Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. COLEMAN (for himself, Mr. LEVIN, Ms. COLLINS, and Mr. REED):

S. 2383. A bill to amend title 10, United States Code, to require the registration of contractors' taxpayer identification numbers in the Central Contractor Registry database of the Department of Defense, and for other purposes; to the Committee on Armed Services.

Mr. COLEMAN. Mr. President, I rise today to introduce the Central Contractor Registry Act of 2004 whose purpose is to establish a centralized contractor database within the Department of Defense and to require federal contractors who register in that database to provide their taxpayer identification number and their consent to verifying that number with the Internal Revenue Service as a condition that must precede the awarding of a contract by the Department of Defense. This bill will close a $3 billion tax loophole and will help to recover over $100 million annually from federal contractors who have not filed federal tax returns or who have not paid the taxes they owe the government. I am joined by Senators CARL LEVIN, SUSAN COLLINS and JACK REED.

In a hearing before the Permanent Subcommittee on Investigations, the General Accounting Office testified that over 27,000 contractors at the Department of Defense owed over $3 billion in unpaid Federal taxes. Normally, these taxes could be collected through the Federal Payment Levy Program by levying fifteen percent of the contractors' payments. In fiscal year 2002, the Financial Management Service should have collected over $100 million from tax delinquent Department of Defense contractors. However, actual collections for the year were less than $500,000. Further, in 2001, the Department of Defense provided the Internal Revenue Service with over 26,000 information returns that could not be used to determine contractors' tax liability. One of the principal reasons for this anemic state of collections and the large volume of unusable information returns has been and remains the inability of the Department of Defense and the Internal Revenue Service to reach an accord on verifying the taxpayer identification numbers of the contractors who have registered in the Department of Defenses's Central Contractor Registration database.

Under current law, the Department of Defense's authority to verify contractors' taxpayer identification numbers is limited to those contractors who have contracts with the Department of Defense and for whom the department is required to report miscellaneous income to the Internal Revenue Service on a Form 1099 information return. However, there are contractors who have registered in the Central Contractor Registration for whom the Department of Defense lacks authority to verify their taxpayer identification numbers including individuals and companies who would like to contract with the federal government and contractors who have contracts with agencies and departments other than the Department of Defense. On the other hand, current law also allows a taxpayer to consent to the verification of their taxpayer identification number with the Internal Revenue Service and allows the Internal Revenue Service to provide a validated taxpayer identification number.

My bill will resolve the impasse between the Department of Defense and the Internal Revenue Service by requesting contractors' consent to the validation of their taxpayer identification number as part of the registration process. Contractors will not be required to provide their consent. But if they do not, they will not be awarded a contract by the Department of Defense.

Further, my bill requires the Department of Defense to warn contractors as part of the registration process that if they do not provide a valid taxpayer identification number they may be subject to backup withholding. This would apply to those contractors who list an invalid taxpayer identification number, have a contract with the Department of Defense, and will earn miscellaneous income that is required to be reported to the Internal Revenue Service.

I would like to briefly summarize the major provisions of my bill. It provides a statutory basis for the Central Contractor Registration and renames the database as the Central Contractor Registry. It requires that the registry contain contractor's taxpayer identification numbers, their consent to verifying their numbers with the Internal Revenue Service and for the Internal Revenue Service to provide a corrected number if possible. It requires that registrants furnish this information as a condition for registration, and requires the Department of Defense to warn contractors who fail to provide a valid taxpayer identification number that they may be subject to backup withholding and requires implementation of backup withholding in cases where it is required. It precludes awarding a contract to any registrant who has not provided a valid taxpayer identification number and excludes from coverage any registrant who is not required to have a taxpayer identification number.

It directs the Secretary of Defense to apply to the Internal Revenue Service for inclusion in the Taxpayer Identification Number Matching Program and directs the Commissioner of Internal Revenue to provide response to the Department of Defense. It directs the Secretary of Defense to provide any registrant who is determined to have an invalid taxpayer identification number with an opportunity to provide a valid number. It further requires that the Central Contractor Registry clearly indicate whether a registrant's taxpayer identification number is valid, under review, invalid, or not required. Finally, it requires that contractors taxpayer identification numbers be treated as confidential by federal contract officers who have access to the Central Contractor Registry.

My overall objective in introducing this bill is to ensure that tax cheats are not rewarded with federal contracts. If the Department of Defense and the Internal Revenue Service do not have accurate and reliable taxpayer identification numbers then we will not be able to stop this practice. My bill takes the necessary first step toward ensuring that the Department of Defense and the Internal Revenue Service have valid taxpayer identification numbers in the Central Contractor Registry database.

I ask unanimous consent that the text of the bill be printed in the RECORD.