What contractors should know about tax certification.

• Author: D.Agostino, L. James
• Position: ETHICSCORNER

President Obama recently ordered the commissioner of internal revenue to review the accuracy of contractor documents that show federal taxes have been paid in full and on time.

The president's Jan.20,2010, directive calls for the commissioner to conduct a review of certifications made by contractors since the certification came into effect in 2008. Furthermore, the directive calls for the director of the Office of Management and Budget to work with the secretary of the Treasury to review and create new systems for contracting officers and debarring officials to review these tax status certifications.

Generally, no certification should ever be signed that is not fully understood. This seems obvious, but in practice it is not always easy to do. The president's directive to tighten enforcement of the government contractor tax non-delinquency certification reinforces key ethical concerns as to certifications to the government.

In 2008, then Sen. Obama authored language in all appropriations bills requiring contractors to certify they were current on their federal taxes. The tax certification language requires government contract bids to certify that the offeror and its principals have or have not "within a three-year period preceding this offer, been notified of any delinquent federal taxes in an amount that exceeds $3,000 for which the liability remains unsatisfied." (FAR [section][section] 52.209-5, 52.212-3)

The certification clause deems federal taxes to be delinquent when the tax liability is "finally determined" and the taxpayer is delinquent in making payment., "Finally determined" and the taxpayer is delinquent in making payment. "Finally determined" is further defined as when there are no further administrative or judicial appeals and all judicial appeal rights have been exhausted.

This tax status certification was added to other existing Federal Acquisition Regulation (FAR) certifications--such as presently debarred, suspended, or indicted. All of these certifications are made on behalf of the "offeror" (the government contractor company) and the principals of the government contractor company. The FAR clause defines "principal," for purposes of these certifications, as "an officer, director, owner, partner, or person having primary management or supervisory responsibilities within a business entity (general manager, plant manager, head of a subsidiary, division, or business segment, and similar positions)." (FAR [section]...