B-6659, DECEMBER 9, 1939, 19 COMP. GEN. 565

B-6659: Dec 9, 1939

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

IT IS MANDATORY. 1939: THERE WAS RECEIVED FROM THE COMMISSIONER OF INTERNAL REVENUE A LETTER OF NOVEMBER 10. AS FOLLOWS: IT IS DEEMED ADVISABLE TO BRING TO YOUR ATTENTION THE INDEBTEDNESS TO THE UNITED STATES OF THE BEVERLY IMPROVEMENT COMPANY. 486.53 INTEREST WILL CONTINUE TO ACCRUE ON THE UNPAID ASSESSED BALANCES IN THE AMOUNTS OF $422.08. TO WHOM THE TAXES INVOLVED WERE LISTED FOR COLLECTION. ENCLOSED IS A COPY OF A COMMUNICATION DATED SEPTEMBER 9TH FROM THE PROCUREMENT DIVISION ADDRESSED TO THE BUREAU. WAS FORWARDED TO YOUR OFFICE FOR SUCH ACTION AS MAY BE DEEMED NECESSARY. IT WILL BE APPRECIATED IF YOU WILL TAKE THE NECESSARY STEPS TO WITHHOLD FROM ANY FUNDS DUE THE BEVERLY IMPROVEMENT COMPANY.

B-6659, DECEMBER 9, 1939, 19 COMP. GEN. 565

CONTRACTS - PAYMENTS - WITHHOLDING - WALSH-HEALEY ACT VIOLATIONS - APPLICATION OF AMOUNTS SO WITHHELD TO CONTRACTOR'S TAX INDEBTEDNESS WHERE THE GOVERNMENT, IN MAKING PAYMENT UNDER A CONTRACT, WITHHELD AN AMOUNT FOR THE BENEFIT OF CERTAIN OF THE CONTRACTOR'S EMPLOYEES PURSUANT TO THE PROVISIONS OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, IT IS MANDATORY, UNDER SAID PROVISIONS, THAT THE WITHHELD FUNDS BE PLACED IN A SPECIAL DEPOSIT ACCOUNT AND MADE AVAILABLE TO THE SECRETARY OF LABOR FOR PAYMENT TO THE EMPLOYEES ENTITLED THERETO, AND THE FUNDS SO WITHHELD MAY NOT BE APPLIED IN LIQUIDATION OF THE CONTRACTOR'S INDEBTEDNESS TO THE GOVERNMENT FOR UNPAID TAXES.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF THE TREASURY, DECEMBER 9, 1939:

THERE WAS RECEIVED FROM THE COMMISSIONER OF INTERNAL REVENUE A LETTER OF NOVEMBER 10, 1939, AS FOLLOWS:

IT IS DEEMED ADVISABLE TO BRING TO YOUR ATTENTION THE INDEBTEDNESS TO THE UNITED STATES OF THE BEVERLY IMPROVEMENT COMPANY, 5944 HARLEM AVENUE, CHICAGO, ILLINOIS, FOR THE FOLLOWING INCOME AND SOCIAL SECURITY TAXES:

CHART

INCOME TAX FOR THE YEAR 1936

UNPAID ASSESSED BALANCE ------------------------- $422.08

DELINQUENCY INTEREST COMPUTED TO NOVEMBER 10,

1939 ---------- 37.81

------- $459.89

SOCIAL SECURITY TAX UNDER TITLE VIII

UNPAID ASSESSED BALANCE ------------------------- $973.76

DELINQUENCY INTEREST COMPUTED TO NOVEMBER 10,

1939 ---------- 4.87

------ 978.63

SOCIAL SECURITY TAX UNDER TITLE IX FOR THE YEAR 1937

UNPAID ASSESSED BALANCE ------------------------$2,037.82

DELINQUENCY INTEREST COMPUTED TO NOVEMBER 10,

1939 ---------- 10.19

--------2,048.01

TOTAL LIABILITY -------------------------------------- 3,486.53

INTEREST WILL CONTINUE TO ACCRUE ON THE UNPAID ASSESSED BALANCES IN THE AMOUNTS OF $422.08, $973.76, AND $2,037.82, AT THE RATE OF SIX PERCENT PER ANNUM TO THE DATE OF PAYMENT.

THE COLLECTOR OF INTERNAL REVENUE AT CHICAGO, ILLINOIS, TO WHOM THE TAXES INVOLVED WERE LISTED FOR COLLECTION, HAS BEEN UNABLE TO MAKE COLLECTION. HOWEVER, AN INVESTIGATION DISCLOSES THAT THE ABOVE-NAMED COMPANY ENTERED INTO A CONTRACT WITH THE GOVERNMENT WHICH INVOLVED OVER $10,000.00, AND AGREED TO COMPLY WITH THE LAWS AND REGULATIONS GOVERNING SUCH CONTRACT AS TO THE AMOUNTS TO BE PAID TO ITS EMPLOYEES. SINCE THE CORPORATION FAILED TO COMPLY WITH SUCH LAWS AND REGULATIONS GOVERNING SUCH CONTRACT, THE DEPARTMENT OF LABOR TOOK STEPS TO WITHHOLD $4,000.00 OF THE CONTRACT PRICE, AS LIQUIDATING DAMAGES, IN ORDER THAT THE SECRETARY OF LABOR MAY PAY SUCH AMOUNTS TO THE EMPLOYEES OF THE CORPORATION FOR SERVICES RENDERED.

ENCLOSED IS A COPY OF A COMMUNICATION DATED SEPTEMBER 9TH FROM THE PROCUREMENT DIVISION ADDRESSED TO THE BUREAU, STATING THAT A VOUCHER IN THE AMOUNT OF $4,000.00, REPRESENTING THE BALANCE OF THE CONTRACT PRICE, WAS FORWARDED TO YOUR OFFICE FOR SUCH ACTION AS MAY BE DEEMED NECESSARY.

IT WILL BE APPRECIATED IF YOU WILL TAKE THE NECESSARY STEPS TO WITHHOLD FROM ANY FUNDS DUE THE BEVERLY IMPROVEMENT COMPANY, FROM THE GOVERNMENT, AN AMOUNT SUFFICIENT TO LIQUIDATE ITS TAX LIABILITIES. ANY AMOUNTS SO WITHHELD SHOULD BE COVERED INTO THE TREASURY AS AN INTERNAL REVENUE COLLECTION, WITH PERSONAL CREDIT TO HONORABLE CARTER H. HARRISON, COLLECTOR OF INTERNAL REVENUE, CHICAGO, ILLINOIS (INDEBTEDNESS OF THE BEVERLY IMPROVEMENT COMPANY).

YOUR KINDNESS IN ADVISING THIS BUREAU OF YOUR ACTION IN THE MATTER WILL ALSO BE APPRECIATED.

IT IS REPORTED THE BEVERLY IMPROVEMENT CO. VIOLATED CERTAIN REPRESENTATIONS AND STIPULATIONS OF SECTION 1 OF THE WALSH-HEALEY ACT, 49 STAT. 2036, IN THE PERFORMANCE OF CONTRACTS NOS. ER-TPS-54-41135 AND ER- TPS-54-37436; THAT IN JANUARY 1938 THE DEPARTMENT OF LABOR REQUESTED THE TREASURY DEPARTMENT TO WITHHOLD THE SUM OF $4,000 FROM THE AMOUNT OTHERWISE DUE THE CONTRACTOR UNDER CONTRACT NO. ER-TPS-54-37436 BECAUSE OF SUCH VIOLATIONS; THAT THE AMOUNT DUE THE CONTRACTOR'S EMPLOYEES BY REASON OF UNDERPAYMENTS OF WAGES HAD NOT THEN BEEN DEFINITELY DETERMINED; THAT UNDER DATE OF JUNE 6, 1939, THE COMMISSIONER OF INTERNAL REVENUE NOTIFIED THE PROCUREMENT DIVISION OF THE CONTRACTOR'S TAX INDEBTEDNESS TO THE UNITED STATES; AND THAT ON JUNE 28, 1939, THE DEPARTMENT OF LABOR FURNISHED THE TREASURY DEPARTMENT A COPY OF THE FINAL DECISION WITH RESPECT TO THE ABOVE-MENTIONED VIOLATIONS, SHOWING THE SUM OF $5,926.39 TO BE DUE THE UNITED STATES BY REASON THEREOF, AND REQUESTED THAT THE SUM OF $4,000 WITHHELD BE MADE AVAILABLE TO THE DEPARTMENT OF LABOR FOR DISBURSEMENT TO THE CONTRACTOR'S EMPLOYEES. THE QUESTION NOW FOR CONSIDERATION IS WHETHER THE SUM OF $4,000 WITHHELD SHOULD BE APPLIED IN LIQUIDATION OF THE CONTRACTOR'S INDEBTEDNESS FOR TAXES OR WHETHER IT SHOULD BE MADE AVAILABLE TO THE DEPARTMENT OF LABOR FOR PAYMENT TO THE EMPLOYEES OF THE CONTRACTOR WHO WERE UNDERPAID IN THE PERFORMANCE OF THE CONTRACTS INVOLVED.

SECTION 2 OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, 2037, PROVIDES, IN PART, AS FOLLOWS:

* * * ANY SUMS OF MONEY DUE TO THE UNITED STATES OF AMERICA BY REASON OF ANY VIOLATION OF ANY OF THE REPRESENTATIONS AND STIPULATIONS OF SAID CONTRACT SET FORTH IN SECTION 1 HEREOF MAY BE WITHHELD FROM ANY AMOUNTS DUE ON ANY SUCH CONTRACTS OR MAY BE RECOVERED IN SUITS BROUGHT IN THE NAME OF THE UNITED STATES OF AMERICA BY THE ATTORNEY GENERAL THEREOF. ALL SUMS WITHHELD OR RECOVERED AS DEDUCTIONS, REBATES, REFUNDS, OR UNDERPAYMENTS OF WAGES SHALL BE HELD IN A SPECIAL DEPOSIT ACCOUNT AND SHALL BE PAID, ON ORDER OF THE SECRETARY OF LABOR, DIRECTLY TO THE EMPLOYEES WHO HAVE BEEN PAID LESS THAN MINIMUM RATES OF PAY AS SET FORTH IN SUCH CONTRACTS AND ON WHOSE ACCOUNT SUCH SUMS WERE WITHHELD OR RECOVERED: * * *. ( ITALICS SUPPLIED.)

IT WILL BE NOTED THE FOREGOING SECTION PROVIDES THAT SUMS WITHHELD IN ACCORDANCE THEREWITH SHALL BE HELD IN A SPECIAL DEPOSIT ACCOUNT AND SHALL BE PAID, ON ORDER OF THE SECRETARY OF LABOR, DIRECTLY TO THE UNDERPAID EMPLOYEES ON WHOSE ACCOUNT THE SUMS WERE WITHHELD. THE PRIMARY OBJECT OF THE SECTION IS TO SECURE PAYMENT TO THE EMPLOYEES OF THE AMOUNTS TO WHICH THEY ARE ENTITLED AND THE STATUTE IS MANDATORY THAT SUMS WITHHELD IN ACCORDANCE THEREWITH BE HELD IN A SPECIAL DEPOSIT ACCOUNT AND BE PAID TO THE EMPLOYEES INVOLVED AS PROVIDED THEREIN.

AS PREVIOUSLY STATED, IT APPEARS THAT IN JANUARY 1938, THE DEPARTMENT OF LABOR REQUESTED THE TREASURY DEPARTMENT TO WITHHOLD THE SUM OF $4,000 IN ACCORDANCE WITH THE PROVISIONS OF THE WALSH-HEALEY ACT AND IT WAS NOT UNTIL JUNE 6, 1939--- APPROXIMATELY 1 1/2 YEARS LATER--- THAT THE PROCUREMENT DIVISION WAS NOTIFIED OF THE CONTRACTOR'S TAX INDEBTEDNESS. IN THE MEANTIME THE CONTRACTOR APPARENTLY HAD BEEN PAID THE CONTRACT PRICE EXCEPT THE SUM OF $4,000 WHICH WAS NOT PAID SOLELY BECAUSE OF THE DEPARTMENT OF LABOR'S REQUEST THAT IT BE WITHHELD. THE CONTRACTOR'S TWO INVOICES, IN THE AMOUNTS OF $1,899.16 AND $2,100.84, WERE RECEIVED BY THE ADMINISTRATIVE OFFICE IN NOVEMBER 1937, THEY WERE ADMINISTRATIVELY APPROVED FOR PAYMENT AS SUBMITTED, AND THE VOUCHERS TO WHICH THEY ARE ATTACHED STATE PAYMENT THEREOF WAS "WITHHELD" BY REASON OF VIOLATIONS OF THE REQUIREMENTS OF THE WALSH-HEALEY ACT. ALSO, THE DIRECTOR OF PROCUREMENT HAS REPORTED THAT PAYMENT OF THE INVOICES WAS "WITHHELD" IN ACCORDANCE WITH THE DEPARTMENT OF LABOR'S REQUEST. IT IS EVIDENT THE SUM OF $4,000 WOULD HAVE BEEN PAID TO THE CONTRACTOR--- AND HENCE WOULD NOT BE AVAILABLE FOR APPLICATION TO THE CONTRACTOR'S TAX INDEBTEDNESS--- BUT FOR THE INTERVENTION OF THE DEPARTMENT OF LABOR IN JANUARY 1938.

UNDER THE CIRCUMSTANCES THERE WOULD APPEAR TO BE NO ROOM FOR DOUBT THAT THE WITHHOLDING OF THE SUM OF $4,000 WAS PURSUANT TO THE PROVISIONS OF THE WALSH-HEALEY ACT, FOR THE BENEFIT OF CERTAIN OF THE CONTRACTOR'S EMPLOYEES; AND HAVING BEEN WITHHELD FOR THAT PURPOSE IT IS MANDATORY, UNDER THE PROVISIONS OF SAID ACT, THAT THE FUNDS BE MADE AVAILABLE TO THE SECRETARY OF LABOR FOR PAYMENT TO THE EMPLOYEES ENTITLED THERETO. ACCORDINGLY, STEPS WILL BE TAKEN TO DEPOSIT THE SUM OF $4,000 WITHHELD INTO THE SPECIAL DEPOSIT ACCOUNT ESTABLISHED PURSUANT TO SECTION 2 OF THE WALSH-HEALEY ACT IN ORDER THAT IT MAY BE AVAILABLE FOR PAYMENT, ON ORDER OF THE SECRETARY OF LABOR, TO THE EMPLOYEES OF THE CONTRACTOR WHO ARE ENTITLED THERETO.

HOWEVER, THE TAX INDEBTEDNESS OF THE BEVERLY IMPROVEMENT COMPANY, AS REPORTED BY THE COMMISSIONER OF INTERNAL REVENUE, WILL BE MADE A MATTER OF RECORD IN THIS OFFICE FOR CONSIDERATION IN THE EVENT ANY OTHER ALLOWABLE CLAIM OF THE SAID COMPANY BECOMES AVAILABLE FOR OFFSET.