[Federal Register: April 22, 2008 (Volume 73, Number 78)]
[Rules and Regulations]
[Page 21791-21799]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ap08-18]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 4, 9, and 52
[FAC 2005-25; FAR Case 2006-011; Item V; Docket 2008-0001; Sequence 8]
RIN 9000-AK73
Federal Acquisition Regulation; FAR Case 2006-011,
Representations and Certifications - Tax Delinquencies
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to add conditions
regarding violation of Federal criminal tax laws and delinquent Federal
taxes to standards of contractor responsibility, causes for debarment
and suspension, and the certifications regarding debarment, suspension,
proposed debarment, and other responsibility matters.
DATES: Effective Date: May 22, 2008.
FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, Procurement
Analyst, at (202) 208-6925 for clarification of content. For
information pertaining to status or publication schedules, contact the
FAR Secretariat at (202) 501-4755. Please cite FAC 2005-25, FAR case
2006-011.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule was opened to consider adding conditions regarding
violation of tax laws and delinquent taxes to standards of contractor
responsibility, causes for debarment and suspension, and the
certifications regarding debarment, suspension, proposed debarment, and
other responsibility matters. The case was initiated in response to a
request from the Senate Permanent Subcommittee on Investigations (PSI),
which requested implementation of the following:
``To identify noncompliance with tax law . . . the Government
should be asking potential contractors, not whether they have been
indicted or convicted of tax evasion, but whether they have had any
criminal tax law violation in the last three years, whether they have
any outstanding tax indebtedness more than one year old, or whether
they have any outstanding unresolved federal or state tax lien.''
The Councils published a proposed rule in the Federal Register at
72 FR 15093, March 30, 2007. The comment period closed on May 29, 2007.
The Councils received comments from nine respondents.
In drafting the final rule, the Councils have made the following
changes from the proposed rule:
1. Violating Federal criminal tax laws.
Change ``violating tax laws, failing to pay taxes'' to ``violating
Federal criminal tax laws'' (9.406-2(a)(3), 9.407-2(a)(3), 52.209-
5(a)(1)(i)(B), and 52.212-3(h)(2)).
2. Federal tax delinquency in an amount that exceeds $3,000.
a. Change ``tax delinquency'' to ``Federal tax delinquency in an
amount that exceeds $3000'' (9.104-5(a)(2)).
b. Change ``delinquent taxes or unresolved tax liens'' to
``delinquent Federal taxes in an amount that exceeds $3,000'' and
provide detailed definition of delinquent Federal taxes (which includes
unresolved tax liens), with examples (9.406-2(b)(1)(v), 9.407-2(a)(7),
and comparable changes to the clauses at 52.209-5(a)(1)(i)(D) and (E)
and 52.212-3(h)(4) and (5)).
3. Other matters of responsibility.
a. Move 9.408 and 9.409(a) to 9.104-5 and 9.104-6, respectively.
b. Modify the new 9.104-5(a)(1) to require the offeror to provide
the information it deems necessary to demonstrate its responsibility.
c. Change the title of 52.209-5 from ``Certification Regarding
Debarment, Suspension, Proposed Debarment, and Other Responsibility
Matters'' to ``Certification Regarding Responsibility Matters''.
In accordance with FAR 1.107 and Section 29 of the Office of
Federal Procurement Policy (OFPP) Act, approval was requested to revise
and extend the existing two non-statutory certification requirements at
FAR 52.209-5, Certification Regarding Responsibility Matters, and FAR
52.212-3(h), Offeror Representations and Certifications--Commercial
Items. The Administrator for Federal Procurement Policy approved the
request on January 16, 2008. The basis for each change and analysis of
all public comments follows.
1. General support for the rule.
Comments: Three respondents express general support for the
proposed rule.
Response: None required.
2. Broad arguments against inclusion of tax delinquency as
debarment criteria.
a. Historical.
Comments: Two respondents comment on the inclusion of tax
delinquency as a cause for debarment. One respondent notes that the
Office of Management and Budget (OMB) objected to the inclusion of tax
debts as a cause for debarment in 1988, when the Nonprocurement-Common
Rule was finalized, on the basis that the Internal Revenue Service
(IRS) had sufficient power and authority to collect taxes without using
the suspension and debarment tool. The respondent suggests that it
would be prudent for OMB to reconcile the philosophical/policy
differences underpinning the proposed FAR case here with those
pronounced under the Nonprocurement-Common Rule in 1988.
Response: Since 1988, the Government Accountability Office (GAO)
has issued various reports highlighting the fact that Federal
contractors fail to pay their taxes, e.g.,
Financial Management: Thousands of Civilian Agency
Contractors Abuse the Federal Tax System with Little Consequence. GAO-
05-637 (June 2005).
Tax Compliance: Thousands of Federal Contractors Abuse the
Federal Tax System. GAO-07-742T (April 2007).
The GAO concluded that contractors' failure to pay payroll taxes
provided them with an unfair advantage in pricing their contracts.
The letter from the Senate PSI specifically requests that the
Federal Acquisition Regulations include criminal tax law violations and
outstanding tax indebtedness or outstanding unresolved tax liens as
causes for debarment.
b. No relationship to present responsibility.
Comment: One respondent expresses concern about using the
suspension and debarment process as an enforcement mechanism for
violations that have no relationship to a contractor's present
responsibility to perform Government contracts.
Response: A contractor's present responsibility to perform includes
financial responsibility, as well as integrity. The rule is not
intended as a tool to collect taxes for the IRS, but to provide
information to the contracting officer on issues that may affect the
contractor's responsibility.
3. Conflict with Nonprocurement-Common Rule.
Comment: One respondent notes that the OMB Interagency Suspension
and
[[Page 21792]]
Debarment Committee was established by E.O. 12549 to monitor
implementation of the Nonprocurement-Common Rule and as a vehicle of
coordination of Federal suspension and debarment policies and
practices. If the FAR rule is finalized, it will place the two near
mirror image rules in conflict with one another.
Response: Upon issuance of this final rule, the Councils believe
that the OMB Interagency Suspension and Debarment Committee will
consider similar changes to the Nonprocurement-Common Rule to keep the
two rules parallel.
4. Other information available to the Government.
a. Government already has the necessary information.
Comment: One respondent comments that most of the information
requested by the rule is already available to the Federal Government.
The respondent provides examples of ready access to IRS information,
including the Central Contractor Registration (CCR) Taxpayer
Identification Number (TIN) match program, Federal Payment Levy
Program, and a recent DoD final rule requiring the contractor to notify
the contracting officer if any tax withholding would jeopardize
performance of a contract.
Response: Various Federal agencies have access to some information
originating with the IRS and regarding prospective contractors. This
information, including a verified Taxpayer Identification Number
disclosed to the CCR and levy information disclosed to the Financial
Management Service in the Federal Payment Levy Program process, is not
the same information that offerors are requested to certify under this
rule. Contracting officers making responsibility determinations would
not be able to deduce from a TIN, levy, or tax withholding whether a
prospective contractor has, within a 3-year period preceding the offer,
been convicted of or had a civil judgment rendered against them for
violating Federal criminal tax law, or been notified of any delinquent
Federal taxes in an amount that exceeds $3,000. To a large extent, the
information already released to Federal agencies involved in the
procurement process would not provide the facts important to making
responsibility determinations.
Furthermore, to the extent the IRS information has been disclosed
to other Federal agencies, disclosure has been made under specific
statutory authority allowing disclosure of the information, and use of
the information once disclosed, to specifically identified recipients
for specifically identified purposes. This generally does not allow the
redisclosure or reuse of this information by the recipient for reasons
other than that for which it was originally received. Likewise, the
information in the IRS' control cannot be disclosed or used unless
specifically authorized by the Internal Revenue Code (I.R.C.) (Title 26
of the United States Code). There are both civil and criminal penalties
attached to the unauthorized disclosure of this information by the IRS
or, in many cases, authorized recipients. Thus even to the extent some
information is in the hands of other Federal agencies, it cannot be
used in making responsibility determinations.
b. Use of other electronic systems for verification.
Comment: One respondent states that the proposed rule needs to be
supported by a strong system of verifications. The electronic tools are
already in place, or could be easily modified so that the
certifications would be more than words on paper, and this could be
done without imposing an additional burden on law-abiding companies
doing business with the Government. This respondent recommends that the
Councils back up the certifications using verifications between the
systems of flags being created in the CCR and the representations in
the Online Representations and Certifications Application, so that
contracting officers are immediately alerted to any discrepancies.
Response: The respondent proposes the verification enhancement of
requiring the contracting officer to compare and make consistent the
CCR debt flag and the offeror's proposal certification regarding tax
delinquencies. The Councils do not agree with this suggestion for
several reasons. There will be numerous circumstances under which the
two properly would be inconsistent. First, the debt flag system is
designed to cover all types of Federal debt, not just tax
delinquencies. Further, even if the debt flag in CCR were related to a
Federal tax debt, it would give a contracting officer no indication
whether an affirmative certification was required with regard to
violation of Federal criminal tax law or Federal tax delinquency. Also,
the Councils have relocated the former FAR 9.408 to 9.104-5, where its
requirements to ask for additional information from the offeror and
refer anomalies to the suspension and debarment official will be a
regular part of the determination of present responsibility, thus
better serving the respondent's purpose.
5. Certification issues.
a. Subject to additional criminal penalties.
Comment: One respondent states that each certification makes the
business and the individual who signs it subject to criminal penalties.
The company is also subject to Civil False Claims Act (CFCA) double and
treble damages, even if the violations were unintended, as the
Government does not need to show intent to defraud; also, the standard
of proof is only a ``preponderance of evidence''. An innocent mistake
under another statute could lead to a CFCA violation, which could then
lead to a determination of nonresponsibility under the new
certification, followed by debarment and suspension proceedings.
Response: The certification is not whether the contractor violated
another statute, but whether the contractor has been convicted or had a
civil judgment rendered against it, or received certain notifications.
b. S Corporations or partnerships.
Comment: One respondent states that the certification could be
problematic for companies that are organized as S corporations or
partnerships, because it is unclear under the proposed rule whether
each shareholder or partner would be required to certify that neither
they nor their fellow shareholders or partners has a tax delinquency.
Given that S corporations do not file corporate tax returns, but
instead report the company's tax liability on the individual tax
returns on the S corporation partners, the rule could impose a
significant level of personal information sharing among business
partners.
Response: The rule does not change the existing procedures for the
certification. The existing certification at 52.209-5 and 52.212-3(h)
is that ``(a)(1) The Offeror certifies, to the best of its knowledge
and belief, that-- (i) The Offeror and/or any of its Principals -. .
.''. The definition of principals is found at FAR 52.209-5, and
includes owners and partners. The offeror already has to certify to
whether it or its principals are debarred, suspended, proposed for
debarment, convicted of or charged with or had a civil judgment for
certain offenses. Individual certifications from each owner and each
partner are not required.
c. Application to commercial items.
Comment: One respondent objects to the certification being imposed
on commercial item procurements. 41 U.S.C. 430 prohibits the imposition
of any certification for a commercial item that is not required to
implement a statute or executive order unless the FAR Council has made
a determination to impose the certification. The FAR
[[Page 21793]]
Council has not done so. Therefore, Part 12 acquisitions should be
exempted.
Response: 41 U.S.C. 430 is the statute regarding laws inapplicable
to acquisition of commercial items. It requires a covered law enacted
after October 13, 1994, to be included on the list of laws inapplicable
to commercial items, unless the FAR Council makes a written
determination. This statute does not apply, as this regulation is not
based on statute. This statute does not prohibit application of this
rule to acquisitions of commercial items.
41 U.S.C. 425 is the certification statute. It forbids including a
contractor certification in the FAR unless it is specifically imposed
by statute, or a written justification is provided by the FAR Council
to the Administrator of OFPP, and the Administrator approves the
inclusion. This statute does apply. The FAR Council has obtained
approval from the Administrator of OFPP for inclusion of this
nonstatutory certification in the FAR.
d. Best knowledge and belief.
Comment: One respondent recommends that the certifications should
include the phrase ``best knowledge and belief''.
Response: The certifications already do include this phrase in the
current FAR in paragraphs 52.209-5(a)(1) and 52.212-3(h). Because no
change was proposed to these prefaces, they were not republished in the
proposed rule.
e. Date certain.
Comment: One respondent recommends that the contractor be allowed
to add a date certain, such as the end of the last calendar quarter, to
the certification.
Response: The Councils have elected not to add a ``date certain''
requirement to the certification regarding notification of delinquent
taxes because such an addition would require more, not less, work by
offerors. Adding a ``date certain'' requirement would effectively
require offerors to perform a ``sweep'' prior to each certification.
Absent a ``date certain'' requirement, offerors certify to their best
knowledge and belief. With the additional clarifications regarding
finality and Federal tax delinquency, offerors should be able to
certify with confidence without having to conduct an internal
``sweep.''
6. New causes of suspension and debarment and required
certification.
a. Inclusion of ``any'' (Federal, State, local, and foreign) tax
law violation or delinquency.
Comments: The U.S. Small Business Administration, Office of
Advocacy (SBA-OA) comments that the proposed rule would require a
contractor to certify that it does or does not have a tax liability not
just for Federal, State or local, but also foreign jurisdictions.
Another respondent comments that the rule should clearly state
whether the phrase ``tax laws'' refers to ``any and all'' tax laws.
Innumerable State, local, and foreign tax statutes may be applicable to
an offeror, depending on the size of the business, the number of
divisions or subsidiaries, nature, and location of work being
performed. A contractor who frequently submits proposals may not know
on a real time basis whether any notice has been received relating to
all the tax areas. The respondent recommends limiting the rule to
Federal income and payroll taxes.
Another respondent comments that because a multi-state company can
be under audit by hundreds of Federal, State, and local taxing
authorities at one time, such a company would find it virtually
impossible to comply with the proposed rule. This respondent recommends
that the rule be limited to Federal entities.
Response: The Councils concur with the respondents and have
narrowed the scope of the final rule to Federal tax delinquency and
violation of Federal criminal tax laws, except for tax evasion, which
applies to evasion of any tax, not just Federal. This should limit an
offeror's need to know on a real-time basis whether any notice has been
received relating to other than Federal tax areas (i.e., State, local,
and foreign jurisdictions).
The Councils' decision to remove State, local, and foreign tax
violations (except for tax evasion) from the scope of this rule is
because their inclusion would unduly burden the offerors and the
contracting officer, who would potentially face uncertainty when
assessing the impact of multi-jurisdictional tax violations on the
award process.
Although the Councils do agree to limiting to Federal criminal tax
law violations and Federal tax delinquency, they have not specifically
limited the final rule to address just Federal income and payroll
taxes, although such taxes certainly constitute the bulk of Federal
taxes. Any violation of Federal criminal tax law or Federal tax
delinquency can affect the contractor's responsibility, regardless of
the specific tax involved. Tracking of all Federal criminal tax
violation or Federal tax delinquency (even if other than income or
payroll) does not increase the complexity of the certification, but
simplifies it.
b. Tax evasion, violating tax law, failing to pay taxes.
Comment: One respondent comments that the proposed rule transforms
the precisely defined FAR Subpart 9.4, ``Debarment, Suspension and
Ineligibility,'' inclusive of a well-defined tax code definition of tax
evasion, into an undefined infraction called a tax liability for any
tax law.
Another respondent recommends deletion of the term ``tax evasion''
as a basis for suspension or disbarment, because ``tax evasion'' is
covered by the new causes: ``violating tax laws'' and ``failing to pay
taxes''.
Response: The Councils agree that the term ``tax evasion'' is
covered by the proposed phrases ``violating tax laws'', and ``failing
to pay taxes'', although those phrases cover a much broader range of
circumstances. However, the Councils also concur that the term ``tax
evasion'' is a precisely-defined well-understood term, applicable to
all types of taxes (Federal, state, local, and foreign) and therefore
have retained the term. The final rule has been drafted so that the
term ``tax evasion'' is no longer totally a subset of the subsequent
terms.
The term ``violating tax laws'' has been made more specific to
cover only the violation of ``Federal criminal tax laws'' (e.g.,
willful failure to file). The FAR sections 9.406-2(a) and 9.407-2(a)(3)
are intended to focus on criminal violations. The letter from the
Permanent Subcommittee on Investigations specifically requested that
the FAR should require certification with regard to criminal tax law
violation. The decision to limit the cause for debarment/suspension to
Federal criminal tax law violation was also based on the conclusion
that violation of other than criminal tax laws probably has less
bearing on contractor responsibility. Because the certification with
regard to criminal tax law violation is restricted to Federal criminal
tax law, it is necessary to retain ``tax evasion'' as well, which
applies to evasion of any tax, not just Federal taxes.
The broad circumstance covered by the phrase ``failing to pay
taxes'' is not necessarily a criminal offense, and the Councils have
therefore deleted it from the specified paragraphs. The non-criminal
failure to pay taxes is subsequently covered in the rule using a more
precisely defined term ``delinquent taxes''.
c. Delinquent taxes - need definition.
Comment: One respondent recommends a clear definition of
``delinquent taxes'', which allows for due process to dispute the tax
liability without penalty of debarment or suspension.
Another respondent states that use of the term ``delinquent taxes''
significantly lowers the standard from tax evasion. Because the IRS
does not
[[Page 21794]]
have a clear definition of ``delinquent taxes'', it is difficult to
ensure compliance with the new standard. It is unclear how this
definition accommodates taxpayers who are disputing tax liability.
Another respondent recommends that the certification provide that
an installment agreement or offer-in-compromise not be considered a
``delinquent'' tax subject to reporting requirements. The respondent
recommends the term ``notice of delinquency'' be deleted or defined to
reflect the adjudication of a tax liability after due process.
A fourth respondent recommends that the definition of ``delinquent
taxes'' be revised to specify that all avenues of appeal have been
closed, to allow for due process in disputing the tax liability.
Response: The Councils agree that the definitions of ``delinquent
taxes'' and ``tax delinquency'' need clarification. For purposes of the
FAR rule, the definition should have two components. First, the tax
liability should be finally determined (e.g., it is not a proposed
liability subject to further administrative or judicial challenge and
it has been assessed (``finality'' element)). Second, the taxpayer must
have neglected or refused to pay a liability that has become due
(``delinquent'' element).
The Councils considered, as a starting point, whether the
definition of ``delinquent taxes'' used in certain provisions of the
I.R.C. might be useful in defining the term for purposes of this rule.
For example, I.R.C. section 7524 requires an annual notice of tax
delinquency be provided to a taxpayer with a ``tax delinquent
account''. I.R.C. section 6103(l)(3) allows disclosure of return
information to a Federal agency where an applicant for a Federal loan
has a ``tax delinquent account''. See also Internal Revenue Manual
11.3.29.6(8). A ``tax delinquent account'' for purposes of these
provisions, however, is an account which shows up as being unpaid on
the IRS computer systems. These provisions do not allow for the
possibility for further dispute of the liability, for IRS error, or for
whether the taxpayer is currently required to pay the liability. While
for purposes of these provisions, this definition may be adequate, we
agree that for purposes of this FAR rule a different definition is
warranted.
i. Finality.
This definition should apply only to tax liabilities that are
finally determined, not proposed or under valid dispute. For example,
this would not apply to proposed deficiencies shown on a statutory
notice of deficiency which a taxpayer is entitled to contest in Tax
Court. The liabilities should have been assessed and should generally
be subject to enforced collection action, such as a tax lien or levy
(although there may be something precluding the IRS from taking
enforced collection action, as further discussed below).
There should be no pending administrative or judicial challenge to
the underlying liability. An administrative or judicial challenge could
include a refund claim, collection due process lien or levy hearing,
deficiency case, interest or penalty abatement case, etc. In the case
of a judicial challenge to the liability, there would be no finality
until all judicial appeal rights have been exhausted.
The Councils considered whether it would provide helpful
information to the contracting officer for offerors to report in the
certification tax liabilities that had no remaining administrative
challenge, but might still have open avenues of judicial challenge. The
Councils decided that to provide due process, it would be more useful
to the contracting officer and suspending and debarring official (SDO)
to focus on unpaid taxes for which there is no pending administrative
or judicial challenge to the underlying liability.
ii. Delinquency.
If there is a finally determined tax liability, a taxpayer should
be deemed ``delinquent'' for purposes of this definition only if that
taxpayer has refused or neglected to pay that liability when full
payment is due and required.
For example, some respondents suggested that a taxpayer who has
entered into an installment agreement or offer-in-compromise should not
be considered to be ``delinquent''. The Councils agree. A taxpayer who
has entered into such an agreement with the IRS is not currently
required to make full payment of the liability.
A taxpayer is also not delinquent in cases where the IRS is
precluded from taking collection action, because in those cases payment
from the taxpayer is also not currently due and required. For example,
a taxpayer who has filed for bankruptcy protection should not be
considered to be delinquent for purposes of this definition. (As
discussed above, the IRS may also be precluded from taking enforced
collection action in cases where the tax liability is not finally
determined).
d. Unresolved tax liens.
Comment: One respondent states that the term ``received notice of a
tax lien'' is too expansive or ambiguous because the notice could be
mistaken and the lien filing could be contested. Another respondent
states that all avenues of appeal should be allowed to dispute a filed
notice of tax lien.
Response: The Councils agree with these comments, but have deleted
the references to ``unresolved tax liens'' and ``received notice of a
tax lien'' from the final rule. It is superfluous to have separate
certification/contractor responsibility requirements for delinquent
taxes and for tax liens, especially since the final rule more precisely
defines ``delinquent taxes''.
e. Minimum threshold for reporting.
Comments: Three respondents propose minimum thresholds. The
respondents suggest that the wide range in amounts of tax issues and
the various stages of administration with various authorities suggest
the establishment of a threshold for disclosure to contracting
officers.
One respondent states that the value of actionable
information to contracting officials in assessing a contractor's
responsibility would be improved by establishing a minimum threshold
level below which reporting would be unnecessary. The respondent points
out that companies receive a variety of notices, often for minor
amounts that by any reasonable standard would not call into question a
contractor's present responsibility. They propose $25,000 as the
threshold.
Another respondent uses the term ``materiality'' in their
comments and expresses a concern that a tax dispute of $100 requires
the same certification as $1,000,000 dispute. Consequently, the
respondent suggests use of threshold equal to the greater of $100,000
or 1% of the contract bid amount.
The SBA-OA suggests a minimum threshold of $2,500.
Response: The Councils agree that both contractors and contracting
officers will be unnecessarily burdened by the proposed rule with
numerous disclosures that do not have a direct bearing on
responsibility. To mitigate such a result, the Councils have set a
minimum threshold of $3,000, consistent with the legislation that was
favorably reported on May 9, 2007 by the Subcommittee on Government
Management, Organization and Procurement of the House Oversight and
Government Reform Committee (HR 1870, Towns Substitute Amendment), but
recognizing the recent inflationary adjustment to the micro-purchase
threshold.
f. Increase scope of certification.
Comment: One respondent comments that the certifications should be
revised to address potentially criminal behavior before it is
identified by the IRS, by asking for simple certification that the
[[Page 21795]]
company has been paying its taxes. The respondent suggests the
additional certification should be added to both FAR 52.209-5 and
52.212-3, which would read: ``Have [ballot], have not [ballot], paid
all payroll and corporate taxes due.'' These certifications would
require that the contractor affirm that it is following the law, not
simply that the IRS hasn't caught the company breaking the law.
Response: While the purpose of the additional proposed
certification is well-intended, such a ``have paid'' certification
would only present the contractor's position or perspective regarding
its tax situation, and would not account for situations where a taxing
authority and the contractor may be in dispute over whether or not the
contractor has paid all taxes due. Therefore, such a certification
would not provide the information pertinent to a responsibility
determination. Furthermore, should a contractor check the ``have not''
box, it would be the other certifications that would provide more
specific information regarding violation of Federal criminal tax laws
or delinquent Federal taxes. Therefore, we do not believe such an
additional certification would add any important information.
7. What do contracting officers do upon receipt of a positive
certification? Will ``de facto'' debarment result?
a. Lack of clear guidance to contracting officers.
Comment: The Small Business Administration Office of Advocacy (SBA-
OA) indicates that small businesses are concerned that the lack of
clear guidance to contracting officers, particularly after the
contractor has certified that the company has a tax liability, will
create widely varying interpretations of rule.
SBA-OA raised several questions:
Does the affirmation of a tax liability mean the lack of
contractor responsibility?
Does the affirmation of a tax liability also mean the
initiation of debarment and/or suspension provisions of the FAR?
Is the contracting officer the only decision maker in this
contract determination/award process?
Another respondent comments that additional guidance is needed at
FAR 9.408(a) to provide criteria by which contracting officers can
assess whether a potential tax issue is of sufficient magnitude to deny
award. The guidance should provide examples.
Response: There is already specific guidance to the contracting
officer in the FAR. FAR 9.103 prohibits any acquisition unless the
contracting officer makes an affirmative determination of
responsibility. The FAR provides the standards that the contracting
officer is required to consider when determining contractor
responsibility. This rule does not in any way change the process for
determination of responsibility, just adds one more factor to consider.
FAR 9.408 provides specific direction to the contracting officer as
to the appropriate procedures to follow when an offeror provides an
affirmative response to paragraph (a)(1) of the certification at
52.209-5 or paragraph (h) of the provision 52.212-3. The contracting
officer must--
Request such additional information from the offeror as
the contracting officer deems necessary in order to demonstrate the
offeror's responsibility to the contracting officer; and
Notify, prior to proceeding with award, in accordance with
agency procedures, the agency official responsible for initiating
debarment or suspension action, when an offeror indicates the existence
of an indictment, charge, conviction, or civil judgment (now the
Councils have also added Federal tax delinquency in an amount greater
than $3,000).
In order to more clearly associate these procedures to the
responsibility determination required in FAR Subpart 9.1, these
procedures, as well as the clause prescription for the certifications,
have been moved to FAR 9.104.
Furthermore, the Councils have modified the requirement to request
such additional information as the contracting officer deems necessary.
The Councils specify that the request should be made promptly, upon
receipt of offers, so as not to delay the procurement, and has placed
the burden upon the offeror to provide the information it deems
necessary to demonstrate its responsibility. When an offeror has made
an affirmative response to the certification, the offeror is in a
better position to know what evidence is available to mitigate the
response and demonstrate its responsibility.
Several of the other revisions to the final rule, as already
discussed, better define and limit the circumstances that require
reporting and will eliminate many extraneous affirmations that may have
little bearing on contractor responsibility.
The broad phrases ``violating tax laws, failing to pay
taxes'' have been replaced with ``violation of Federal criminal tax
law''.
Notification of ``delinquent'' taxes is restricted to
delinquent Federal taxes in an amount that exceeds $3,000, and
``delinquent'' is clearly defined, limiting applicability to tax
liability that has been finally determined and which the taxpayer has
not paid when it has become due, with several examples provided.
In specific response to the SBA-OA questions--
The affirmation of a tax liability does not necessarily
mean the lack of contractor responsibility. A tax liability is just one
of many factors to be evaluated by the contracting officer and, as
appropriate, the SDO.
The affirmation of a tax liability does not necessarily
mean the initiation of debarment and/or suspension provisions of the
FAR. If the contracting officer forwards information to the SDO, the
SDO will further investigate and evaluate before deciding to initiate
suspension or debarment proceedings.
The contracting officer may consult with the SDO. The SDO
may determine in advance of contract award that the contractor is
presently responsible, although not with regard to the award of a
particular contract.
b. Certificate of Competency.
Comment: SBA-OA was concerned that the unintended result of the
rule may be denial of a Certificate of Competency (COC) ruling from SBA
to an otherwise qualified small business.
Response: The policy at FAR 9.103(b) is clear with regard to making
responsibility determinations involving small businesses. If the
prospective contractor is a small business concern, the contracting
officer shall comply with Subpart 19.6, Certificates of Competency and
Determinations of Responsibility. If the contracting officer determines
that an apparent successful small business lacks certain elements of
responsibility, the contracting officer must refer the matter to the
SBA. The final rule does not change this policy or make any exceptions
to compliance with Subpart 19.6, if the contracting officer determines
that a small business lacks certain elements of responsibility based
upon affirmative responses to the certifications. SBA's COC regulations
currently state that if a small business concern is debarred from
Federal procurement, proposed or suspended from Federal procurement
pending debarment to protect the Government's interests, SBA will find
that small business ineligible for COC consideration.
c. De facto debarment.
Comment: One respondent states that to subject a potential
contractor to an informal blacklisting or a formal contracting officer
decision of nonresponsibility repeatedly for the same condition may
subject the Government to a legal challenge on the basis of de facto
debarment. Generally,
[[Page 21796]]
these matters should be referred to agency suspending and debarring
officials. The respondent recommends additional regulatory or guidance
language to the contracting officer.
SBA-OA questions whether the lack of clarity of the rule can result
in the unintended de-facto denial of a contract to a small business
bidder.
Another respondent comments that the proposed rule is not de facto
debarment, but simply a good way to further ensure that contractors are
indeed responsible.
Response: The Councils concur that this rule will not cause de
facto debarment. This rule does not change the process at all, but just
adds information for consideration in the determination of a
contractor's responsibility. A contracting officer is required to make
an affirmative determination of responsibility in accordance with the
standards in the FAR. The rule requires the contracting officer to
consider the new certifications relating to taxes in the certification
at 52.209-5 or 52.212-3(h), among other information when making
responsibility determinations.
An affirmative response to one of the certifications does
not necessarily mean that the contractor is not responsible. Even if
the contractor is determined to be not responsible, that does not
constitute a de facto debarment.
A contracting officer is required to request additional
information, and notify, prior to proceeding with award, in accordance
with agency procedures, the agency official responsible for initiating
debarment or suspension action, 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.
Making a single determination of nonresponsibility does
not constitute de facto debarment, as long as the contracting officer
refers the matter to the SDO, so that the Government will not continue
to deny awards to the offeror without the due process of the suspension
and debarment process.
d. Incentive for contacting officer to assume guilt.
Comment: One respondent comments that while the proposed rule would
not instantaneously debar a contractor nor expressly prohibit a
contracting officer from awarding a contract to a company that informs
the Government of the delinquent tax or unresolved tax lien
notifications, there would be a strong incentive for the contracting
officer to assume guilt and award the contract to another company.
Response: The respondent does not present any evidence that there
would be a strong incentive for contracting officers to assume guilt
and award a contract to another company when a contractor provides an
affirmative response to the certification at 52.209-5 or 52.212-3(h).
The contracting officer is required to follow the regulations at FAR
Subpart 9.1 when making a responsibility determination. In fact, the
Councils find that a contracting officer has strong incentive not to
assume guilt and find an offeror nonresponsible, as such irresponsible
action would be highly likely to result in a law suit.
However, in order to further prevent contracting officers from
assuming anything, the final rule has been narrowed to exclude the need
to certify with regard to unpaid taxes until there has been a final
determination, and there are not further avenues of administrative or
judicial appeal. This will protect offerors from having to report
unresolved tax disputes, which may still be resolved in their favor.
8. Small business issues.
a. Impact on small businesses.
i. Will hurt small businesses.
Comments: One respondent states that because the regulations are
unclear, and because some small businesses do not have the financial
resources to employ lawyers or tax accountants, small businesses will
simply certify they have a tax liability. SBA-OA was also concerned
that without a factual basis for the certification, it is impossible
for the approximately 300,000 small business registered in the CCR to
fully evaluate the economic impact of the proposed regulation.
One respondent comments that this certification could hurt
companies that have owned up to their mistakes and paid their relevant
tax liability, interest, and penalties, a standard which particularly
hurts small businesses.
Response: The basis for a certification is clearly delineated in
the final rule. A small business can tell without hiring a tax
accountant or lawyer whether they have been convicted of violation of
Federal criminal tax law or have received a notice from the IRS
regarding delinquent Federal taxes.
If the tax liability has been satisfied, then the notification need
not be reported in the certification. If an offeror has been convicted
of violation of Federal criminal tax law or received notification of
delinquent taxes for which the liability has not been satisfied, then
that information will be evaluated on a case-by-case basis to determine
whether the notification of delinquent taxes or conviction of violation
of Federal criminal tax law is an indication that the offeror is not
presently responsible.
ii. The proposed rule will help small businesses.
Comment: One respondent states that the organizations they
represent vigorously support the Councils' efforts to better enforce
the responsibility requirement for all Federal contractors. The
respondent believes that further strengthening the electronic systems
and FAR 9.408 will help small businesses compete.
Response: No response required.
b. Need reasonable alternatives for small business compliance.
Comment: SBA-OA states that it welcomes the efforts of the Councils
to increase corporate tax accountability, but caveats this with the
statement that several areas of the proposed regulation require a more
balanced approach for small businesses. The SBA-OA urges the Councils
to give careful consideration to the need for reasonable alternatives
for small business compliance with the proposed regulation. As one
alternative, the respondent recommends a minimum threshold of $2,500.
Response: As previously stated, the Councils have revised the final
rule to make it less burdensome for all respondents, including small
businesses:
Limit to Federal tax delinquency and violation of Federal
criminal tax laws (except for tax evasion).
Clearly define ``delinquent taxes,'' limiting
applicability to tax liability that has been finally determined and
which the taxpayer has not paid when it has become due. To make it even
clearer, examples are provided.
Set a minimum threshold of $3,000 (adjusted for
inflation).
c. Need Initial Regulatory Flexibility Analysis.
Comment: SBA-OA stated that an Initial Regulatory Flexibility
Analysis is required by Section 603 of the Regulatory Flexibility Act
when a Federal rule is expected to have a significant economic impact
on a substantial number of small entities. The Councils stated in the
preamble to the proposed rule that they did not expect the rule to have
such a significant impact on a substantial number of small entities.
SBA-OA commented that the Councils did not provide a factual basis for
this assessment. SBA-OA stated that the rule is likely to increase the
cost of doing business with the Government, and that due to the lack of
clarity in the regulation, those increased costs could be significant.
Response: The Councils worked with SBA-OA to make the impact of the
rule
[[Page 21797]]
on small business minimal. Small businesses must already complete the
certification at 52.209-5, including information on tax evasion. The
new certification only requires the offeror to certify whether it has,
or has not, within a three-year period preceding the offer, been
convicted of violating Federal criminal tax laws or been notified of
any delinquent Federal taxes in an amount that exceeds $3,000 for which
the liability remains unsatisfied. This is a very clearly defined
certification, and a small business should not have difficulty
identifying the correct response, especially after limiting it to
delinquent Federal taxes of which it has received notice. The small
business is not required to assess whether there are any unpaid tax
liabilities of which it has not been notified (as some respondents
requested). Either it got such notice or it did not. If it got the
notice of delinquent Federal taxes, either it satisfied the liability
or it did not.
After review of the final rule, SBA-OA is satisfied that the final
rule achieves a more balanced approach for small business, and that a
Regulatory Flexibility Analysis is not required.
9. Ways to further improve: Waiver of privacy rights; FCTCTF to
resolve issues; use DCAA to monitor.
Comments: One respondent comments that the tax certification is an
excellent idea and should also carry a waiver of privacy rights under
I.R.C. section 6103 to permit expedited access to contractor tax
records, parallel to the TIN matching process. The respondent also
suggests that the joint Federal Contactor Tax Compliance Task Force
(FCTCTF) is the perfect forum to resolve issues, and that the Defense
Contract Audit Agency could monitor tax compliance.
Response: No waiver of privacy rights is required, because this
certification creates no need for Government contracting officers to
access any IRS or other tax records or submissions. Indeed, it would be
improper for contracting officers to do so. The function of the
certification is to provide contracting officers with information on an
aspect of a prospective contractor's present responsibility (as
required by FAR Subpart 9.1). Contracting officers should not, and
cannot, become involved in any aspect of a tax delinquency (e.g.,
collection, adjudication).
The Councils cannot agree with the suggestion regarding the Federal
Contactor Tax Compliance Task Force because that body's charter does
not include resolving tax issues. Similarly, it is not part of Defense
Contract Audit Agency's mission to monitor tax compliance.
10. Intersection with Public Law 109-222.
Comments: One respondent references the law (presumably referring
to Section 511 of the Tax Increase Prevention and Reconciliation Act of
2005, Pub. L. 109-222) requiring Federal, State and certain local
contracting entities to withhold 3% of each payment made after December
31, 2010. The respondent states that it strongly opposes this arbitrary
payment withholding provision and looks forward to commenting on the
implementing federal regulations, while simultaneously seeking a repeal
of the law.
Another respondent expresses its appreciation for the Councils
seeking to address the issue of delinquent taxpayers receiving Federal
contracts through certifications rather than the punitive withholding
envisioned by Section 511 of Pub. L. 109-222. This respondent urges the
Councils to seize this opportunity to make the FAR strong enough to
obviate the need for the draconian provisions of Pub. L. 109-222, which
affect all contractors, regardless of their compliance practices. This
respondent points out that the construction industry, where there is
already a practice of retainage, will suffer in particular from the
impact of the 3% withhold. Certifications and enforcement provide a
much more surgical approach to the problem of the tax gap. Tax
collection should be left to the tax enforcement professionals, rather
than contracting personnel.
Response: While the respondents may prefer the certifications
proposed by this rule to the withholding requirements of Pub. L. 109-
222, this rule is not an alternative to those 3% withholding
requirements, which are statutory. Any discussion of implementation of
that statute is outside the scope of this case.
11. Relocation of FAR 9.408 and 9.409.
The Councils have moved two sections, FAR 9.408 and 9.409, out of
FAR Subpart 9.4, Debarment, Suspension, and Ineligibility, to FAR
Subpart 9.1, Responsible Prospective Contractors, for several reasons.
First, locating the material at FAR 9.408 does not appear to be the
most logical placement. The Councils have moved these directions to the
contracting officer as to what to do when an offeror makes a positive
response to one of the certifications under FAR 52.209-5 to 9.104-5,
under the section on standards for determining the responsibility of
prospective contractors.
Second, the certification no longer relates solely, or primarily,
to suspension or debarment. It relates to broader considerations of an
offeror's general responsibility. Thus, while certain responses on the
certification could result in a referral to the Suspending and
Debarring Official, the main purpose of the clause is to provide
information that a contracting officer should use in the mandatory pre-
award determination of an offeror's present responsibility for the
purpose of awarding a contract only to such responsible offerors, the
subject of Subpart 9.1. In addition, the title of the clause at FAR
52.209-5 has been shortened to the broader, and more accurate,
``Certification Regarding Responsibility Matters.''
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The Councils worked with SBA-OA
to make the impact of the rule on small business minimal. Small
businesses must already complete the certification at FAR 52.209-5,
including information on tax evasion. The new certification only
requires the offeror to certify whether it has, or has not, within a 3-
year period preceding the offer, been convicted of violating Federal
criminal tax laws or been notified of any delinquent Federal taxes in
an amount that exceeds $3,000 for which the liability remains
unsatisfied. This is a very clearly defined certification, and a small
business should not have difficulty identifying the correct response,
especially after limiting it to delinquent Federal taxes of which it
has received notice. The small business is not required to assess
whether there are any unpaid tax liabilities of which it has not been
notified (as some respondents requested). Either it got such notice or
it did not. If it got the notice of delinquent Federal taxes, either it
satisfied the liability or it did not.
C. Paperwork Reduction Act
The Paperwork Reduction Act does apply; however, these changes to
the
[[Page 21798]]
FAR do not impose additional information collection requirements to the
paperwork burden previously approved under OMB Control Number 9000-0094
and 9000-0136.
List of Subjects in 48 CFR Parts 4, 9, and 52
Government procurement.
Dated: April 4, 2008.
Al Matera,
Director, Office of Acquisition Policy.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 4, 9, and 52 as set
forth below:
0
1. The authority citation for 48 CFR parts 4, 9, and 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 4--ADMINISTRATIVE MATTERS
0
2. Amend section 4.1202 by revising paragraph (e) to read as follows:
4.1202 Solicitation provision and contract clause.
* * * * *
(e) 52.209-5, Certification Regarding Responsibility Matters.
* * * * *
PART 9--CONTRACTOR QUALIFICATIONS
0
3. Add sections 9.104-5 and 9.104-6 to read as follows:
9.104-5 Certification regarding responsibility matters.
(a) When an offeror provides an affirmative response in paragraph
(a)(1) of the provision at 52.209-5, Certification Regarding
Responsibility Matters, or paragraph (h) of provision 52.212-3, the
contracting officer shall--
(1) Promptly, upon receipt of offers, request such additional
information from the offeror as the offeror deems necessary in order to
demonstrate the offeror's responsibility to the contracting officer
(but see 9.405); and
(2) Notify, prior to proceeding with award, in accordance with
agency procedures (see 9.406-3(a) and 9.407-3(a)), the agency official
responsible for initiating debarment or suspension action, 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.
(b) Offerors who do not furnish the certification or such
information as may be requested by the contracting officer shall be
given an opportunity to remedy the deficiency. Failure to furnish the
certification or such information may render the offeror
nonresponsible.
9.104-6 Solicitation provision.
The contracting officer shall insert the provision at 52.209-5,
Certification Regarding Responsibility Matters, in solicitations where
the contract value is expected to exceed the simplified acquisition
threshold.
0
4. Amend section 9.105-1 by revising paragraph (c)(3) to read as
follows:
9.105-1 Obtaining information.
* * * * *
(c) * * *
(3) The prospective contractor--including bid or proposal
information (including the certification at 52.209-5 or 52.212-3(h)
(see 9.104-5)), questionnaire replies, financial data, information on
production equipment, and personnel information.
* * * * *
0
5. Amend section 9.406-2 by removing from paragraph (a)(3) ``tax
evasion,'' and adding ``tax evasion, violating Federal criminal tax
laws,'' in its place; and by adding paragraph (b)(1)(v) to read as
follows:
9.406-2 Causes for debarment.
* * * * *
(b) * * *
(1) * * *
(v) Delinquent Federal taxes in an amount that exceeds $3,000.
(A) Federal taxes are considered delinquent for purposes of this
provision if both of the following criteria apply:
(1) The tax liability is finally determined. The liability is
finally determined if it has been assessed. A liability is not finally
determined if there is a pending administrative or judicial challenge.
In the case of a judicial challenge to the liability, the liability is
not finally determined until all judicial appeal rights have been
exhausted.
(2) The taxpayer is delinquent in making payment. A taxpayer is
delinquent if the taxpayer has failed to pay the tax liability when
full payment was due and required. A taxpayer is not delinquent in
cases where enforced collection action is precluded.
(B) Examples. (1) The taxpayer has received a statutory notice of
deficiency, under I.R.C. Sec. 6212, which entitles the taxpayer to
seek Tax Court review of a proposed tax deficiency. This is not a
delinquent tax because it is not a final tax liability. Should the
taxpayer seek Tax Court review, this will not be a final tax liability
until the taxpayer has exercised all judicial appeal rights.
(2) The IRS has filed a notice of Federal tax lien with respect to
an assessed tax liability, and the taxpayer has been issued a notice
under I.R.C. Sec. 6320 entitling the taxpayer to request a hearing
with the IRS Office of Appeals contesting the lien filing, and to
further appeal to the Tax Court if the IRS determines to sustain the
lien filing. In the course of the hearing, the taxpayer is entitled to
contest the underlying tax liability because the taxpayer has had no
prior opportunity to contest the liability. This is not a delinquent
tax because it is not a final tax liability. Should the taxpayer seek
tax court review, this will not be a final tax liability until the
taxpayer has exercised all judicial appeal rights.
(3) The taxpayer has entered into an installment agreement pursuant
to I.R.C. Sec. 6159. The taxpayer is making timely payments and is in
full compliance with the agreement terms. The taxpayer is not
delinquent because the taxpayer is not currently required to make full
payment.
(4) The taxpayer has filed for bankruptcy protection. The taxpayer
is not delinquent because enforced collection action is stayed under 11
U.S.C. 362 (the Bankruptcy Code).
* * * * *
0
6. Amend section 9.407-2 by--
0
a. Removing from paragraph (a)(3) ``tax evasion,'' and adding ``tax
evasion, violating Federal criminal tax laws,'' in its place;
0
b. Removing from the end of paragraph (a)(6) the word ``or'';
0
c. Redesignating paragraph (a)(7) as paragraph (a)(8); and
0
d. Adding a new paragraph (a)(7) to read as follows:
9.407-2 Causes for suspension.
(a) * * *
(7) Delinquent Federal taxes in an amount that exceeds $3,000. See
the criteria at 9.406-2(b)(1)(v) for determination of when taxes are
delinquent; or
* * * * *
9.408 [Removed and reserved]
0
7. Remove and reserve section 9.408.
0
8. Amend section 9.409 by revising the section heading; by removing
paragraph (a); and by removing the paragraph designation (b). The
revised heading reads as follows:
9.409 Contract clause.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
9. Amend section 52.209-5 by--
0
a. Revising the section heading;
0
b. Removing from the introductory paragraph ``9.409(a)'' and adding
``9.104-6'' in its place;
[[Page 21799]]
0
c. Revising the clause heading and the date;
0
d. Removing from paragraph (a)(1)(i)(B) ``tax evasion, or receiving
stolen property; and'' and adding ``tax evasion, violating Federal
criminal tax laws, or receiving stolen property;'' in its place; and
0
e. Removing from the end of paragraph (a)(1)(i)(C) the period and
adding ``; and'' in its place; and
0
f. Adding paragraph (a)(1)(i)(D) to read as follows:
52.209-5 Certification Regarding Responsibility Matters.
* * * * *
CERTIFICATION REGARDING RESPONSIBILITY MATTERS (MAY 2008)
(a)(1) * * *
(i) * * *
(D) Have [ballot], have not [ballot], within a three-year period
preceding this offer, been notified of any delinquent Federal taxes
in an amount that exceeds $3,000 for which the liability remains
unsatisfied.
(1) Federal taxes are considered delinquent if both of the
following criteria apply:
(i) The tax liability is finally determined. The liability is
finally determined if it has been assessed. A liability is not
finally determined if there is a pending administrative or judicial
challenge. In the case of a judicial challenge to the liability, the
liability is not finally determined until all judicial appeal rights
have been exhausted.
(ii) The taxpayer is delinquent in making payment. A taxpayer is
delinquent if the taxpayer has failed to pay the tax liability when
full payment was due and required. A taxpayer is not delinquent in
cases where enforced collection action is precluded.
(2) Examples. (i) The taxpayer has received a statutory notice
of deficiency, under I.R.C. Sec. 6212, which entitles the taxpayer
to seek Tax Court review of a proposed tax deficiency. This is not a
delinquent tax because it is not a final tax liability. Should the
taxpayer seek Tax Court review, this will not be a final tax
liability until the taxpayer has exercised all judicial appeal
rights.
(ii) The IRS has filed a notice of Federal tax lien with respect
to an assessed tax liability, and the taxpayer has been issued a
notice under I.R.C. Sec. 6320 entitling the taxpayer to request a
hearing with the IRS Office of Appeals contesting the lien filing,
and to further appeal to the Tax Court if the IRS determines to
sustain the lien filing. In the course of the hearing, the taxpayer
is entitled to contest the underlying tax liability because the
taxpayer has had no prior opportunity to contest the liability. This
is not a delinquent tax because it is not a final tax liability.
Should the taxpayer seek tax court review, this will not be a final
tax liability until the taxpayer has exercised all judicial appeal
rights.
(iii) The taxpayer has entered into an installment agreement
pursuant to I.R.C. Sec. 6159. The taxpayer is making timely
payments and is in full compliance with the agreement terms. The
taxpayer is not delinquent because the taxpayer is not currently
required to make full payment.
(iv) The taxpayer has filed for bankruptcy protection. The
taxpayer is not delinquent because enforced collection action is
stayed under 11 U.S.C. 362 (the Bankruptcy Code).
* * * * *
0
10. Amend section 52.212-3 by--
0
a. Revising the date of the clause;
0
b. Removing from paragraph (h) ``Debarment, Suspension or Ineligibility
for Award'' and adding ``Responsibility Matters'' in its place;
0
c. Removing from the end of paragraph (h)(1) the word ``and'';
0
d. Removing from paragraph (h)(2) ``tax evasion, or receiving stolen
property; and'' and adding ``tax evasion, violating Federal criminal
tax laws, or receiving stolen property;'' in its place;
0
e. Removing from paragraph (h)(3) ``offenses.'' and adding ``offenses
enumerated in paragraph (h)(2) of this clause; and'' in its place; and
0
f. Adding paragraph (h)(4) to read as follows:
52.212-3 Offeror Representations and Certifications--Commercial Items.
* * * * *
OFFER REPRESENTATIONS AND CERTIFICATIONS--COMMERCIAL ITEMS (MAY
2008)
* * * * *
(h) * * *
(4) [ballot] Have, [ballot] have not, within a three-year period
preceding this offer, been notified of any delinquent Federal taxes
in an amount that exceeds $3,000 for which the liability remains
unsatisfied.
(i) Taxes are considered delinquent if both of the following
criteria apply:
(A) The tax liability is finally determined. The liability is
finally determined if it has been assessed. A liability is not
finally determined if there is a pending administrative or judicial
challenge. In the case of a judicial challenge to the liability, the
liability is not finally determined until all judicial appeal rights
have been exhausted.
(B) The taxpayer is delinquent in making payment. A taxpayer is
delinquent if the taxpayer has failed to pay the tax liability when
full payment was due and required. A taxpayer is not delinquent in
cases where enforced collection action is precluded.
(ii) Examples. (A) The taxpayer has received a statutory notice
of deficiency, under I.R.C. Sec. 6212, which entitles the taxpayer
to seek Tax Court review of a proposed tax deficiency. This is not a
delinquent tax because it is not a final tax liability. Should the
taxpayer seek Tax Court review, this will not be a final tax
liability until the taxpayer has exercised all judicial appeal
rights.
(B) The IRS has filed a notice of Federal tax lien with respect
to an assessed tax liability, and the taxpayer has been issued a
notice under I.R.C. Sec. 6320 entitling the taxpayer to request a
hearing with the IRS Office of Appeals contesting the lien filing,
and to further appeal to the Tax Court if the IRS determines to
sustain the lien filing. In the course of the hearing, the taxpayer
is entitled to contest the underlying tax liability because the
taxpayer has had no prior opportunity to contest the liability. This
is not a delinquent tax because it is not a final tax liability.
Should the taxpayer seek tax court review, this will not be a final
tax liability until the taxpayer has exercised all judicial appeal
rights.
(C) The taxpayer has entered into an installment agreement
pursuant to I.R.C. Sec. 6159. The taxpayer is making timely
payments and is in full compliance with the agreement terms. The
taxpayer is not delinquent because the taxpayer is not currently
required to make full payment.
(D) The taxpayer has filed for bankruptcy protection. The
taxpayer is not delinquent because enforced collection action is
stayed under 11 U.S.C. 362 (the Bankruptcy Code).
[FR Doc. E8-8508 Filed 4-21-08; 8:45 am]
BILLING CODE 6820-EP-S