PGI 232.7101 Policy and procedures.

Background. The Internal Revenue Service (IRS) is authorized to collect overdue taxes through a

continuous levy up to 100 percent of the debt on certain vendor contract payments disbursed by the

Defense Finance and Accounting Service. The levy is continuous until the overdue taxes are paid in

full, or other arrangements are made to satisfy the debt. Contractors are required to promptly notify

the procuring contracting officer when a tax levy that may result in an inability to perform the

contract is imposed, so that the contracting officer and the Principal Director, Defense Pricing and

Contracting (DPC), can take appropriate action to mitigate any possible adverse effect on national

security.

(b) Procuring contracting officer procedures for reviewing the contractor’s rationale and submitting

the required documentation.

(i) When the procuring contracting officer receives notification from the contractor that the tax levy

may result in an inability to perform the contract, the procuring contracting officer shall promptly

review the contractor’s assessment and either agree or disagree that the levy may result in an

inability to perform. The procuring contracting officer shall alert the administrative contracting

officer and the cognizant contract auditor when a notice of levy has been received, and shall obtain

any necessary assistance from the administrative contracting officer or contract auditor when

performing this review.

(ii) If the procuring contracting officer does not agree with the contractor’s assessment, the

procuring contracting officer shall notify the contractor of this determination and no further action

will be taken.

(iii) If the procuring contracting officer agrees with the contractor’s assessment that the levy may

result in an inability to perform the contract, the procuring contracting officer shall document, in

writing, whether the inability to perform—

(A) Adversely affects national security; and/or

(B) Will result in significant additional costs to the Government (e.g., cost of re-procurement, loss of

contract financing payments when the product produced to date is not salvageable).

(iv) If the procuring contracting officer believes that the levy will impact national security and/or

result in significant additional costs to DoD, the procuring contracting officer shall, in accordance

with agency procedures, promptly notify the Principal Director, DPC, via email at

osd.pentagon.ousd-a-s.mbx.asda-dp-c-contractpolicy@mail.mil. The notification to the Principal

Director, DPC, shall include—

(A) The rationale supporting the recommendation that the levy may result in an inability to perform

the contract;

(B) A description of the adverse effect on national security, if applicable; and

(C) A description and estimate of the additional costs to the Government, if applicable. Since prompt

notification to the Principal Director, DPC, is essential, the procuring contracting officer should not

delay the notification while trying to achieve more precise data.

(c) Director, DPC, procedures. The Principal Director, DPC, will promptly evaluate the procuring
contracting officer’s notification package.

(i) If the Director, DPC, disagrees with the recommendation of the procuring contracting officer, the

Principal Director, DPC, will notify the procuring contracting officer through the same agency

channels that were used for submission of the notification.

(ii) If the Principal Director, DPC, agrees with the recommendation of the procuring contracting

officer—

(A) When there is an adverse effect on national security, the Principal Director, DPC, will notify the

payment office, the IRS, and the procuring contracting officer that the total amount of the levy

should be promptly returned to the contractor; or

(B) When there is not an adverse effect on national security, but the levy will result in significant

additional costs to DoD, the Director, DPAP, will promptly notify the procuring contracting officer

and the IRS. The Principal Director, DPC, notification to the IRS will—

(1) State that the procuring contracting officer has notified the contractor and has recommended

that the contractor contact the IRS to resolve the situation;

(2) Request that the IRS expedite resolution of the situation with the contractor; and

(3) Include an estimate of additional costs to DoD that will result if the contractor is unable to

perform on the contract.

(d) Procuring contracting officer procedures for notifying the contractor of the decision of the

Principal Director, DPC . The procuring contracting officer shall promptly notify the contractor, in

writing, of the decision made by the Principal Director, DPC, including the actions to be taken (if

any).

Parent topic: PGI 232.71 -LEVIES ON CONTRACT PAYMENTS