[§103D-328]  Tax clearances; setoff for dueand unpaid taxes.  (a)  Unless the director of taxation determines thatwaiver of the Internal Revenue Service tax clearance requirement is necessaryto expedite or facilitate the procurement process and is in the best interestof the State, and waives the Internal Revenue Service tax clearancerequirement, no contract shall be binding or effective until the contractorsecures and the purchasing agency receives a tax clearance from the director oftaxation and the Internal Revenue Service to the effect that all tax returnsdue have been filed, and all taxes, interest, and penalties levied or accrued,under title 14 that are administered by the department of taxation and underthe Internal Revenue Code, against the contractor have been paid.

(b)  During the term of a contract, if a lienis imposed against the contractor for a tax debt under section 231-33 or thecontractor fails to timely file all tax returns and pay all  taxes, interest,and penalties due to the Internal Revenue Service, the comptroller orrespective county director of finance, upon request of the director oftaxation, shall set off the amount of the tax debt against any payment due tothe contractor until the tax debt is paid in full.

(c)  All state and county procurement officersor agents shall withhold final payment of a contract until the receipt of taxclearances from the director of taxation and the Internal Revenue Service. Notwithstanding sections 40-57 and 40-58, if a contractor fails to provide therequisite tax clearances within six months of the completion of the contract,the state or county procurement officer or agent shall first notify thedepartment of taxation which in turn will notify the Internal Revenue Service,of amounts payable to the contractor on completed contracts.  The department oftaxation and the Internal Revenue Service, within thirty days, shall requestthe procurement officer or agent to set off the amount of taxes due against anypayment due to the contractor until the tax debt is paid in full to the Stateor the Internal Revenue Service, or both.  No final bill or invoice from thecontractor shall be required as a condition to the setoff.  Any remainingcontract balance shall revert to the appropriation under which it wasencumbered.

(d)  This section shall not apply to anycontract of less than $25,000 or any contract entered into pursuant to section103D-305 or 103D-307.

(e)  This section shall not apply to acontractor who the director of taxation certifies is:

(1)  Contesting the validity of a tax debt, or thatany tax, penalty, or interest is due and owing the Internal Revenue Service inan administrative or judicial appeal; or

(2)  In good standing, having entered into a plan orplans in which the tax debt, or any tax, penalty, or interest due and owing theInternal Revenue Service is being paid to the department of taxation or theInternal Revenue Service. [L 1997, c 352, §1]