U.S. Rep. Ed Towns, D-N.Y., in April introduced the Contractor Tax Enforcement Act, HR 1870, to bar federal tax debtors from contracting with the government. Another bill, introduced by Brad Ellsworth, D-Ind., would require contractors to certify they don’t owe a federal tax debt. The proposed legislation followed by a few days a Government Accountability Office report to a House Oversight and Government Reform subcommittee chaired by Towns. The GAO found in a continuing investigation of tax cheating by federal contractors that of 122 contractors owing tax that the agency selected for closer scrutiny, all had engaged in abusive or criminal nonpayment. One contractor that owed more than $18 million in tax provided health care services to the departments of Veterans Affairs and Health and Human Services. Owners of several of the businesses also owned vacation homes, boats or luxury vehicles or spent hundreds of thousands of dollars on gambling, the GAO said. Earlier, the GAO determined some 63,000 federal contractors collectively owed about $7.6 billion in taxes.
Because tax returns are confidential, federal procurement officials must rely on voluntary disclosure or public records to identify tax debtors, the GAO said. The Office of Management and Budget in March published proposed new rules requiring contractors to certify they have not been convicted of tax-law violations or been notified they owe delinquent taxes.
How tax compliant are federal employees? In its annual Federal Employee/Retiree Delinquency Initiative (FERDI) report, the IRS said that as of last October, 283,852 federal employees and retirees owed more than $2.1 billion in back taxes, not including installment agreements, a delinquency rate of 3.1%. More than 10,200 workers and retirees of the Department of Veterans Affairs’ nearly 240,000 total head count owed $82.7 million, a 4.26% delinquency rate. Another 7,370 Veterans Affairs employees and retirees owed $39 million in installment plans. More than 1.2% of the Department of the Treasury’s workers and retirees owed taxes without an installment plan, for a total of $7.26 million. Of the Tax Court’s 208 employees and retirees, 10, or 4.8%, were delinquent. The FERDI tally showed an improvement from 2005, when the overall rate was 3.3%. Federal workers and retirees generally pay their taxes more conscientiously than the rest of the population, the IRS said, but it urged federal agency leaders to stress compliance.