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Turning a blind eye: How tax-delinquent companies are landing government contracts

(Source: AP Graphics Bank) (Source: AP Graphics Bank)
JONESBORO, AR (KAIT) -

An IRS corporate tax collection mistake allowed companies saddled with tax liens to continue to score lucrative government contracts, according to a Raycom Media Investigative Unit investigation.

Through Freedom of Information Act records requests, the investigation found at least 125 companies that owe the IRS a total of more than $40 million in unpaid taxes.

Yet they were still awarded huge federal government contracts.

According to the records, the companies netted a total of nearly $134 million in contracts during the very years they piled up enough tax indebtedness to warrant IRS liens.

"It's just blatant disregard for taxpayer money," said U.S. Rep. John Kennedy, (R) Louisiana.

The records revealed the worst offender is the North American Management and Business Corporation in Arlington, Virginia.

It carries tax liens of more than $5 million over four years, according to the records.

Yet during that time, the communications company received more than $4.4 million in government contract revenue.

The company's representatives did not respond to our request for comment.

Neither did Joseph Turner, the president of Universal Electronics, Inc. (UEI) in Nashville, Tennessee. 

The records showed it holds 11 government contracts worth $70,203.77. 

But it's saddled with IRS tax liens totaling $160,322.58.

Neither Turner nor UEI will likely pay those taxes. Court records confirmed Turner and UEI filed for bankruptcy.

Two Arkansas companies made the list. 

Delta Sign & Neon in Pine Bluff was awarded a $12,528.87 contract with U.S. Department of Defense.

Yet it owes the IRS $185,896.36 in unpaid taxes. 

Electronics and appliance dealer Sabra Technology in Malvern, Arkansas, enjoys a $21,985 with the Bureau of Prisons, as the IRS has ignored the company's tax lien of $5,376.67. 

Both companies' bosses never returned our messages.

“I think you’re incentivizing or rewarding bad behavior if you award contracts to a contractor who has a tax lien or tax indebted to the federal government,” said U.S. Congressman Rick Crawford. “To those individuals, I share your frustration. I don’t think that should be done. I think that folks who haven’t paid their taxes should be held to account and should not be rewarded by getting further government contracts.”

An August 14, 2017, audit by the Treasury Inspector General for Tax Administration revealed how it's happening. 

According to the audit, the IRS recently automated its Federal Payment Levy Program so that it would automatically and electronically collect delinquent taxes from government contractors. 

But the audit found more than 25 percent of the total accounts of federal contractors enrolled in the program "...were improperly excluded" from the automated system.

The IRS failed to collect those contractors' unpaid taxes "...for more than one year," read the audit.

In response to the audit, Mary Beth Murphy, commissioner of the IRS's Small Business/Self-Employed Division, wrote a letter accepting responsibility for the mistake.

In the letter and its accompanying corrective action plan, Murphy pledged "...to identify all the affected (accounts)" and that "...action is being taken to include them" in the collection program by February 15, 2018.

Congressman Crawford said he doesn’t believe there needs to be a legislative fix to address this issue.

Instead, he suggests administrative action in the IRS to bring the database online to allow federal agencies to make sure the companies they’re offering contracts to don't have any liens.

Copyright 2017 KAIT. All rights reserved.

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