House Passes Ellsworth, Obama Bill to Require Federal Contractors to Pay Taxes
Monday, April 14, 2008
Printable FormatFOR IMMEDIATE RELEASE
Contact: Liz Farrar (Ellsworth) or Michael Ortiz (Obama)
WASHINGTON - On the day before millions of everyday Americans are required to file their tax returns, the House today approved a bill requiring federal contractors to pay their taxes. According to studies by the Government Accountability Office (GAO), thousands of federal contractors owe billions of dollars in unpaid taxes. Rep. Brad Ellsworth and U.S. Senator Barack Obama (D-IL) introduced the Contracting and Tax Accountability Act, H.R. 4881, to address this problem by withholding large federal contracts from businesses and organizations that fail to file tax returns and are delinquent on their taxes.
Late last year, a similar provision was included in the Omnibus Appropriations package (H.R. 2764). While the bill was signed into law, the provision is only effective for Fiscal Year 2008. The Contracting and Tax Accountability Act is necessary to make the fix permanent for all federal spending on contracts and grants.
"Every year, on April 15th, Hoosiers play by the rules and pay their taxes; I don't think it's too much to ask companies that receive millions, sometimes billions, in taxpayer dollars to do the same. Not only do these bad actors cheat our government of tax revenue, they also gain an unfair advantage over businesses that are doing the right thing," said Ellsworth. "This bill is a practical and cost-effective way to ensure all companies compete on an equal playing field and to restore some accountability in the government contracting system."
"Hard-working Americans don't get a free pass if they fail to pay their taxes, and neither should corporate interests," said Senator Obama. "Our government should ensure that federal contractors also play by the rules and satisfy the basic responsibility of paying taxes. I commend Representative Ellsworth for his leadership in passing this important bill in the House, and I look forward to working to pass it in the Senate."
Summary of Legislation:
In 2004 and 2005 alone, the GAO reported that government contractors owed more than $5 billion in unpaid federal taxes. Many of these contractors have repeatedly failed to fulfill their tax obligations and have delinquencies that extend over multiple tax periods.
Currently, federal law does not require federal agencies to consider tax debts in making contracting decisions. In fact, current law prohibits the disclosure of taxpayer data, which means there is no mechanism for contracting officers to assess the IRS's tax data when conducting their review of prospective contractors. While the government requires agencies to consider various criteria, including financial resources, business ethics, and integrity, a contractor with seriously delinquent tax debt is not disqualified from receiving federal funds. This bill requires contract and grant applicants to give contracting officers permission to check their tax status.
This bill ensures that companies that receive funds from U.S. taxpayers through federal contracts or grants play by the rules by withholding large federal contracts from businesses and organizations that fail to file tax returns and are delinquent on their taxes. The bill defines delinquent tax debt as an outstanding debt for which a notice of lien has been filed in public records. The definition also excludes tax debt that is being repaid in accordance with an installment agreement and tax debt for which a collection due process hearing has been requested.