October 14, 2019

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Federal Felony Convictions and Delinquent Taxes Must be Reported Under New FAR Rule

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.

© 2019 Covington & Burling LLP

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About this Author

Heather Finstuen, Covington, government contracts attorney
Special Counsel

Heather Finstuen is special counsel in the firm’s Washington, DC office.  Her practice focuses on government contracts, litigation and internal investigations, and national security law.

Ms. Finstuen represents and counsels government contractors in connection with internal investigations, mandatory disclosures, federal inquiries and investigations, and compliance policies and procedures.  Ms. Finstuen’s experience includes conducting internal fraud and ethics investigations in various industries (defense, software, banking and finance, healthcare, food) into a...

202.662.5823
Alexander Hastings, Litigation and e-discovery lawyer, Covington
Associate

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.

202-662-5026