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FEDERAL WORKFORCE TAX ACCOUNTABILITY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 18, 2015 

Serial No. 114–15 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 
(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DeSAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

SEAN MCLAUGHLIN, Staff Director 

DAVID RAPALLO, Minority Staff Director 

JENNIFER HEMINGWAY, Staff Director, Government Operations Subcommittee 

JULIE DUNNE, Senior Counsel 

MELISSA BEAUMONT, Clerk 
(III) 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSEY, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

STACEY E. PLASKETT, Virgin Islands 

(V) 

C O N T E N T S 

Page 

Hearing held on March 18, 2015 ............................................................................ 1 

WITNESSES 

Mr. Brad Huther, Chief Financial Officer, U.S. Department of Housing and 

Urban Development 

Oral Statement ................................................................................................. 4 

Written Statement ............................................................................................ 6 

Mr. E.J. Holland, Jr., Assistant Secretary for Administration, U.S. Department of Health and Human Services 

Oral Statement ................................................................................................. 9 

Written Statement ............................................................................................ 11 

Mr. Seto Bagdoyan, Director, Forensic Audits and Investigative Service, U.S. 

Government Accountability Office 

Oral Statement ................................................................................................. 15 

Written Statement ............................................................................................ 17 

Mr. Alan Chvotkin, Executive Vice President and Counsel, Professional Services Council 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 30 

Ms. Maureen Gilman, Legislative and Political Director, National Treasury 

Employees Union 

Oral Statement ................................................................................................. 39 

Written Statement ............................................................................................ 41 

(1) 

FEDERAL WORKFORCE TAX ACCOUNTABILITY 

Wednesday, March 18, 2015, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 1:04 p.m. in room 

2247, Rayburn House Office Building, the Honorable Mark Meadows (chairman of the subcommittee), presiding. 

Present: Representatives Meadows, Massie, Mulvaney, Carter, 

Connolly, Maloney, and Lynch. 

Mr. MEADOWS. The Subcommittee on Government Operations 

will come to order. 

Without objection, the Chair is authorized to declare a recess at 

any time. We do have votes coming up pretty shortly, so we are 

going to try to fast track and at least get your opening Statements. 

Our Federal employees are held accountable by paying taxes, by 

the Code of Ethics for what they sign and acknowledge for the executive branch. The Code of Ethics dictates that Federal employees 

must ‘‘satisfy in good faith their obligations as citizens, including 

all just financial obligations, especially those such as Federal, State 

and local taxes that are imposed by law.’’ 

Certainly the President’s Fiscal Year 2016 budget asks that the taxpayer spend some $275 billion to fund the executive branch payroll. Federal salaries now average over $75,000 per person. Yet, according to the IRS, more than 100,000 Federal civilian employees 

owe more than $1 billion in unpaid Federal income tax for 2013. 

In prior work, the GAO has identified tens of thousands of Federal employees and contractors with access to classified information 

that were delinquent in their taxes, including many of them who 

had accrued tax debt following the adjudication of their security 

clearance. 

The GAO also found thousands of Federal contractors with substantial amounts of unpaid Federal taxes. For example, in the VAHHS contract for healthcare-related services, a contractor was paid 

over $100,000 in Federal funds and the contractor had an unpaid 

tax debt of over $18 million. 

At the same time, owners were buying multimillion dollar properties and luxury vehicles but not paying their payroll taxes. Employees and contractors who do not play by the rules, who consciously ignore the channels and processes in place to fulfill their 

tax obligation, must be held accountable. 

This particular hearing is to address those particular issues. We 

look forward to hearing from our witnesses in terms of your poten-
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tial ideas and solutions or ramifications. We welcome you here 

today and thank you so much. 

Mr. MEADOWS. Chairman Chaffetz will be soon introducing or reintroducing some legislative reform that is aimed at addressing the 

tax delinquent Federal employees and contractors, including those 

who have access to national security information. 

It is with that potential reintroduction of legislation that we hold 

this hearing. I am joined by my friend and colleague from the 11th 

congressional District, the Ranking Member of this subcommittee. 

I will now recognize him for his opening remarks, Mr. Connolly. 

Mr. CONNOLLY. I thank my friend the Chairman. 

I welcome all of the witnesses at the table. 

From the outset, let us be clear. While members and stakeholders may debate the particulars of how we can best address serious and willful tax delinquency committed by Federal employees, 

contractors, grant recipients and for that matters, Members of Congress and their staffs, there is absolutely no disagreement among 

members here on this dais or of stakeholders in the crowd I am 

sure that all Americans should pay their fair taxes in full and on 

time. 

Any disagreement or debate that may arise this afternoon simply 

reflects legitimate differences over what would be the most effective approach and what set of tools would be optimal to deal with 

the challenge of serious tax delinquency while preserving sacred 

constitutional principles such as the right to due process of law, 

even the presumption of innocence. 

I have the privilege of representing the dedicated and far too 

under-appreciated Federal employees and contractors that protect 

our borders, administer Social Security and Medicare, and support 

our warfighters, among so many other critical missions. 

I have great empathy for my constituents who express justified 

resentment over Congress’ repeatedly highlighting those few instances of outrageous, willful tax delinquency to unfairly tarnish 

the entire Federal work force and contracting communities. 

The reality is that Federal employees pay their taxes at a substantially higher rate than the general public. Indeed, 97 percent 

of the Federal work force paid their taxes in full and on time in 

2013, an impressive figure that significantly exceeded the general 

public’s compliance rate of 91 percent. 

Furthermore, through levies and wage garnishments, the IRS already recovers almost all tax delinquent debts of Federal employees. The Majority’s longstanding obsession with advancing legislation that mandates firing Federal workers who have fallen behind 

in their taxes seems to me a classic example of the solution in 

search of a problem. 

Consider the last Congress in the official cost estimate of the socalled Federal Employee Tax Accountability Act, the Joint Committee on Taxation of the Congress, bipartisan, reported that enacting the legislation would ‘‘have a negligible effect on revenues.’’ 

In that same cost estimate, the Congressional Budget Office, a 

non-partisan office, scored the legislation and actually projected 

that enacting the bill would increase Federal spending by $1 million in the first year and about half a million dollars in every year 

thereafter. 
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Make no mistake, the unfair effort by some to target all Federal 

employees as tax scoff offs has nothing to do with improving our 

Nation’s tax compliance rate or lowering the deficit. Spending more 

than $1 million of taxpayer funds to implement a counter-productive bill that only targets our Nation’s civil servants, while ignoring 

our Nation’s multibillion tax gap is neither a prudent nor a wise 

policy response. 

Let us remember, this committee has highlighted in the past 

that every year the IRS cannot collect or does not collect about 

$350 billion a year, not from Federal employees but money owed 

the Federal Government that just is not collected because of lack 

of resources. 

No one disputes these tax debts must eventually be paid. However, while simply firing an employee may feel good, it will not 

properly address the problem. In fact, it would undermine the ability of the government to collect those unpaid taxes on behalf of the 

American people because that individual is now unemployed. 

The Internal Revenue Service Federal Employee Delinquency 

Initiative and its Federal Payment Levy Program have already 

proven effective in holding Federal workers accountable for paying 

their taxes and recouping back taxes. 

I would be interested in working with my colleagues to explore 

whether we can double down on those proven programs that, in 

fact, do work. The bottom line is we can improve upon the Federal 

work force that is an already impressive and admirable tax compliance rate of 97 percent by focusing on better execution of existing 

programs as opposed to creating new duplicative bureaucracies and 

a punitive work ethic. I do not think it is going to prove useful with 

our Federal workers. 

I certainly stand ready to hear the testimony today and hear the 

facts, but I must confess at the beginning, I wonder what the problem we are trying to solve is. 

With that, I yield back, Mr. Chairman. 

Mr. MEADOWS. I thank the Ranking Member for his opening 

Statement. 

I will hold the record open for five legislative days for any members who would like to submit written Statements. 

I would say the Ranking Member and I believe wholeheartedly 

that painting a broad brush with our Federal employees is not 

something we want to do. As we introduce the witnesses, I would 

ask let us look at how do we address this? How is your agency different from some of those performing better? 

If we do not have to pass legislation to make this happen, I think 

we are all in agreement that it is more about accountability than 

it is trying to paint a broad brush. 

Mr. CONNOLLY. Mr. Chairman, I want to be very clear. In no way 

should my remarks be inferred as you having painted any such 

broad brush. I know you did not. 

Mr. MEADOWS. I thank you. 

We will recognize our panel of witnesses. I am pleased to welcome Mr. Brad Huther, Chief Financial Officer, U.S. Department 

of Housing and Urban Development; Mr. E.J. Holland, Jr., Assistant Secretary for Administration, U.S. Department of Health and 

Human Services; Mr. Seto Bagdoyan, Director, Audit Services, Fo-
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rensic Audits and Investigative Service, U.S. Government Accountability Office; Mr. Alan Chvotkin, Executive Vice President and 

Counsel, Professional Services Council; and Ms. Maureen Gilman, 

Legislative and Political Director, National Treasury Employees 

Union. Welcome to all of you. 

Pursuant to committee rules, all witnesses will be sworn before 

they testify. Please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Mr. MEADOWS. In order to allow time for discussion, please limit 

your oral testimony to 5 minutes. Your entire written Statement 

will be made a part of the record. 

We will recognize our first witness for 5 minutes. 

WITNESS STATEMENTS 

STATEMENT OF BRAD HUTHER 

Mr. HUTHER. Thank you, Chairman Meadows, Ranking Member 

Connolly, and other distinguished members of the subcommittee. 

My name is Brad Huther. I am the Chief Financial Officer at the 

Department of Housing and Urban Development. I am honored to 

be here today on behalf of the Department. It is my privilege to testify before this distinguished subcommittee. 

I have been with HUD for approximately 6 months having been 

confirmed by the Senate on September 17, 2014. I am additionally 

pleased to work alongside a strong team of colleagues in the Office 

of the Chief Financial Officer to achieve Secretary Castro’s vision. 

Prior to joining HUD, I served over 30 years in senior leadership 

positions with the Federal Government at the U.S. Patent and 

Trademark Office, the United States Census Bureau and the Office 

of the Secretary of Commerce. 

My non-government professional experience includes serving as 

the President and Chief Executive Officer of the International Intellectual Property Institute as a distinguished adjunct professor in 

residence at American University. 

Over the past 25 years, the CFO Act of 1990 has played a central 

role in improving financial performance and importantly, accountability based largely on private sector models. At HUD, Secretary 

Castro is committed to strengthening our core financial operations 

so that all senior financial and program management officials can 

sharpen their focus on the strategically important issues of financial analysis, forecasting and the leveraged management of every 

dollar we spend. 

I appreciate the subcommittee’s interest in examining the issue 

of the accountability of Federal employees and contractors. Building a stronger HUD is a key priority for Secretary Castro, Deputy 

Secretary Coloretti and the new leadership team at the department. 

We are working diligently to increase transparency and accountability, to eliminate inefficiency and I ensure that all employees 

meet high ethical standards. These efforts will help everyone at the 
5 

department fulfill our critical mission of creating strong, sustainable, inclusive communities and quality, affordable homes for all. 

Like all Federal employees and all citizens, HUD employees have 

a responsibility to satisfy their tax obligations. The vast majority 

of HUD employees do meet their tax requirements. Of course the 

goal of the department is to have all employees comply with their 

tax obligations and we have taken steps to help employees meet 

those responsibilities. 

The earnings and leave Statements of all employees includes a 

reminder of the Federal tax filing deadline and a notice that employees are unable to pay the taxes owed, they should contact the 

Internal Revenue Service to discuss payment options. 

Further, HUD makes counseling available to any employees who 

need assistance managing their personal finances. 

Despite these efforts, there are some employees who do not meet 

their tax obligations. These employees, like all taxpayers, are subject to the enforcement and collection efforts of the IRS. They also 

receive the same due process protections as their fellow citizens. 

As the subcommittee examines this issue, it is important for both 

the subcommittee and the public to understand that Section 6103 

of the Internal Revenue Code protects the confidentiality of tax information and prohibits its disclosure unless the statutory exception applies. 

Furthermore, the responsibility to take enforcement action to recover unpaid taxes rests appropriately with the IRS. 

Let me reassure the subcommittee that the department remains 

firmly committed to the goal of building an accountable work environment and a work force where each and every employee is meeting his or her ethical and legal obligations, including tax requirements. 

Again, I wish to thank the subcommittee for the opportunity to 

appear before you today. 

[Prepared Statement of Mr. Huther follows:] 
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Mr. MEADOWS. Thank you so much. 

Mr. Holland, you are recognized for 5 minutes. 

STATEMENT OF E.J. HOLLAND, JR. 

Mr. HOLLAND. Thank you, Chairman Meadows, Ranking Member 

Connolly and distinguished members of the subcommittee. 

I am E.J. Holland, Jr., Assistant Secretary for Administration, 

U.S. Department of Health and Human Services. I am honored to 

be here on behalf of our department. It is my privilege to testify 

before this distinguished committee on a matter which we believe 

to be very important. 

While I am incredibly honored to serve this Administration, I 

frankly am relatively new to civil service. I came here 5 years ago 

after a 41-year career in the private sector practicing law and serving in senior executive roles at three separate Fortune 500 companies. 

Now, as Assistant Secretary for Administration at the department, I serve in a role similar to a chief administrative officer in 

a private sector company. My division is responsible for supporting 

some 80,000-plus employees in matters of technology, real eState, 

human resources and security services. 

I came to serve in government with a commitment to help make 

government efficient and effective. Your invitation and my commitment to American taxpayers bring me here today. 

You have invited me to testify regarding the tax accountability 

of Federal employees. Let me begin by saying that at the Department of Health and Human Services, we expect our employees to 

be exemplary citizens. 

Our Code of Ethics requires that each of us satisfy in good faith 

our obligations as citizens, including all just financial obligations, 

especially those such as Federal, State and local taxes that are imposed by law. 

We believe that Federal employees hold the public trust and 

should be held to a high standard of conduct. We agree that Federal employees, like all employees, should pay Federal as well as 

State and local taxes. 

It also is of utmost importance that I communicate to you that 

HHS is not privy to information about tax delinquency of our individual employees. It is the Internal Revenue Service that collects 

tax delinquency information and only the IRS has the procedures 

in place to recover funds from HHS or other government employees 

who might be delinquent in paying their taxes. 

Our understanding is that IRS sends our payroll provider, in our 

case, Defense Finance and Accounting Services, one of the four authorized Federal payroll providers, the information needed to collect any tax levies. DFAS notifies and collects from the Federal employee without any intervention by the Department of Health and 

Human Services. 

Even if we were privy to tax delinquency matters of our employees, we would have to establish a nexus or a connection between 

an employee’s position in the tax delinquency in order to take any 

administrative action against the employee under current law. 
10 

Under OPM governmentwide regulations, unsuitability, evidence 

that a job applicant is dishonest in meeting financial obligations 

from Federal programs such as taxes, may result in a negative 

suitability determination. However, this does not automatically 

make the applicant ineligible for Federal employment but may be 

a consideration based on individual circumstances. 

While there is not current law strictly barring a person with seriously delinquent tax debts from Federal employment, we do have 

laws and regulations that we follow that significantly restrict the 

awarding of contracts to delinquent offerors. 

The Federal Acquisition Regulations, the so-called FAR, requires 

contractor offerors, in certain circumstances, certify whether they 

have been notified about delinquencies in Federal taxes and I understand the Federal Acquisition Regulatory Counsel is developing 

regulatory changes to the FAR to implement the new requirements 

in the Appropriations Act. 

In summary, we do not currently have any authority to enforce 

tax delinquency laws on the employees of Health and Human Services. We are not privy to information regarding specific employees 

who might be delinquent in paying their taxes. 

We, at HHS, do believe taxpayers, regardless of their income or 

their place of employment, should be held accountable for filing accurate tax returns and paying taxes they owe on time. We are fully 

supportive of enforcing those laws. 

[Prepared Statement of Mr. Holland follows:] 
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Mr. MEADOWS. Thank you, Mr. Holland. 

Mr. Bagdoyan, you are recognized for 5 minutes. 

STATEMENT OF SETO BAGDOYAN 

Mr. BAGDOYAN. Good afternoon, Chairman Meadows, Ranking 

Member Connolly and members of the subcommittee. 

I am pleased to be here today to discuss the results of reports 

GAO issued in September 2013 and July 2014 on the Federal tax 

debt of Federal employees and contractors with security clearances. 

I would note that Federal law does not preclude individuals with 

tax debt from holding such clearances. However, tax debt may be 

an indicator of potential current or future financial pressure and 

vulnerability to compromise. 

According to ODNI, several million Federal employees and contractors were eligible for or held clearances as of October 2013, 

more than half. 

Circumstances in which such clearance-holders face financial 

pressure create an inverted risk pyramid, with those suitable for 

Federal employment that may require some type of clearance at 

the relatively lower risk top and those with access to classified TS/ 

SCI level information at the relatively higher risk bottom. Disclosure of such information could cause, in some cases, grave damage 

to national security. 

With this risk as backdrop, I will now outline our key findings. 

In July 2014, we reported that about 83,000 DOD employees and 

contractors eligible for various clearances during 2006–2011 had 

Federal tax-debt totaling more than $730 million to millions of dollars. About 40 percent had voluntary repayment plans with IRS. 

About 25 percent were eligible for a top secret or SCI clearance. 

About 76 percent accrued tax debt after being deemed eligible for 

a clearance and most noteworthy, in terms of increased potential 

vulnerability, about 31 percent had access to classified information 

and owed about $229 million. 

In September 2013, we reported that about 8,400 non-DOD, nonintelligence civilian agency employees and contractors eligible for 

clearances during the period of our analysis from 2006–2011 owed 

about $85 million in tax debt as of June 2012. The median debt 

was about $3,800 and debts ranged once again from $100 to several 

millions of dollars. About half had voluntary repayment plans with 

IRS. About half were eligible for a top secret clearance and about 

76 percent accrued their tax debt after being deemed eligible for a 

clearance. 

We further reported that because Section 6103 of the Internal 

Revenue Code restricts access to tax information without taxpayer 

consent, investigators primarily relied on clearance applicants self 

reporting their debts and validation techniques such as use of credit reports to detect tax debt. 

However, each of these are shortcomings. Self reporting is a relatively weak front end control without in-depth, independent 

verification and credit reports only contain information on debts for 

which IRS filed a lien on debtors’ properties. 
16 

Additionally, Federal agencies do not routinely review the tax 

compliance of clearance holders. There is no process to detect unpaid tax debt accrued after an individual has been favorably adjudicated unless it is self reported, reported by a security manager 

due to garnishment of wages or discovered during a clearance renewal or upgrade. 

Our findings underscore the importance of thoroughly assessing 

clearance applicants and holders with detailed and timely insight 

into their financial status while simultaneously balancing important concerns and tradeoffs about privacy and security. Such insight could help provide reasonable assurance that these individuals are not unduly exposed to financial pressure and mitigate related vulnerabilities to compromise. 

In the July 2013 report, we recommended that ODNI in consultation with other agencies evaluate the feasibility of developing a system that could obtain tax debt information through an automated 

means for investigating and adjudicating clearance applicants and 

monitoring the debt status of clearance holders. 

An ODNI working group is in the process of looking into this 

matter and we continue to monitor their progress. We will continue 

to periodically report on it. 

Mr. Chairman, this concludes my Statement. I look forward to 

the subcommittee’s questions. 

[Prepared Statement of Mr. Bagdoyan follows:] 
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Mr. MEADOWS. Thank you for your work and your testimony. 

Mr. CHVOTKIN. 

STATEMENT OF ALAN CHVOTKIN 

Mr. CHVOTKIN. Thank you, Mr. Chairman and members of the 

subcommittee. 

PSC is also a strong proponent of creating a fair, balanced, and 

competitive Federal contracting marketplace with a level playing 

field for businesses. 

No entity should have an unfair competitive advantage by failing 

to pay taxes over those firms that pay their taxes. Companies that 

violate the tax laws should be held accountable for those violations 

and punished accordingly. 

In addition, in the Federal contracting market, those companies 

should be carefully evaluated to ensure they are ‘‘presently responsible’’ parties, decisions separate from punishment for past violations before being eligible to receive future Federal contracts. 

The principal requirements for tax compliance are found in the 

Federal tax laws and enforced by the Internal Revenue Service. 

There are also provisions, as Mr. Holland mentioned, in the Federal Acquisition Regulation to identify and provide due process before an agency takes action against contractors who fail to comply 

with the tax laws. The Federal Acquisition Regulation applies only 

to contracts, not to grants. 

The FAR specifically includes an enumerated list of causes for 

suspension and debarment and authorization to act against a contractor for having delinquent Federal taxes in an amount that exceeds $3,000. The FAR also contains guidance about what constitutes a delinquent tax debt and clearly provides that such debts 

must be finely determined, meaning that there is not a pending administrative or judicial challenge and all appeal rights have been 

exhausted. 

To identify contractors that may have violated Federal tax laws 

that have a tax delinquency, the System for Award Management, 

called SAM, is the Federal contractor registration system that all 

perspective contractors must use to enter detailed information 

about their company in order to be eligible to compete for Federal 

contracts. 

SAM requires companies to certify that they have not been convicted of or had any civil judgment rendered against them because 

of a tax evasion or violation of Federal tax laws. SAM also requires 

contractors to annually certify whether or not they have been notified of any tax delinquency in excess of $3,000. 

Under the Treasury’s Federal Payment Levy Program, Treasury 

is authorized to withhold a percentage of any Federal payment in 

order to satisfy a Federal tax debt. For Federal contractors, Treasury is authorized to withhold up to 100 percent of that payment. 

Despite the clear and effective initiatives to ensure contractor 

compliance with tax laws, policy riders regarding contractor compliance have been included in a myriad of appropriations laws over 

the past several years. These different approaches adopted by appropriations acts make it difficult to achieve a truly governmentwide approach and also creates significant confusion within the 
29 

government and the contractor community about reporting and 

compliance requirements. 

PSC believes that the current FAR provisions, which have been 

in place since 2008, have had a positive impact on addressing Federal contractor compliance with Federal tax laws. Legislation that 

codifies, clarifies, and offers minimally invasive improvements to 

the Federal Acquisition Regulation could be beneficial. However, 

such legislation must be tailored carefully to avoid creating new 

challenges or new circumstances. 

We understand that Chairman Chaffetz is planning to reintroduce his Contractor Tax Accountability Act. PSC recommends that 

the committee adopt the improvements that I have identified in my 

prepared Statement to better align it with current regulations and 

practices, including repealing prior years appropriations acts, clearly stating that the provisions of the bill supersede those prior appropriations act provisions. 

Your invitation letter also requested we comment on the vulnerability posed by tax delinquent workers, including Federal employees and contractor personnel with security clearances. 

An assessment of a contractor employee’s or a Federal employee’s 

current compliance with tax laws is and should be a factor in the 

initial security clearance and background investigation and Federal 

adjudication process. It is, and should be, taken into account in the 

periodic reinvestigation of an individual’s continued suitability for 

that clearance. 

We support the current Federal Government adjudication guidelines that evaluate the whole person when considering the specific 

impact of any single behavior and see no need to change those adjudicatory guidelines. 

However, if there are to be any changes to the security clearance 

process or adjudication standards regarding tax law compliance, it 

must treat all individuals who are applying for or holding a clearance equally. 

To repeat what others have said, it is important to note that Federal contracting companies often have little ability to address 

cleared personnel’s compliance with tax laws because it is the Federal Government that manages that clearance process and personnel privacy issues prevent companies from knowing about the 

tax status of their employees unless they are told. 

Nevertheless, using continuous evaluation and monitoring techniques could improve the overall compliance with the tax laws by 

all cleared personnel regardless of whether they are a Federal or 

a contract employee. 

That concludes my Statement. I look forward to your questions. 

[Prepared Statement of Mr. Chvotkin follows:] 
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Mr. MEADOWS. Thank you for your testimony. 

Ms. Gilman, you are recognized for 5 minutes. 

STATEMENT OF MAUREEN GILMAN 

Ms. GILMAN. Chairman Meadows, Ranking Member Connolly, 

and members of the subcommittee, thank you for the opportunity 

to provide NTEU’s views on tax compliance issues in the Federal 

work force. 

I would like to extend regrets from NTEU’s President, Colleen 

Kelly, who wanted to be here today but is recovering from back 

surgery. 

Let me begin by stating that NTEU firmly believes that every 

Federal employee should pay their taxes in a timely manner. There 

are currently rules in place that allow Federal employees to be disciplined and even terminated for serious tax delinquency. 

NTEU believes that termination for tax delinquency can be appropriate in some cases, but we believe that a blanket policy of termination is not warranted and will likely lead to more revenue 

going uncollected. 

Under current law, agencies can take disciplinary against employees for failure to satisfy their just financial obligations, including their obligations to pay Federal taxes. These actions can range 

from counseling to removal. 

In addition, there is also an efficient and successful process currently in place to recover taxes owed by Federal employees who become delinquent. In 1997, Congress authorized establishment of 

the Federal Payment Levy Program which allows the IRS to continuously levy up to 15 percent of certain Federal payments made 

to delinquent taxpayers. 

Under the FPLP, the IRS shares tax debt information with the 

Bureau of the Fiscal Service, which is responsible for most Federal 

payments. If a match is found, a 30-day notice is given, then the 

IRS authorizes BFS to levy all eligible Federal payments to that 

individual. 

The levy remains in effect until the debt is paid in full or until 

the taxpayer makes other arrangements to pay off the debt. Federal payments that can be levied through the FPLP include Federal 

salaries. It is important to note, however, that Federal payments, 

including salaries to delinquent employees, are exempt from the 

levy program under certain circumstances, including when a taxpayer is in bankruptcy, when they have applied for relief as an innocent spouse, or when the IRS has determined that they are in 

a hardship situation. 

Therefore, one reason a Federal employee that owes taxes may 

not currently be under the FPLP program is that they qualify for 

one of these exemptions. Another reason could be that the process 

of determining the delinquency and implementing the levy has simply not been completed. 

NTEU believes that prioritizing and providing adequate resources to the Federal Payment Levy Program would be a much 

better solution than a blanket employment bar. It would be a win- 
40 

win by helping to get Federal employees with tax debt into compliance while recovering additional revenue that is owed. 

If, however, legislation is pursued that would prohibit Federal 

employment for those with tax debt, we believe it is critically important to include exemptions similar to those in the FPLP, especially a hardship exemption that represents a consistent and transparent standard, as well as a notice and grace period for those 

working earnestly to resolve their debts. 

As you know, the U.S. Tax Code is incredibly complex. People 

can end up owing additional taxes for many non-nefarious reasons. 

For example, if they took deductions they thought were allowed but 

were not or they got bad advice from an inexperienced or unscrupulous preparer or a joint filer got inaccurate information about a 

spouse’s earnings. 

NTEU believes that intent should be a consideration when determining whether a Federal employee should be terminated due to 

tax delinquency. We also believe that ability to pay should be a 

consideration. 

If an employee is in such dire financial straits that he or she is 

exempt from the levy program, it is not disrespect for the law but 

lack of wherewithal that is behind the non-payment. Clearly firing 

that individual, who might otherwise get back on track, repay the 

debt as well as become a tax compliant, contributing member of society, rather than someone not working and possibly collecting government benefits, does not seem to make economic sense. 

In fact, the Joint Committee on Taxation and the Congressional 

Budget Office, who scored one version of legislation that would require firing tax delinquent Federal employees as raising negligible 

revenue but costing an additional $1 million in administrative costs 

in the first year alone. 

We urge the subcommittee to consider options such as 

prioritizing the levy program that will improve tax compliance 

within the Federal work force while bringing in additional revenue 

that is owed before moving to a blanket policy of termination. 

Thank you again for the opportunity to provide this testimony. 

I would be happy to answer any questions. 

[Prepared Statement of Ms. Gilman follows:] 
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45 
46 
47 

Mr. MEADOWS. Thank you, Ms. Gilman. 

I appreciate the testimony of all the witnesses. Thank you for 

staying close to the five minute deadline. Some of you actually 

came in under, so I thank you. 

I am going to defer on my questions because we will have votes 

shortly. I am going to recognize the gentleman from Kentucky, Mr. 

Massie, for 5 minutes. 

Mr. MASSIE. Thank you, Mr. Chairman. 

Ms. Gilman, first of all, I want to offer congratulations. When I 

look through the list here, I see the delinquency rate for the Department of Treasury, I assume that would include members of 

your union, is the lowest on the list which I am hoping would be 

the case. It is 1.2 percent which is admirable compared to the other 

members here and even the population in general, especially the 

population in general. 

My question is, what is it that the Treasury is doing right that 

everybody else is maybe missing? 

Ms. GILMAN. Let me say that the National Treasury Employee 

Union represents employees throughout the Federal Government 

but we do represent the bulk of employees who work for the Treasury Department. 

Within Treasury, only IRS employees have had historically more 

stringent rules about tax compliance than the rest of the Federal 

work force. That continues today. They have had historically rules 

within the IRS manual on conduct involving tax violations that 

have made them subject to termination for many, many years. 

Since that time, there have been provisions included in the Tax 

Code known as the ten deadly sins which involve termination for 

willing and knowing violations of tax rules. I think there is sometimes a misperception that those rules involve non-payment. They 

do not. They involve purposely not filing returns that an employee 

knows are supposed to be filed or purposely under-reporting or 

lying about your income. 

The idea of whether or not your ability to pay is actually not part 

of that is considered in whether or not you face termination at the 

IRS. 

Mr. MASSIE. Would it be safe to say that the Treasury has a 

higher standard than the other organizations on the list and how 

maybe enforcement mechanisms and that is how you achieved a 

rate that is about one-third? 

Ms. GILMAN. The IRS does, not all of Treasury. 

Mr. MASSIE. The IRS. 

I think Mr. Huther pointed out that just because you are a Federal employee does not mean that you are not still deserving of the 

protections of the laws and your civil liberties should still be intact. 

We should not single out, for instance, Federal employees. 

When you apply to work at a bank, I know this because the 

bankers I have talked to in my district lament the fact that so 

many young people have horrible credit ratings are no longer eligible to be employed by their bank. To work at a bank, you have to 

go through credit checks. This is for you, Mr. Holland. Do employees at HHS, your organization, have to go through a credit check 

as a condition of employment? 
48 

Mr. HUTHER. Congressman Massie, it depends on the nature of 

the position. But for the vast majority of employees, at the time of 

their initial entry or periodically throughout the course of their careers, they would rarely be subject to a credit check per se. Those 

in the Senior Executive Service level and other higher ranking 

management officials and the career service, could be but it is a 

function really of the disclosure documents that they provide at the 

time of their filing of ethics Statements and the like. 

Mr. MASSIE. Mr. Holland? 

Mr. HOLLAND. The situation at the Department of Health and 

Human Services is the same as Mr. Huther describes at the Department of Housing and Urban Development. It depends upon the 

situation and depends upon the particular position. 

Mr. MASSIE. I think Mr. Bagdoyan who pointed out that even on 

a credit report only if the IRS had resorted to a lien would it show 

up on a credit report. Is that true? 

Mr. HOLLAND. That would be my understanding but I am not an 

expert in credit reports. 

Mr. MASSIE. It still might be worth doing. 

Mr. Bagdoyan, I have a question for you. When you went 

through the numbers and looked at the individuals who were eligible for clearance, how many of them are in bankruptcy? Can you 

know that or not? 

Mr. BAGDOYAN. We did not identify those who were in bankruptcy. That was not in our scope. I can double check. 

Mr. MASSIE. I want to get in one question. Should the government verify tax information for top secret and SCI-cleared individuals? 

Mr. BAGDOYAN. That would certainly be a consideration for the 

overall toolbox, but as several of the other panelists testified, the 

Section 6103 protections afforded tax information would preclude 

that and doing it in real time unless the taxpayer, in this case the 

security clearance applicant, consented for that information to be 

accessed. 

Mr. MASSIE. Thank you very much. My time has expired. 

Mr. MEADOWS. I thank the gentleman. 

The Chair recognizes the Ranking Member, Mr. Connolly, for 5 

minutes. 

Mr. CONNOLLY. I thank the Chair. 

I would like to pick up on that very last point, Mr. Bagdoyan. 

Section 6103, which you referred to, was written by Congress and 

sent to the Internal Revenue Code, is that correct? 

Mr. BAGDOYAN. I believe that is correct. 

Mr. CONNOLLY. What do you think the purpose of that provision 

was? 

Mr. BAGDOYAN. Obviously to protect the privacy of taxpayer information. 

Mr. CONNOLLY. Speaking of privacy, Mr. Huther and Mr. Holland, you get a list every month of people who are tax delinquent, 

your employees? 

Mr. HOLLAND. I am afraid not, Mr. Connolly, we do not get such 

a list. 

Mr. CONNOLLY. Who would know since you do not know? 

Mr. HOLLAND. The Internal Revenue Service knows. 
49 

Mr. CONNOLLY. Even if you wanted to take corrective measures, 

you are not privy to that information, is that correct? 

Mr. HOLLAND. Yes, sir, that is correct. 

Mr. CONNOLLY. Following up on Mr. Massie’s point, if there were 

a lien, you might be notified as the employer so that you could comply with withholding, correct? 

Mr. HOLLAND. Actually, we do not even know then. We have, as 

do all the Federal agencies, one of four Federal payroll providers 

that pay our employees. Matters of liens are handled directly between the lienholder and the payroll provider. They do not need to 

involve the department and we do not know when that happens. 

Mr. CONNOLLY. Mr. Bagdoyan, you talked about your audit at 

DOD over a 5-year period. Those numbers in macros sound impressive but you pointed out that the range of taxes owed was from 

$100 to in the millions, correct? 

Mr. BAGDOYAN. That is correct, Mr. Connolly. 

Mr. CONNOLLY. What percentage of the people would you say 

were involved in relatively small amounts of money? 

Mr. BAGDOYAN. I do not have that off the top of my head. I can 

look into it and get back to you. 

Mr. CONNOLLY. That would be very useful because just the macro 

numbers alone do not tell you much of a story. As Ms. Gilman 

pointed out, there may be lots of reasons somebody might be technically delinquent. 

For example, if you file your taxes late, legally late, you seek an 

extension and you file in October instead of April 15. In compiling 

what you owe, assuming for a moment you owe money, you may 

find after filing what you think you owe, your tax preparer, that 

the IRS has a small interest fee or a small penalty fee that is relatively tens of dollars. 

Technically, you owe that to the IRS. You technically are delinquent. It is a matter of their accounting versus your accounting. 

You are absolutely legally within the law, you took advantage of a 

legal provision to extend when you file because you are busy in 

April, but what you owe is calculated slightly differently by the IRS 

and you pay it. 

Ms. Gilman gave a bunch of examples of people who might find 

themselves in perfectly understandable circumstances. Ms. Gilman, 

one of them might be a messy divorce, correct? 

Ms. GILMAN. That is correct, Mr. Connolly. 

Mr. CONNOLLY. If somebody finds themselves in that circumstance, they might even be advised by their attorneys before 

you pay the taxes or even file them on time because of a messy divorce, you may not want to reveal x, y or z. You may want to wait 

until this is settled and then we can settle. 

It may not be because of a willful desire not to pay your taxes, 

it may be because something else is at work that affects that tax 

obligation, is that correct? 

Ms. GILMAN. That is correct. 

Mr. CONNOLLY. Is it possible, Ms. Gilman, that somebody owes 

taxes and may not know it? 

Ms. GILMAN. Yes, it is. I believe it is often the case that there 

is a lien filed and people are unaware of the lien. 
50 

Mr. CONNOLLY. I know of cases where the IRS had the wrong address or somebody moved. IRS is only obligated to notify you with 

the best available information they have, correct? 

Ms. GILMAN. That is correct. 

Mr. CONNOLLY. With the best of intentions, you may be innocent 

except IRS has decided otherwise and they have not reached you? 

Ms. GILMAN. That is right. 

Mr. CONNOLLY. By the way, I find what is driving this legislation 

really interesting because one of the things you have to concede if 

you want to go forward with this kind of legislation, it seems to me, 

is you have to concede the omniscience of the IRS. The IRS cannot 

possibly be mistaken, so when it declares you are delinquent, you 

are delinquent. 

I find that a little ironic when so many of my friends have 

bashed the IRS for mistakes, for incompetence and for getting it 

wrong. In this one case, if you are a Federal employee, we just assume they always get it right. 

I yield back, Mr. Chairman. 

Mr. MEADOWS. I thank the Ranking Member. 

They have called votes at this particular point. Just so you all 

know, I am going to recognize the gentleman from South Carolina 

for 5 minutes, Mr. Mulvaney, but the Ranking Member may pop 

out as we are getting close to a deadline. Mr. Mulvaney. 

Mr. MULVANEY. Thank you, Mr. Chairman and the Ranking 

Member. 

Thanks to everyone for doing this. It has been very helpful. 

I want to stay on the issue that Mr. Massie finished with and 

Mr. Connolly began with, the Section 6103 protections which I 

think we would all agree is probably well reasoned and sound. 

Mr. Bagdoyan, did I hear you or Mr. Holland say you folks require some people to waive that as part of their background for a 

security clearance? 

Mr. BAGDOYAN. That is my understanding that if the applicant 

for a security clearance is asked about their financial status, they 

have the option of waiving their 6103. 

Mr. MULVANEY. Is the option to waive it or are they required to 

waive it? 

Mr. BAGDOYAN. I believe it is an option but I can double check 

on that and get back to you. 

Mr. MULVANEY. It occurs to me there are ways to fix this. To Mr. 

Connolly’s opening point, Mr. Connolly, I do not think the issue 

here is about the amount of money involved. I think the issue is 

about trust in government and the credibility that government 

workers have. 

I think both you and I know because of what we have chosen to 

do for a living, we are held to a higher standard. I think taxpayers, 

ordinary folks, expect Federal workers to be held to at least a 

slightly higher standard. 

It strikes me that may be looking at reforms to 6103 to make it 

more waivable, require it to be waived, if you want to work for the 

Federal Government might be something we could look at. 

Mr. CONNOLLY. Would my friend yield? 

Mr. MULVANEY. I would be happy to. 

Mr. CONNOLLY. Thank you, Mr. Mulvaney. 
51 

My only point in questioning Mr. Bagdoyan about the amounts 

was simply to get a sense of the scope. I was not trying to make 

the point that $100 does not matter. I was only trying to find out 

how many are in the millions. 

Mr. MULVANEY. I was actually speaking to your opening, reclaiming my time, comments about whether or not this was a fiscal responsibility bill. I do not think it is. The CBO report would be 

meaningless unless we are trying to show people that the government can properly work and that people who work for it are good 

and honest people. 

What intrigues me the most is what Mr. Massie asked you, Ms. 

Gilman, the fact that Treasury seems to have it down. Your delinquency rate is well below 2 percent, roughly a third of what the 

average is across every other agency. 

You are doing it without the heavy hand of Congress on you folks 

and it strikes me that the rules that you put in place, specifically 

IRS, might actually work. Why not do it everywhere? 

Ms. GILMAN. One thing I think is different about the IRS is that 

people at the IRS have 6103 authority. Information about their employees is available to the agency at the IRS unlike any other agency because they administer the Tax Code. 

It has been a tradition there for as long as I am aware that the 

IRS existed that they were able to look into their own employees’ 

tax compliance because they administer the Code. 

Mr. MULVANEY. One of my takeaways is, again to the Ranking 

Member’s point, that the IRS has a much lower delinquency rate 

than anybody else. What is different about the IRS? They have 

6103 authority over their own employees and I think you said they 

have a different code of ethics, was that the term you used? 

Ms. GILMAN. They have both a manual that has always included 

provisions on the importance of tax compliance. They also have 

some statutory rules that apply only to the IRS about truthfulness 

and taxes. 

Mr. MULVANEY. Maybe this is specific to Treasury, I do not 

know, but I think you said IRS folks can actually be terminated for 

nonpayment under certain circumstances? 

Ms. GILMAN. Yes. 

Mr. MULVANEY. Is that the case at HUD or HHS? Can you be 

terminated for non-payment of taxes? 

Mr. HUTHER. Not that I am aware of, sir. 

Ms. GILMAN. If it is found to be a violation of rules that you are 

not complying with your just financial obligations, including Federal taxes, then you can be terminated for that. 

Mr. MULVANEY. My point is not that maybe that needs to be 

fixed or changed; my point is it seems to work. If we are looking 

for ways to encourage, to use a positive term, more Federal workers to file their taxes on time and do the right thing, maybe the 

model already exists and maybe the IRS is something we could 

look at, for a change, as a model for use at other agencies. 

With that, I yield back the balance of my time. Thank you, Mr. 

Chairman. 

Mr. MEADOWS. I thank the gentleman from South Carolina. 

As I said, they have called votes. I want to be sensitive to each 

one of you. In recognition of the hard work the committee has done, 
52 

I am going to submit my questions for you in writing and let you 

respond in writing. That way we can adjourn this hearing and let 

you go so you do not have to wait for an hour. 

I do want to say thank you, each one of you, for your testimony. 

It is important, I think, that we point out this is not about the 

hardship cases because we all think about the hardship cases of 

when we could not afford to pay a tax or we had a spousal issue 

or something else. 

This really is about making sure Federal employees adhere to 

the highest standards. That is what the American taxpayers want, 

that is what they believe. If you are getting paid by the Federal 

Government, you ought to pay back into the Treasury. 

In doing that, it is imperative that we work together. If you have 

recommendations on how we can accomplish this without legislative intervention, we are certainly all ears and willing to hear that. 

I want to thank each of you for your testimony and for appearing 

here today. 

There is no other business. Without objection, the subcommittee 

stands adjourned. 

[Whereupon, at 1:55 p.m., the subcommittee was adjourned.] 

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