I 

108TH CONGRESS 

1ST SESSION H. R. 3653

To provide authorities to, and impose requirements on, the heads of executive 

agencies in order to facilitate State enforcement of State tax, employment, and licensing laws against Federal construction contractors. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 8, 2003

Mr. CASE (for himself and Mr. ABERCROMBIE) introduced the following bill; 

which was referred to the Committee on Government Reform, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such 

provisions as fall within the jurisdiction of the committee concerned 

A BILL

To provide authorities to, and impose requirements on, the 

heads of executive agencies in order to facilitate State 

enforcement of State tax, employment, and licensing laws 

against Federal construction contractors.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fairness to Local Con5 tractors Act’’. 
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1 SEC. 2. ENHANCEMENT OF STATE ENFORCEMENT OF 

2 STATE TAX, EMPLOYMENT, AND LICENSING 

3 LAWS AGAINST CONSTRUCTION CONTRAC4 TORS. 

5 (a) REQUIREMENT FOR STATE TAX CLEARANCE

6 FROM POTENTIAL CONSTRUCTION CONTRACTORS.—

7 (1) DEFENSE CONTRACTS.—Section 2305(b) of 

8 title 10, United States Code, is amended by adding 

9 at the end the following new paragraph: 

10 ‘‘(10) In order to be considered a responsible bidder 

11 or offeror for a contract for the construction of a public 

12 building, facility, or work, a bidder or offeror shall submit 

13 with the bid or offer a tax clearance from the State in 

14 which the contract is to be performed. For purposes of 

15 this paragraph, a tax clearance is a document from an 

16 appropriate State agency indicating that the bidder or of17 feror is in compliance with all the tax laws of the State 

18 in which the contract is to be performed.’’. 

19 (2) CIVILIAN AGENCY CONTRACTS.—Section 

20 303B of title III of the Federal Property and Ad21 ministrative Services Act of 1949 (41 U.S.C. 253b) 

22 is amended by adding at the end the following new 

23 subsection: 

24 ‘‘(n) TAX CLEARANCE.—In order to be considered a 

25 responsible bidder or offeror for a contract for the con26 struction of a public building, facility, or work, a bidder 
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1 or offeror shall submit with the bid or offer a tax clearance 

2 from the State in which the contract is to be performed. 

3 For purposes of this paragraph, a tax clearance is a docu4 ment from an appropriate State agency indicating that the 

5 bidder or offeror is in compliance with all the tax laws 

6 of the State in which the contract is to be performed.’’. 

7 (b) REQUIREMENT TO WITHHOLD FINAL CONTRACT

8 PAYMENT UNTIL RECEIPT OF STATE TAX CLEARANCE

9 AND CERTIFICATION OF COMPLIANCE WITH EMPLOY10 MENT LAWS FROM CONTRACTOR.—

11 (1) DEFENSE CONTRACTS.—Section 2307 of 

12 title 10, United States Code, is amended by adding 

13 at the end the following new subsection: 

14 ‘‘(j) REQUIREMENT TO WITHHOLD FINAL PAY15 MENT.—(1) The head of an agency shall withhold final 

16 payment under a contract for the construction of a public 

17 building, facility, or work until the contractor submits to 

18 the agency both of the following: 

19 ‘‘(A) A tax clearance from the State in which 

20 the contract is or was performed. 

21 ‘‘(B) A certification stating that the contractor 

22 is in compliance (or was in compliance during the 

23 performance of the contract) with all applicable 

24 State laws that require employers to make payments 

25 to or for the benefit of employees, including laws re-
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1 lating to unemployment insurance, workers com2 pensation, health insurance, and disability insurance. 

3 ‘‘(2) For purposes of this subsection, a tax clearance 

4 is a document from an appropriate State agency indicating 

5 that the contractor is or was in compliance with all the 

6 tax laws of the State in which the contract is or was per7 formed.’’. 

8 (2) CIVILIAN AGENCY CONTRACTS.—Section 

9 305 of title III of the Federal Property and Admin10 istrative Services Act of 1949 (41 U.S.C. 255) is 

11 amended by adding at the end the following new 

12 subsection: 

13 ‘‘(h) REQUIREMENT TO WITHHOLD FINAL PAY14 MENT.—(1) The head of an executive agency shall with15 hold final payment under a contract for the construction 

16 of a public building, facility, or work until the contractor 

17 submits to the agency both of the following: 

18 ‘‘(A) A tax clearance from the State in which 

19 the contract is or was performed. 

20 ‘‘(B) A certification stating that the contractor 

21 is in compliance (or was in compliance during the 

22 performance of the contract) with all applicable 

23 State laws that require employers to make payments 

24 to or for the benefit of employees, including laws re-
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1 lating to unemployment insurance, workers com2 pensation, health insurance, and disability insurance. 

3 ‘‘(2) For purposes of this subsection, a tax clearance 

4 is a document from an appropriate State agency indicating 

5 that the contractor is or was in compliance with all the 

6 tax laws of the State in which the contract is or was per7 formed.’’. 

8 (c) AUTHORITY TO WITHHOLD PAYMENT TO CON9 TRACTOR OF AMOUNTS NECESSARY TO MEET STATE TAX

10 OBLIGATIONS.—

11 (1) DEFENSE CONTRACTS.—Section 2307 of 

12 title 10, United States Code, is further amended by 

13 adding at the end the following new subsection: 

14 ‘‘(k) AUTHORITY TO WITHHOLD PAYMENT TO MEET

15 STATE TAX OBLIGATIONS.—The head of an agency may 

16 withhold, from any payment due to a contractor under a 

17 contract made by the agency for the construction of a pub18 lic building, facility, or work, an amount considered nec19 essary by the head of the agency to pay to the State in 

20 which the contract is being performed the amount of the 

21 contractor’s State tax liability that is attributable to the 

22 contract. The head of the agency that so withholds a pay23 ment may, upon request of the State in which the contract 

24 is being performed and with such documentation as the 

25 head of the agency considers necessary, pay such tax li-
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1 ability amount directly to the State from the withheld pay2 ment. Any amount of a withheld payment that exceeds the 

3 actual State tax liability amount shall be paid to the con4 tractor.’’. 

5 (2) CIVILIAN AGENCY CONTRACTS.—Section 

6 305 of title III of the Federal Property and Admin7 istrative Services Act of 1949 (41 U.S.C. 255) is 

8 further amended by adding at the end the following 

9 new subsection: 

10 ‘‘(i) AUTHORITY TO WITHHOLD PAYMENT TO MEET

11 STATE TAX OBLIGATIONS.—The head of an executive 

12 agency may withhold, from any payment due to a con13 tractor under a contract made by the agency for the con14 struction of a public building, facility, or work, an amount 

15 considered necessary by the head of the agency to pay to 

16 the State in which the contract is being performed the 

17 amount of the contractor’s State tax liability that is attrib18 utable to the contract. The head of the executive agency 

19 that so withholds a payment may, upon request of the 

20 State in which the contract is being performed and with 

21 such documentation as the head of the agency considers 

22 necessary, pay such tax liability amount directly to the 

23 State from the withheld payment. Any amount of a with24 held payment that exceeds the actual State tax liability 

25 amount shall be paid to the contractor.’’. 
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1 (d) REQUIREMENT FOR CONSTRUCTION CONTRAC2 TORS TO OBTAIN APPLICABLE STATE LICENSES.—

3 (1) DEFENSE CONTRACTS.—(A) Chapter 141 of 

4 title 10, United States Code, is amended by adding 

5 at the end the following new section: 

6 ‘‘§ 2410n. Construction contracts: requirement to ob7 tain applicable State licenses 

8 ‘‘The Secretary of Defense shall require, in any con9 tract entered into by the Secretary for the construction 

10 of a public building, facility, or work which is to be per11 formed in a State that requires persons performing the 

12 type of work to be performed under the contract to be 

13 licensed, that the contractor be so licensed.’’. 

14 (B) The table of sections at the beginning of such 

15 chapter is amended by adding at the end the following 

16 new item:

‘‘2410n. Construction contracts: requirement to obtain applicable State licenses.’’.

17 (2) CIVILIAN AGENCY CONTRACTS.—Title III of 

18 the Federal Property and Administrative Services 

19 Act of 1949 (41 U.S.C. 251 et seq.) is amended by 

20 adding at the end the following new section: 

21 ‘‘SEC. 318. CONSTRUCTION CONTRACTS: REQUIREMENT TO 

22 OBTAIN APPLICABLE STATE LICENSES. 

23 ‘‘The head of an executive agency shall require, in 

24 any contract entered into by the agency for the construc-
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1 tion of a public building, facility, or work which is to be 

2 performed in a State that requires persons performing the 

3 type of work to be performed under the contract to be 

4 licensed, that the contractor be so licensed.’’. 

5 (e) REQUIREMENT TO EXPLAIN HAWAII EXCISE TAX

6 IN FEDERAL ACQUISITION REGULATION.—The Federal 

7 Acquisition Regulation shall be revised to contain provi8 sions explaining the general excise tax law of the State 

9 of Hawaii. 

10 (f) EFFECTIVE DATE.—The amendments made by 

11 this Act shall apply with respect to contracts entered into 

12 after the date of the enactment of this Act.

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