New Rule Requires Federal Contractors to Disclose Federal Tax Delinquencies and Felonies

On December 4, 2015, the Department of Defense, General Services Administration and the National Aeronautics and Space Administration issued an interim rule amending the Federal Acquisition Regulations to implement sections of the Consolidated and Further Continuing Appropriations Act, 2015. The interim rule prohibits the Federal government from entering into contracts with any corporation that (1) has any unpaid federal tax liability that has been assessed for which all judicial and administrative remedies have been exhausted or lapsed and which is not being paid in a timely manner; or (2) was convicted of a federal criminal violation under any federal law within the preceding twenty-four months. The interim rule requires that all offerors responding to federal solicitations make representations as to whether it is a corporation with a delinquent tax liability or a felony conviction under federal law. If an offeror answers in the affirmative, the contracting officer is required to request additional information from the offeror and notify the agency official responsible for initiating debarment or suspension action. The contracting officer may not make an award to the corporation unless the agency official responsible for debarment or suspension actions has considered debarment or suspension and determined that this action is not necessary to protect the interests of the Government.

The rule also adds a “Certification Regarding Tax Matters” for contracts that exceed $5,000,000 (including options). The certification requires an offeror to certify that it has (1) filed all federal tax returns during the preceding three years; (2) not been convicted of a criminal offense under the Internal Revenue Code; and (3) not, more than 90 days prior to certification, been notified of any unpaid federal tax assessment that remains unsatisfied.

The interim rule is scheduled to take effect February 26.2016. Contractors would be wise to assess their status before this time and take steps to remedy any defects which would require them to make an affirmative representation (regarding an unpaid tax liability or felony conviction) or which would prevent them from making an affirmative certification that all of the requirements are met. As we stated above, if you are a Federal contractor, you should consider an audit of your compliance with Federal requirements. Remember this: if you duck the requirement here, get the contract, and then make a payment application, you may be making a false claim, which is a possible civil and criminal violation.