Morning Briefing - October 24, 2018
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October 24, 2018

NNSA Won’t Rule Out Forcing LANL Manager to File for Tax-Exempt Status

By ExchangeMonitor

The National Nuclear Security Administration (NNSA) won’t rule out pressing Triad National Security, the incoming management contractor for the Los Alamos National Laboratory in New Mexico, to apply for federal nonprofit status. The company apparently hasn’t done that yet, and its new host county hopes it never does.

The NNSA “is focused on making the transition from LANS to Triad a success,” a spokesperson for the semiautonomous Department of Energy agency said by email. “We are mindful of the concerns expressed by County leadership regarding the Gross Receipts Tax issue and will look at the issue once transition is complete and Triad is operating Los Alamos National Laboratory.”

In a meeting of the Los Alamos County Council earlier this month, County Manager Harry Burgess said the NNSA was pushing Triad to apply for federal 501(c)(3) tax-exempt status with the Internal Revenue Service, because the designation would make the contractor exempt from New Mexico’s state gross receipts tax — essentially, a state tax on revenue.

In a late Monday email to Weapons Complex Morning Briefing, Burgess affirmed he received his information directly from NNSA Administrator Lisa Gordon-Hagerty during a September meeting in Washington, D.C. Gordon-Hagerty’s office believes Triad is required by the Federal Acquisition Regulation to seek any cost savings possible, including 501(c)(3) status, Burgess said.

But, “[a]s for Triad, they have told us that they are not presently seeking 501(c)(3) status,” Burgess wrote.

Triad did not reply to multiple requests for comment on Monday and Tuesday.

Triad is led by Battelle Memorial institute, longtime Los Alamos manager the University of California, and Texas A&M University. The company’s industry subcontractors are Fluor and Huntington Ingalls Industries.

In August, after a review initiated at Triad’s request, the New Mexico Taxation and Revenue Department said the contractor would be responsible for a roughly 7-percent annually gross receipts tax. For-profit companies and nonprofit entities that do not have 501(c)(3) status from the IRS must pay that tax, the state agency said at the time.

At the County Council meeting earlier this month, Burgess said Triad planned to pay the gross receipts tax beginning Nov. 1, when the company is slated to take over the lab. The tax would net about $20 million a year for the county, he said. However, if Triad earns 501(c)(3) status at some point after its first year on the job, the county might have to refund any gross receipts taxes collected prior to the tax-exempt designation, Burgess said.