By Richard J. Melnick, Shareholder, Greenberg Traurig, LLP
When Congress giveth, Congress must also taketh away. Under federal law, when Congress enacts legislation with provisions that would increase the federal deficit, it must also include provisions that would offset (or “pay for”) the cost of those provisions.
The question is, whose ox is getting gored in order to provide goodies to other favored constituencies. Increasingly, the answer is federal contractors.
For example, the House of Representatives recently passed H.R. 5901, the Real Estate and Jobs Investment Act of 2010, in order to lower barriers to entry for foreign investors interested in purchasing U.S. real estate through real estate investment trusts.
This is good news for the real estate industry, but bad news for federal contractors. Because the legislation was estimated to “cost” about $995 million, Congress had to raise a corresponding amount in taxes on someone else. So Congress decided that they could do it by allowing the IRS to levy the property of a federal contractor without any due process hearing held prior to the levy, as current law requires (a levy is like foreclosing on the taxpayer’s property, and can include a garnishment of monies due the contractor or the contractor’s bank accounts).
As amazing as it may seem, the Congressional Budget Office and Joint Committee on Taxation estimated that this procedural change would bring in $1.06 billion in additional taxes over the next 10 years.
What this goes to show is that federal contractors don’t have much clout as an industry in Congress and are more and more frequently serving as piggy banks for Congress to tap.
The Senate has not yet acted on the legislation. Our tax and government contracts practice groups will continue to monitor developments and provide updates. Please comment below to this blog post or contact us directly if you have anything to add or have any questions regarding this legislation.
Disclaimer: This post is issued for informational purposes only and is not intended to be construed or used as general legal advice. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.