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



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



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



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



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



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



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