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.

Photo of Heather Finstuen Heather Finstuen

Heather Finstuen has extensive experience advising clients on cross-border investment and U.S. national security matters, negotiating and implementing mitigation agreements, and leading internal investigations and responding to government inquiries related to U.S. national security risks. Clients regard Heather as “very thoughtful” and “superb…

Heather Finstuen has extensive experience advising clients on cross-border investment and U.S. national security matters, negotiating and implementing mitigation agreements, and leading internal investigations and responding to government inquiries related to U.S. national security risks. Clients regard Heather as “very thoughtful” and “superb at translating legal requirements to business realities” (Chambers USA).

Heather represents domestic and international companies in numerous industries in securing the approval of the Committee on Foreign Investment in the United States (CFIUS). She frequently advises clients on national industrial security program regulations and engages with the Defense Counterintelligence and Security Agency, the Department of Energy, and other cognizant security agencies on the determination and mitigation of foreign ownership, control, or influence (FOCI).

Heather has expertise in identifying CFIUS and FOCI mitigation solutions that support commercial strategic objectives and translating complex mitigation requirements into pragmatic business practices. She has been involved in many complex CFIUS and FOCI matters across all industry sectors, including Brookfield Asset Management and Cameco’s $7.9 billion acquisition of Westinghouse; Advent International’s $14 billion consortium investment in McAfee and $6.4 majority investment in Maxar Technologies; BAE Systems’ $5.5 billion acquisition of Ball Aerospace and $2 billion combined acquisition of Collins Aerospace’s military GPS business and Raytheon’s military radios business; Peugeot’s $58 billion merger with Fiat Chrysler Automobiles to create Stellantis N.V.; Nexen Inc.’s $15 billion sale to China National Offshore Oil Corporation; and GlobalFoundries’ $1 billion acquisition of the IBM Microelectronics Division.

Heather counsels U.S. government contractors on National Industrial Security Program Operating Manual (NISPOM) requirements, obtaining and maintaining facility and personnel security clearances, safeguarding requirements, and supply chain considerations. Heather has led numerous internal investigations relating to U.S. national security issues and compliance concerns and has counseled U.S. government contractors in connection with internal investigations, mandatory disclosures, federal inquiries and investigations, and compliance policies and procedures.

Heather was recognized as a Law360 International Trade MVP for 2021 and 2024.

Before joining the firm, Heather served as a law clerk to the Honorable Carolyn Dineen King of the United States Court of Appeals for the Fifth Circuit.