lating to unemployment insurance, workers com-
pensation, health insurance, and disability insurance. 
‘‘(2) For purposes of this subsection, a tax clearance 
is a document from an appropriate State agency indicating 
that the contractor is or was in compliance with all the 
tax laws of the State in which the contract is or was per-
formed.’’. 
(c) AUTHORITY TO WITHHOLD PAYMENT TO CON-
TRACTOR OF AMOUNTS NECESSARY TO MEET STATE TAX 
OBLIGATIONS.—
(1) DEFENSE
CONTRACTS.—Section 2307 of 
title 10, United States Code, is further amended by 
adding at the end the following new subsection: 
‘‘(k) AUTHORITY TO WITHHOLD PAYMENT TO MEET 
STATE TAX OBLIGATIONS.—The head of an agency may 
withhold, from any payment due to a contractor under a 
contract made by the agency for the construction of a pub-
lic building, facility, or work, an amount considered nec-
essary by the head of the agency to pay to the State in 
which the contract is being performed the amount of the 
contractor’s State tax liability that is attributable to the 
contract. The head of the agency that so withholds a pay-
ment may, upon request of the State in which the contract 
is being performed and with such documentation as the 
head of the agency considers necessary, pay such tax li-
ability amount directly to the State from the withheld pay-
ment. Any amount of a withheld payment that exceeds the 
actual State tax liability amount shall be paid to the con-
tractor.’’. 
(2) CIVILIAN
AGENCY
CONTRACTS.—Section 
305 of title III of the Federal Property and Admin-
istrative Services Act of 1949 (41 U.S.C. 255) is 
further amended by adding at the end the following 
new subsection: 
‘‘(i) AUTHORITY TO WITHHOLD PAYMENT TO MEET 
STATE TAX OBLIGATIONS.—The head of an executive 
agency may withhold, from any payment due to a con-
tractor under a contract made by the agency for the con-
struction of a public building, facility, or work, an amount 
considered necessary by the head of the agency to pay to 
the State in which the contract is being performed the 
amount of the contractor’s State tax liability that is attrib-
utable to the contract. The head of the executive agency 
that so withholds a payment may, upon request of the 
State in which the contract is being performed and with 
such documentation as the head of the agency considers 
necessary, pay such tax liability amount directly to the 
State from the withheld payment. Any amount of a with-
held payment that exceeds the actual State tax liability 
amount shall be paid to the contractor.’’.
(d) REQUIREMENT FOR CONSTRUCTION CONTRAC-
TORS TO OBTAIN APPLICABLE STATE LICENSES.—
(1) DEFENSE CONTRACTS.—(A) Chapter 141 of 
title 10, United States Code, is amended by adding 
at the end the following new section: 
‘‘§ 2410n. Construction contracts: requirement to ob-
tain applicable State licenses 
‘‘The Secretary of Defense shall require, in any con-
tract entered into by the Secretary for the construction 
of a public building, facility, or work which is to be per-
formed in a State that requires persons performing the 
type of work to be performed under the contract to be 
licensed, that the contractor be so licensed.’’. 
(B) The table of sections at the beginning of such 
chapter is amended by adding at the end the following 
new item:
‘‘2410n. Construction contracts: requirement to obtain applicable State li-
censes.’’.
(2) CIVILIAN AGENCY CONTRACTS.—Title III of 
the Federal Property and Administrative Services 
Act of 1949 (41 U.S.C. 251 et seq.) is amended by 
adding at the end the following new section: 
‘‘SEC. 318. CONSTRUCTION CONTRACTS: REQUIREMENT TO 
OBTAIN APPLICABLE STATE LICENSES. 
‘‘The head of an executive agency shall require, in 
any contract entered into by the agency for the construc-
tion of a public building, facility, or work which is to be 
performed in a State that requires persons performing the 
type of work to be performed under the contract to be 
licensed, that the contractor be so licensed.’’. 
(e) REQUIREMENT TO EXPLAIN HAWAII EXCISE TAX 
IN FEDERAL ACQUISITION REGULATION.—The Federal 
Acquisition Regulation shall be revised to contain provi-
sions explaining the general excise tax law of the State 
of Hawaii. 
(f) EFFECTIVE DATE.—The amendments made by 
this Act shall apply with respect to contracts entered into 
after the date of the enactment of this Act.
Æ