Surety's Claim for Refund of Internal Revenue Service Claim for Withholding Taxes

A decision was requested regarding the propriety of payment of a claim for reimbursement to the surety of amounts paid on an Internal Revenue Service claim for withholding taxes levied against the surety's principal. The claim filed in behalf of the surety asserted that the surety was entitled to payment by reason of equitable subrogation under a Miller Act payment bond. Since the surety's claim was under the payment bond and not under the performance bond or as completing surety, the government retained its right of set-off in this case. The claim was denied.