and conditions of 
employment or access to public services and accommodations. 
This bill ensures federal tax compliance for both government 
contractors and grantees. As such this 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.

                    Duplication of Federal Programs

    No provision of H.R. 882 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    Section 3(e) requires that the Federal Acquisition 
Regulation be revised to incorporate the requirements of the 
bill within 270 days of date of enactment.
    Section 4(e) requires that the Director of the Office of 
Management and Budget revise regulations governing grants to 
incorporate the requirements of the bill within 270 days of 
date of enactment.

                     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 Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 

                         Earmark Identification

    H.R. 882 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 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. 882. 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. 882 from the Director of 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 11, 2013.
Hon. Darrell Issa,
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. 882, the 
Contracting and Tax Accountability Act of 2013.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
                                              Douglas W. Elmendorf.

H.R. 882--Contracting and Tax Accountability Act of 2013

    H.R. 882 would prohibit federal agencies from awarding 
contracts or grants to persons or companies that have seriously 
delinquent tax debt. The legislation defines seriously 
delinquent as outstanding tax debt to the federal government 
for which a public lien has been filed. Tax debt that is being 
paid in a timely manner, or is part of a requested or pending 
collection-due-process hearing, would not be considered 
seriously delinquent. Under the bill, certain contractors and 
grantees that receive federal funds would have to certify that 
they do not have such tax debt, and the Internal Revenue 
Service (IRS) would be authorized to confirm or refute those 
claims on behalf of the federal agencies involved.
    Based on information from the Office of Management and 
Budget, the Internal Revenue Service, and the staff of the 
Joint Committee on Taxation (JCT), CBO estimates that 
implementing H.R. 882 would increase administrative costs 
governmentwide by less than $500,000 annually, assuming the 
availability of appropriated funds. The bill could affect 
direct spending by agencies not funded through annual 
appropriations; therefore, pay-as-you-go procedures apply. CBO 
estimates that any net increase in direct spending by such 
agencies would not be significant. JCT estimates that enacting 
the bill would have a negligible effect on revenues.
    Most of the provisions of the bill would expand current law 
and practices. The federal government currently collects 
information on contractors and grant recipients through a 
variety of databases. In addition, the IRS has a database 
regarding tax liens and already provides tax-debt information 
to various Treasury Department programs through which certain 
federal payments are withheld or reduced in order to collect 
delinquent tax and nontax debt owed to federal agencies. 
Consequently, CBO estimates that implementing this bill will 
would not significantly increase administrative costs to 
federal agencies.
    H.R. 882 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
    The CBO staff contact for this estimate is Matthew 
Pickford. This estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.