Three major agencies—the Department of Defense (“DoD”), NASA, and the General Services Administration (“GSA”)—have published an interim rule that will require contractors to report federal felony convictions and delinquent taxes when responding to solicitations.  The rule implements requirements imposed by the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. 113-235 (the “CFCAA”) and applies broadly to any procurements with the DoD, NASA, or GSA.  Indeed, the FAR Council declined to exempt procurements for commercial items (including COTS items) or contracts below the simplified acquisition threshold from the reporting requirements, explaining that “[t]ax liability is a serious matter” and that the rule will impose a “minimal burden” on contractors. 

The interim rule establishes the following representation and certification requirements:

  • Representations (FAR 52.209-11) — Contractors pursuing any DoD, NASA, or GSA contract must represent whether they have any unpaid federal tax liability that is not being timely paid pursuant to an agreement with a taxing authority. Notably, contractors do not have to report outstanding tax liability that is being challenged or may still be challenged through judicial or administrative proceedings.  In addition to reporting tax delinquency, the contractor must also represent whether it has been convicted of a felony criminal violation under federal law within the previous two years.  If a contractor reports any information regarding delinquent taxes or a felony conviction, the contracting officer must request additional information and notify the agency official responsible for suspension and debarment proceedings.  The agency may not contract with the reporting entity unless the agency suspending or debarring official determines that suspension or debarment is not necessary to protect the Government’s interests.
  • Certification (FAR 52.209-12) — Contractors pursuing a DoD, NASA, or GSA contract in excess of $5,000,000 and involving certain appropriations under the CFCAA must also certify that they: (1) have filed all federal tax returns in the past three years, (2) have not been convicted of a criminal offense under the Internal Revenue Code; and (3) do not have any outstanding unsatisfied federal tax assessment, unless the assessment is being paid under an agreement with the Internal Revenue Service or subject to a non-frivolous administrative or judicial proceeding.

Although the FAR Council states that the interim rule will impose a “minimum burden,” it could have significant consequences for contractors that have delinquent federal tax liability or a recent felony conviction.  Such contractors pursuing awards from the DoD, NASA, or GSA will need to be prepared to provide information demonstrating that they remain a responsible contractor.  Further, going forward, contractors subject to potential delinquent tax liability or involved in proceedings that could result in a felony conviction should closely consider their ongoing ability to contract with the DoD, NASA, or GSA in light of the interim rule.

The interim rule takes effect on February 26, 2016, and the FAR Council is accepting comments until February 2, 2016.

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Photo of Heather Finstuen Heather Finstuen

Heather Finstuen is a partner in the firm’s CFIUS practice and a co-chair of the Foreign Direct Investment initiative. She represents international and domestic companies in numerous industries in securing the approval of CFIUS and provides counseling on negotiating, implementing, and complying with…

Heather Finstuen is a partner in the firm’s CFIUS practice and a co-chair of the Foreign Direct Investment initiative. She represents international and domestic companies in numerous industries in securing the approval of CFIUS and provides counseling on negotiating, implementing, and complying with CFIUS national security agreements. She frequently advises clients on national industrial security regulations and engages with the Defense Counterintelligence and Security Agency (“DCSA”), the Department of Energy, and other cognizant security agencies on topics including the determination and mitigation of foreign ownership, control, or influence (“FOCI”).

Heather has been involved in many complex CFIUS and FOCI matters, including Nexen Inc. in its $15 billion sale to China National Offshore Oil Corporation, GLOBALFOUNDRIES’ $1 billion acquisition of the IBM Microelectronics Division, Micro Focus on transactions including its $8.8 billion acquisition of HPE’s software business and $2.5 billion sale of its SUSE business, CenturyLink’s $2.2 billion sale of its Savvis data center business, Publicis Groupe’s $3.7 billion acquisition of Sapient, numerous matters for BAE Systems, and multiple transactions for The Carlyle Group.

Photo of Alexander Hastings Alexander Hastings

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in…

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in e-discovery. He assists in investigations and litigations that involve complex e-discovery issues and has represented clients in matters involving the U.S. Department of Justice, Securities and Exchange Commission and the United States International Trade Commission.

Mr. Hastings’ government contracts experience includes advising clients regarding new developments in regulatory requirements, including the Federal Acquisition Regulation’s (FAR) anti-human trafficking requirements and the FAR and Bayh-Dole Act’s intellectual property provisions. Mr. Hastings also provides due diligence regulatory advice to clients contemplating the acquisition of government contracting entities or assets.

Mr. Hastings’ e-discovery experience includes advising a wide-array of clients on best practices in information governance and document collection and assisting clients develop effective mobile device and document management policies.

Mr. Hastings also maintains an active pro bono practice and routinely writes on issues related to government contracts and e-discovery.