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TIGTA: Federal Contracts Awarded to Thousands of Entities With Unpaid Taxes

S.J. Steinhardt
Published Date:
Sep 20, 2022

Despite regulatory and legal bars, federal contractors with unpaid taxes are still winning contracts and grants, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA).  Accounting Today reported that a system allowing federal contractors to self-certify they don't owe a significant amount of taxes is partially responsible.

The TIGTA report found that “[f]ederal agencies across the Government awarded contracts and grants to entities that owed millions in delinquent Federal taxes. Between October 2018 and December 2019, the Federal Government awarded 2.1 million Federal contracts and grants to more than 83,000 awardees. Of these, 3,040 contractors received almost $10.2 billion in Federal contracts while owing $621.8 million in delinquent Federal taxes. In addition, 938 grantees received $22.7 billion in Federal grants while owing $269.2 million in delinquent Federal taxes.”

The issue goes back several years, according to a 2019 Government Accountability Office report quoted by TIGTA. At that time, the GAO found that “in 2015 and 2016 the Departments of Energy, Health and Human Services, and Veterans Affairs, and the Army and Navy, awarded 1,849 contracts to contractors that reported qualifying federal tax debts, such as delinquent debts over $3,500.”

In some cases, the GAO found that the contracting officer did not notify the proper agency official that the contractors in question reported tax debt, as required, posing “potential violations of federal regulations and, in some cases, appropriations law.”

In response, Congress appropriated $30 million for the IRS to establish an “application through which entities could request from the IRS a certification that the entity did or did not owe seriously delinquent taxes,” according to the TIGTA report.

“That system seems to have a mixed record at best,” according to Accounting Today.

The TIGTA report noted that “the IRS made some progress establishing an application called the Federal Contractor Tax Check System that would allow prospective contractors and grantees to request a certificate from the IRS stating that they did or did not owe seriously delinquent taxes.” That application is scheduled for a foundational release in November.

TIGTA recommended that the IRS's deputy commissioner for operations support should continue to prioritize the development of this system. The IRS agreed with this recommendation. 

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