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Live 5 Investigates: Tax-delinquent companies making money from the feds

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CHARLESTON, SC (WCSC) -

A nationwide investigation with other Raycom Media stations revealed some companies are taking advantage of the federal tax system, getting paid millions of dollars though they owe millions in delinquent taxes. 

If companies fail to pay taxes, they’re slapped with a tax lien.

But our investigation revealed the federal government is still doing millions of dollars in business with companies not paying taxes.

Louisiana Sen. John Kennedy said, “It's just blatant disregard for taxpayer money.”

By comparing open tax liens to a list of government contracts, we discovered at least 125 companies owe the federal government a total of $40,633,951 in unpaid taxes as of August; those companies were still awarded big contracts from the federal government.

The total contracts paid equaled $134,519,856  in federal contracts.

The problem?

Tax-delinquent companies are not supposed to earn government contracts. It’s one of those rare issues Democrats and Republicans are equally upset about.

Virginia Congressman Rep. Donald McEachin said, “I'm frustrated when I hear that story! Are you kidding me? The average taxpayer or not. This is just flat out wrong.”

There were two examples in South Carolina, but neither company called us back to offer a comment or explanation, or to confirm whether they are paying the IRS back.

Our numbers were obtained through the Freedom of Information Act from the federal government.

As of August, a company called Quality Touch Janitorial Services in North Charleston owed $107,645.68 for three open tax liens. Yet the company received three US Coast Guard bids totaling $12,887.27 last year.

According to its website, Prez Chemical is a flooring company in Columbia, South Carolina. It has $190,020.52 in ten open tax liens ranging from 2008 to this year. Yet Prez Chemical won a bid in 2015 for more than $13,595.00 from the Department of Defense.

“Not paying your taxes should lead to a punishment, not a reward,” said David Williams.

Williams is the President of the Taxpayers Protection Alliance. The non-partisan non-profit is based in D.C. and keeps tabs on how the government spends our tax money.

“They should not get one more tax payer dollar until they pay all their taxes,” said Williams. “The only people that will disagree with this is the ones not paying taxes and getting contracts… this is not rocket science! It’s an easy fix.”

“It really does put a lot of people at a disadvantage,” said Russ Perkins. Perkins owns Nature’s Calling in Charleston, recognizable by their green dumpsters, and portable showers and bathrooms.

“We do a lot of work with the federal government,” he said.

Perkins has had problems before working with contractors hired by the federal government and thinks the whole vetting process should be stricter.

He said when tax-delinquent companies get bids, it hurts other businesses.

“They’re not paying their share of the taxes so therefore they can afford to do the work for less than what someone that is like myself that are doing the things they’re supposed to be doing.”

The U.S. Government has known about this problem for at least ten years.

In 2007, Congress found 63,800 contractors owed $7.7 billion in taxes, as outlined in this report from the Government Accountability Office.

President Obama also tried to crack down on the practice. In this 2010 memo he sent to department agency heads, telling them to do tax checks.

It seems that memo was largely ignored based on our findings that show a long list of federal departments still giving contracts to tax-delinquent companies.

“It not only shows the system is broken, but no one is monitoring. There’s no oversight,” Williams said.

A Treasury Inspector General report from last year reviewed 73 contracts and found, quote, “no evidence that qualified bidders underwent a tax check as required.”

“It's shocking because it's illegal. You cannot get federal contracts and have a federal tax indebtedness. So that obviously begs the questions how is this happening?” said McEachin.

Even the IRS itself is not immune. It awarded $354,420 to a company in Maryland that owes the IRS $1,574,553.32 in unpaid taxes. 

A statement from the IRS Media Relations department said, “A tax lien is just one of the collection activities available to the IRS. For a better understanding of the collection process as it applies to federal contractors, please read the following TIGTA report. Besides reading the report itself, it is important that you read the letter by IRS SBSE Commissioner Mary Beth Murphy at the end of the report. As I mentioned below, although the federal tax lien is a public document, the federal tax law, 26 U.S.C. § 6103, precludes the IRS from disclosing tax return information.”

Congressman McEachin from Viriginia is so frustrated, he's already taking action from this investigation. 

He's asked Congress's think tank to consider a legislative fix to make sure companies that owe taxes are not rewarded with more taxpayer dollars.

We are waiting for South Carolina’s federal lawmakers reaction to our findings.

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