I
105TH CONGRESS
1ST SESSION
H. R. 1186
To provide authorities to, and impose requirements on, the Secretary of
Defense in order to facilitate State enforcement of State tax, employ-
ment, and licensing laws against Federal construction contractors.
IN THE HOUSE OF REPRESENTATIVES
MARCH 20, 1997
Mrs. MINK of Hawaii introduced the following bill; which was referred to the
Committee on National Security
A BILL
To provide authorities to, and impose requirements on, the
Secretary of Defense in order to facilitate State enforce-
ment of State tax, employment, and licensing laws
against Federal construction contractors.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ENHANCEMENT OF STATE ENFORCEMENT OF
STATE TAX, EMPLOYMENT, AND LICENSING
LAWS 
AGAINST 
DEFENSE 
CONSTRUCTION
CONTRACTORS.
(a) REQUIREMENT
FOR STATE TAX CLEARANCE
FROM POTENTIAL CONSTRUCTION CONTRACTORS.—Sec-
tion 2305(b) of title 10, United States Code, is amended
by adding at the end the following new paragraph:
‘‘(10) In order to be considered a responsible bidder
or offeror for a contract for the construction of a public
building, facility, or work, a bidder or offeror shall submit
with the bid or offer a tax clearance from the State in
which the contract is to be performed. For purposes of
this paragraph, a tax clearance is a document from an
appropriate State agency indicating that the bidder or
offeror is in compliance with all the tax laws of the State
in which the contract is to be performed.’’.
(b) REQUIREMENT TO WITHHOLD FINAL CONTRACT
PAYMENT UNTIL RECEIPT OF STATE TAX CLEARANCE
AND CERTIFICATION
OF COMPLIANCE WITH EMPLOY-
MENT LAWS FROM CONTRACTOR.—Section 2307 of title
10, United States Code, is amended by adding at the end
the following new subsection:
‘‘(i) REQUIREMENT TO WITHHOLD FINAL PAY-
MENT.—(1) The head of an agency shall withhold final
payment under a contract for the construction of a public
building, facility, or work until the contractor submits to
the agency both of the following:
‘‘(A) A tax clearance from the State in which
the contract is or was performed.
‘‘(B) A certification stating that the contractor
is in compliance (or was in compliance during the
performance of the contract) with all applicable
State laws that require employers to make payments
to or for the benefit of employees, including laws re-
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.—Section 2307 of such title is further
amended by adding at the end the following new sub-
section:
‘‘(j) 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.’’.
(d) REQUIREMENT FOR CONSTRUCTION CONTRAC-
TORS TO OBTAIN APPLICABLE STATE LICENSES.—(1)
Chapter 141 of title 10, United States Code, is amended
by adding at the end the following new section:
‘‘§ 2401m. 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.’’.
(2) The table of sections at the beginning of such
chapter is amended by adding at the end the following
new item:
‘‘2401m. Construction contracts: requirement to obtain applicable State li-
censes.’’.
(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].
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