Tag Archives: Defense Contractor Taxes

Government Contractor Tax Day Tidbits – “Food for Thought”

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tax day

“THE PROJECT ON GOVERNMENT OVERSIGHT”

[On] the federal tax filing deadline, the Project On Government Oversight (POGO) offer[ed] some tax-related contractor oversight food for thought:

  • ” The Treasury Inspector General for Tax Administration (TIGTA) found that the Internal Revenue Service (IRS) awarded contracts to at least 20 companies that owed more than $5 million in delinquent federal taxes. TIGTA also found that 11 contractors owing $4.3 million in taxes were awarded more than $356 million in IRS contracts and an additional $3.7 billion in contracts from other federal agencies
  • POGO tracks tax violations in our Federal Contractor Misconduct Database, which shows that contractors have paid $3.64 billion to resolve cases with local, federal, and foreign revenue collection authorities. The bulk of this amount comes from GlaxoSmithKline’s record-breaking $3.4 billion payment in 2006 to settle IRS charges of under-reporting profits.
  • There are some noteworthy tax misconduct cases pending against the large federal contractors, including actions by New York City and State against FedEx and United Parcel Service for allegedly trafficking in contraband cigarettes, and a complaint filed with the IRS accusing ExxonMobil of violating tax laws to wage a campaign attacking climate science.
  • Earlier this month, the IRS launched a program employing private debt collection companies to recover delinquent income taxes. This is the third time since 1996 the IRS has tried to outsource tax debt collection—both previous attempts were dismal failures.
  • Congress has taken another stab at passing a law that would prevent individuals with seriously delinquent tax debts from obtaining federal employment, contracts, and grants. Similar bills introduced in 2011, 2013, and 2015 ultimately failed to advance. The Senate is also attempting to strengthen protections for those who blow the whistle on tax fraud.

So get those tax returns out the door! You can rest assured that POGO will do its best to make sure the government collects what it is owed and does not waste that money.”

http://www.pogo.org/blog/2017/04/tax-day-tidbits.html

 

 

 

Compelling Proof Large Defense Contractors Are Sheltered from Cuts and Pay Little in Taxes

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“PUBLIC INTELLIGENCE.NET”

defense-tax-evaders“NATIONAL DEFENSE MAGAZINE”

“Defense Department contract obligations dropped by 16 percent to $314 billion from 2012 to 2013, a decline four times as steep as was seen from 2009 to 2012, a CSIS study estimated. From 2012 to 2013, contracts for the Pentagon’s top six contractors — Lockheed Martin, Boeing, Raytheon, General Dynamics, Northrop Grumman and L-3 Communications — dropped by 9 percent. For everyone else, they fell by 19 percent.

The report provides overwhelming evidence that the sequester, which was designed to cut government spending across the board, has affected contractors far more dramatically, Berteau said. Non-contract outlays, by comparison, remained mostly flat from 2012 to 2013, an indication that when budgets fall, federal agencies target contract spending as a measure of first resort. The study, conducted annually by CSIS, looks at contracting trends from 2000 to 2013 drawn from the Federal Procurement Data System.

“Contractors are paying the largest share of the impact of the decline,” Berteau said. As a percentage of total gross defense outlays, defense funded contract obligations have declined from 53 percent to 49 percent in 2013, the lowest share since 2002.

Berteau said the industry might not want to keep pretending that its defense sales have hit bottom and are going to come back up. World events and new contingencies such as the war on the Islamic State and the Ebola crisis might boost emergency spending, but will not immediately lead to a broad bipartisan agreement to increase the current caps on government discretionary spending, he added.

At the Defense Department, uncertainty and churn will continue to delay weapon modernization programs. “It is only going to get worse from a contractor point of view,” Berteau said. “I do no see the votes to change those caps any time soon.”

Many defense CEOs believed when sequester hit, that it would be a one-time event, that “Congress would come to its senses, that we’d get our money back in 2014, and the caps would be raised,” said Berteau.

A big warning signal for contractors is the precipitous fall in Defense Department research and development spending. R&D contract obligations dropped by 21 percent from 2012 to 2013, and by 39 percent from 2009 to 2013. The Army’s R&D contracts went down by 35 percent and the Air Force’s by 27 percent, compared to only 10 percent for the Navy.

These numbers show that the Pentagon, contrary to the official rhetoric, is paring back investments in advanced technology and modernization of the force, said CSIS analyst Greg Sanders, one of the authors of the study. After Congress passed the Budget Control Act and military spending took a dive, Defense Secretary Chuck Hagel called for a smaller, but more technologically advanced force. The data contradicts that vision, Sanders said.

As shown by impressive gains in stock prices over the past two year, large primes have pulled through the sequester better than small firms. The study provides compelling proof that the largest contractors are more sheltered from cuts. From 2012 to 2013, contracts for the Pentagon’s top six contractors — Lockheed Martin, Boeing, Raytheon, General Dynamics, Northrop Grumman and L-3 Communications — dropped by 9 percent. For everyone else, they fell by 19 percent.

The numbers in the CSIS study should not come as a surprise to industry investors, says analyst Byron Callan, of Capital Alpha Partners. “The data likely conforms to many investor perceptions of what’s happened in recent years,” he writes in a research note.

“Investors and analysts need to keep in mind that the data is for contracts — this is not the same as outlays,” he warns. Contract awards more closely track company orders while outlays are more closely related to sales. Of particular interest to investors, he says, is that foreign military sales contract obligations fell 20 percent between 2012 and 2013 — from $26 billion to $21 billion. “FMS should not have been impacted by sequestration, but the data is a bit surprising given general optimism surrounding international defense growth opportunities.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=1650