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Construction Law

: The South Carolina Construction Law Blog

Contractors, pay your taxes or get disbarred from Federal contracting!!!

By Ryan McCabe

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            Contractors should think twice when choosing not to pay or when disregarding federal taxes. Regulation 52.209-5 provides an additional certification that all contractors must make when bidding for federal contracts. Contractors must certify that they (and their principals) have not received within 3 years of the bid any notices of tax delinquencies over $3,000 that still remain unpaid. Federal taxes are delinquent if tax liability is finally determined and the taxpayer does not make payment when due. The taxes are not delinquent if the contractor has challenged the tax liability (such as seeking a Tax Court review) and has not yet exhausted all appeals. Also, the tax payer is excused to pay while the government is precluded from collecting taxes, such as when the contractor is in Chapter 11 bankruptcy.

            Note that if the contractor agreed on a payment plan with the government and is making timely payments, the contractor does not have tax delinquencies even if not all taxes owed have been paid. A contractor should also note that a contractor?s principal is very broadly defined, including owners, directors, partners, and persons with significant managerial positions. Just because a contractor had tax delinquencies 3 years before the offer does not automatically mean the government will reject the bid. Nevertheless, the government will keep the delinquency in consideration when awarding the project.

            Regulation 9.104-6 requires that the above mentioned certification be made in all acquisitions expected to exceed the simplified acquisition threshold, which is $100,000 with some exceptions. (Regulation 2.101). If the contractor had tax delinquencies within 3 years of making the offer, the government contracting officer must ask the contractor for additional information to determine the contractor?s responsibility. Also, the contracting officer must give notice of the delinquency to the agency official responsible for initiating disbarment and suspension. The contractor who does not provide the certification or any additional information requested may be held non-responsible.

           Regulation 52.209-5 continues with requiring immediate written notice of any changes or mistakes made in the certification. False certifications may result in up to 8 years in prison. The contractor is not strictly liable for the information he or she certifies. All that is required is knowledge that a prudent person in the ordinary course of business dealings would have.

            This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Full post as published by The South Carolina Construction Law Blog on January 29, 2009 (boomark / email).