Federal Register / Vol. 70, No. 169 / Thursday, September 1, 2005 / Rules and Regulations 52031 

List of Subjects in 48 CFR Parts 225 and 

252 

Government procurement. 

Michele P. Peterson, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR parts 225 and 252 

are amended as follows: 

■ 1. The authority citation for 48 CFR 

parts 225 and 252 continues to read as 

follows: 

Authority: 41 U.S.C. 421 and 48 CFR 

Chapter 1. 

PART 225—FOREIGN ACQUISITION 

225.7008 [Removed and Reserved] 

■ 2. Section 225.7008 is removed and 

reserved. 

225.7008–1 through 225.7008–4 

[Removed] 

■ 3. Sections 225.7008–1 through 

225.7008–4 are removed. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

252.225–7039 [Removed and Reserved] 

■ 4. Section 252.225–7039 is removed 

and reserved. 

[FR Doc. 05–17351 Filed 8–31–05; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

48 CFR Parts 232 and 252 

[DFARS Case 2004–D033] 

Defense Federal Acquisition 

Regulation Supplement; Levy on 

Payments to Contractors 

AGENCY: Department of Defense (DoD). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: DoD has issued an interim 

rule amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to address the effect of Internal 

Revenue Service (IRS) levies on contract 

payments. The rule requires DoD 

contractors to promptly notify the 

contracting officer if a levy that will 

jeopardize contract performance is 

imposed on a contract. 

DATES: Effective date: September 1, 

2005. 

Comment date: Comments on the 

interim rule should be submitted to the 

address shown below on or before 

October 31, 2005 to be considered in the 

formation of the final rule. 

ADDRESSES: You may submit comments, 

identified by DFARS Case 2004–D033, 

using any of the following methods: 

Æ Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Æ Defense Acquisition Regulations 

Web Site: http://emissary.acq.osd.mil/ 

dar/dfars.nsf/pubcomm. Follow the 

instructions for submitting comments. 

Æ E-mail: dfars@osd.mil. Include 

DFARS Case 2004–D033 in the subject 

line of the message. 

Æ Fax: (703) 602–0350. 

Æ Mail: Defense Acquisition 

Regulations Council, Attn: Mr. Bill Sain, 

OUSD(AT&L)DPAP(DAR), IMD 3C132, 

3062 Defense Pentagon, Washington, DC 

20301–3062. 

Æ Hand Delivery/Courier: Defense 

Acquisition Regulations Council, 

Crystal Square 4, Suite 200A, 241 18th 

Street, Arlington, VA 22202–3402. 

All comments received will be posted 

to http://emissary.acq.osd.mil/dar/ 

dfars.nsf. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Bill Sain, (703) 602–0293. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The Debt Collection Improvement Act 

of 1996 authorized a centralized 

program for the offset of Federal 

payments, including contract payments 

to collect delinquent non-tax debts 

owed to the Federal Government. To 

implement this authority, the 

Department of the Treasury created the 

Treasury Offset Program (TOP). The 

Taxpayer Relief Act of 1997 authorized 

the Internal Revenue Service to 

continuously levy up to 15 percent of 

certain Federal payments, including 

contract payments. To implement this 

authority, the Federal Payment Levy 

Program (FPLP) was created. The FPLP 

is an automated process that uses the 

TOP system to match delinquent tax 

debts with Federal payments. When a 

match occurs, the payment is levied and 

applied to the tax debt. The FPLP 

process works in tandem with a manual 

‘‘paper’’ levy process outlined in 26 

U.S.C. 6331–6332. 

Section 887, Modification of 

Continuing Levy on Payments to 

Federal Vendors, of Public Law 108–357 

amends Section 6331(h) of the Internal 

Revenue Code by raising the amount of 

levy the Government may withhold on 

Federal payments for goods or services 

sold or leased to the Federal 

Government, from 15 percent to 100 

percent. 

This interim DFARS rule is intended 

to address contract non-performance 

that may result from application of a 

levy. 

New Contract Clause Stating 

Government Right To Assess Levy 

While DoD has been participating in 

the levy program for a number of years, 

neither the FAR nor the DFARS 

includes a clause addressing levies. DoD 

believes that such a clause, along with 

implementing DFARS language in Part 

232, is needed to ensure that all parties 

understand their rights and obligations 

related to the assessment of a levy. 

Levies That Jeopardize Contract 

Performance 

DoD is concerned that situations may 

arise in which the levy of a contract 

payment could jeopardize contract 

performance. As such, the DFARS needs 

to include coverage addressing the 

process to be followed when such 

situations arise. 

The levy process makes it impractical, 

in most cases, to identify whether a levy 

will jeopardize contract performance 

prior to a contract payment being levied. 

While the contractor may have received 

a notice of potential levy, that notice 

does not identify which contract or 

contracts to which the levy will be 

applied. Furthermore, it is the 

contractor’s responsibility for 

identifying a levy that will significantly 

impact contract performance, since it is 

the contractor’s liability that has created 

the situation. Therefore, this interim 

rule requires that the contractor notify 

the contracting officer when a levy is 

imposed on a DoD contract payment 

and that the contractor state whether it 

believes the levy jeopardizes contract 

performance. In addition, the contractor 

is required to advise the contracting 

officer if the contractor is aware of any 

adverse effect on national security that 

may result from the inability to perform 

the contract. The contracting officer will 

take appropriate action on the instant 

contract. 

When the contractor believes the levy 

jeopardizes contract performance, it is 

important that DoD have a timely 

process for addressing those cases. The 

interim rule requires the Government to 

promptly review the contractor’s 

assessment and either agree or disagree 

that contract performance will be 

jeopardized. When the Government 

disagrees with the contractor’s 

assessment, the Government will notify 

the contractor and no further action will 

be taken. When the Government agrees 

with the contractor’s assessment that the 

levy will jeopardize contract 

performance and also believes that the 

lack of performance will adversely affect 

national security, some or all of the 

monies collected will be returned to the 

contractor. When the Government 

52032 Federal Register / Vol. 70, No. 169 / Thursday, September 1, 2005 / Rules and Regulations 

agrees with the contractor’s assessment 

that the levy will jeopardize contract 

performance but does not believe that 

the lack of performance will impact 

national security, the Government will 

notify the contractor and will 

recommend that the contractor 

promptly contact the IRS to attempt to 

resolve the tax situation. 

This rule was not subject to Office of 

Management and Budget review under 

Executive Order 12866, dated 

September 30, 1993. 

B. Regulatory Flexibility Act 

DoD does not expect this rule to have 

a significant economic impact on a 

substantial number of small entities 

within the meaning of the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq., 

because the rule only applies to those 

contractors that have a delinquent tax 

debt. Therefore, DoD has not performed 

an initial regulatory flexibility analysis. 

DoD invites comments from small 

businesses and other interested parties. 

DoD also will consider comments from 

small entities concerning the affected 

DFARS subpart in accordance with 5 

U.S.C. 610. Such comments should be 

submitted separately and should cite 

DFARS Case 2004–D033. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the rule does not 

contain any information collection 

requirements that require the approval 

of the Office of Management and Budget 

under 44 U.S.C. 3501, et seq. Although 

the rule requires contractors to provide 

certain information to the Government 

when levies are imposed on DoD 

contract payments, the number of 

contractors that will be subject to this 

requirement is expected to be less than 

10 per year. 

D. Determination To Issue an Interim 

Rule 

A determination has been made under 

the authority of the Secretary of Defense 

that urgent and compelling reasons exist 

to publish an interim rule prior to 

affording the public an opportunity to 

comment. This interim rule establishes 

DoD policy regarding levies on contract 

payments. The IRS has begun 

implementing its legislative authority to 

levy up to 100 percent of contract 

payments, up to the amount of tax debt. 

Such levies could jeopardize contract 

performance and adversely affect 

national security. Therefore, it is 

necessary to ensure that all parties 

understand their rights and obligations 

related to the assessment of a levy. 

Comments received in response to this 

interim rule will be considered in the 

formation of the final rule. 

List of Subjects in 48 CFR Parts 237 and 

252 

Government procurement. 

Michele P. Peterson, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR parts 237 and 252 

are amended as follows: 

■ 1. The authority citation for 48 CFR 

parts 237 and 252 continues to read as 

follows: 

Authority: 41 U.S.C. 421 and 48 CFR 

Chapter 1. 

PART 232—CONTRACT FINANCING 

■ 2. Subpart 232.71 is added to read as 

follows: 

Subpart 232.71—Levies on Contract 

Payments 

Sec. 

232.7100 Scope of subpart. 

232.7101 Policy and procedures. 

232.7102 Contract clause. 

232.7100 Scope of subpart. 

This subpart prescribes policies and 

procedures concerning the effect of 

levies pursuant to 26 U.S.C. 6331(h) on 

contract payments. The Internal 

Revenue Service (IRS) is authorized to 

levy up to 100 percent of all payments 

made under a DoD contract, up to the 

amount of the tax debt. 

232.7101 Policy and procedures. 

(a) The contracting officer shall 

require the contractor to—

(1) Promptly notify the contracting 

officer when a levy that will jeopardize 

contract performance is imposed on a 

DoD contract; and 

(2) Advise the contracting officer 

whether the inability to perform may 

adversely affect national security. 

(b) The contracting officer shall 

promptly notify the Director, Defense 

Procurement and Acquisition Policy 

(DPAP), when the contractor’s inability 

to perform will adversely affect national 

security or will result in significant 

additional costs to the Government. 

Follow the procedures at PGI 

232.7101(b) for reviewing the 

contractor’s rationale and submitting the 

required notification. 

(c) The Director, DPAP, will promptly 

review the contractor’s rationale and 

will notify the IRS, the contracting 

officer, and/or the payment office in 

accordance with the procedures at PGI 

232.7101(c). The contracting officer 

shall then notify the contractor in 

accordance with paragraph (c) of the 

clause at 252.232–7010. 

232.7102 Contract clause. 

Use the clause at 252.232–7010, 

Levies on Contract Payments, in all 

solicitations and contracts. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 3. Section 252.232–7010 is added to 

read as follows: 

252.232–7010 Levies on Contract 

Payments. 

As prescribed in 232.7102, use the 

following clause: 

Levies on Contract Payments (SEPT 2005) 

(a) 26 U.S.C. 6331(h) authorizes the 

Internal Revenue Service (IRS) to 

continuously levy up to 100 percent of 

contract payments, up to the amount of tax 

debt. 

(b) When a levy is imposed on a payment 

under this contract and the levy will 

jeopardize contract performance, the 

Contractor shall promptly notify the 

Procuring Contracting Officer and provide—

(1) The total dollar amount of the levy; 

(2) A statement that the levy will 

jeopardize contract performance, including 

rationale and adequate supporting 

documentation; and 

(3) Advice as to whether the inability to 

perform may adversely affect national 

security, including rationale and adequate 

supporting documentation. 

(c) DoD shall promptly review the 

Contractor’s assessment and provide a 

notification to the Contractor including—

(1) A statement as to whether DoD agrees 

that the levy jeopardizes contract 

performance; and 

(2) If the levy jeopardizes contract 

performance and the lack of performance will 

adversely affect national security, the total 

amount of the monies collected that should 

be returned to the Contractor; or 

(3) If the levy jeopardizes contract 

performance but will not impact national 

security, a recommendation that the 

Contractor promptly notify the IRS to attempt 

to resolve the tax situation. 

(d) Any DoD determination under this 

clause is not subject to appeal under the 

Contract Disputes Act. 

(End of clause) 

[FR Doc. 05–17349 Filed 8–31–05; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

48 CFR Parts 237 and 252 

[DFARS Case 2005–D007] 

Defense Federal Acquisition 

Regulation Supplement; Training for 

Contractor Personnel Interacting With 

Detainees 

AGENCY: Department of Defense (DoD).