Increased Government Oversight of Contractors Suggested

Federal government paid contractors are the target of federal legislation currently being considered by Congress. Specifically, Congress is considering several bills that would restrict contractors from doing business with the U.S. government if they have not paid their taxes. Contractors with the federal government are paid over $400 billion per year.

The U.S. government estimates that there are thousands of companies who are delinquent in paying their taxes. This represents over $7 billion in money owed to the U.S. government. There is currently no system in place for the U.S. government to identify which customers who want to do business with the government are among those companies who have not paid their taxes. In order to identify those potential contractors who have not paid their taxes, Congress is considering a law that would require all companies bidding on a federal contract to submit a declaration that the company is current with their tax obligations. The proposed law would also bar any company that is delinquent in the payment of their taxes from being awarded a government contract. The proposed standard for disqualifying a company from contracting with the federal government is whether the IRS has filed a tax lien against the company. Therefore, companies with fairly insignificant amounts owed to the IRS would still likely be eligible to contract with the federal government if a tax lien is not likely to be filed against them.

Additionally, to prevent companies contracting with the federal government from setting up shell companies in foreign companies that act as the employer for the contractor so they can avoid paying Social Security and Medicare taxes, a proposed bill would treat foreign subsidiaries of U.S. companies contracting with the federal government as U.S. companies for which are required to pay Social Security and Medicare taxes.

Finally, one other bill being proposed would require contractors doing business with the U.S. government to disclose the identities of, and compensation for, their executives and make this information available to the public.

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