Debt Collection:

Barring Delinquent Taxpayers From Receiving Federal Contracts and Loan Assistance

T-GGD/AIMD-00-167: Published: May 9, 2000. Publicly Released: May 9, 2000.

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Pursuant to a congressional request, GAO discussed issues related to H.R. 4181, which would bar delinquent taxpayers from receiving federal contracts and loan assistance.

GAO noted that: (1) as of September 30, 1998, nearly 2 million businesses owed $49 billion in cumulative delinquent unpaid payroll taxes and 185,000 individuals responsible for the nonpayment of delinquent payroll taxes owed $15 billion in trust fund recovery penalties (TFRP); (2) the majority of these unpaid payroll taxes and associated TFRPs are not likely to be collected for various reasons; (3) a significant number of both businesses with delinquent unpaid payroll taxes and individuals with outstanding TFRPs also receive substantial payments from the federal government, either for federal benefits or loans or for other payment purposes, such as under federal contracts for goods and services; (4) the Internal Revenue Service (IRS) does not have the systems that would enable it to consistently provide federal agencies with timely, accurate, and complete information on an individual's or business' tax delinquency status; (5) IRS is undergoing a major systems modernization program, and if these modernization efforts are successful, IRS may be able to provide agencies with timely, accurate, and complete tax delinquency status information that could be used as a basis for denying federal loan assistance and contracts to delinquent taxpayers; (6) the Office of Management and Budget (OMB) directs administrators of federal loan, loan insurance, and loan guarantee programs to determine whether an applicant has any type of delinquent federal debt, including a tax debt, for the purpose of determining creditworthiness; (7) however, in regard to tax debts, agencies may not always be complying with this directive; (8) OMB does not direct federal agencies to check on a prospective contractor's tax debts; (9) to help reduce the burden on the acquisition process, imposition of H.R. 4181's barring requirements on the acquisition process could be deferred until IRS has an effective and efficient tax delinquency check program; (10) with the exception of taxpayers that have made arrangements with IRS to make payments on their tax debts, H.R. 4181 would deny loan assistance or contracts to all taxpayers with tax debts that have been outstanding for more than 90 days after the date the tax was assessed; (11) this provision may be too restrictive because it may not allow enough time for delinquent taxpayers to fully exercise their due process rights for settling their tax debts; and (12) after 90 days from the date of the tax assessment, some taxpayers could still be in the process of negotiating payment agreements to resolve their delinquencies.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The revised bill H.R. 4181 contains a provision for a pilot project. However, the bill was never acted upon.

    Matter: Congress may wish to provide that the H.R. 4181 requirements be implemented initially on a pilot basis for loans, loan guarantees, and loan insurance. With respect to federal contracts, Congress may wish to defer the application of the barring provisions of H.R. 4181 until the results of the pilot program for loan assistance and the success of IRS' systems modernization are known.

  2. Status: Closed - Not Implemented

    Comments: The revised bill H.R. 4181 contains a provision that allows the Secretary of the Treasury to provide additional standards for determining the tax delinquency status of taxpayers. However, the bill was not acted upon.

    Matter: To help ensure that taxpayers are not prematurely barred from receiving federal contracts or loan assistance, Congress may wish to require the Secretary of the Treasury to prescribe additional standards for IRS to use in determining when a taxpayer has an outstanding tax debt in delinquent status for purposes of barring under H.R. 4181.


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