§ 3902. — Interest penalties.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 31USC3902]
TITLE 31--MONEY AND FINANCE
SUBTITLE III--FINANCIAL MANAGEMENT
CHAPTER 39--PROMPT PAYMENT
Sec. 3902. Interest penalties
(a) Under regulations prescribed under section 3903 of this title,
the head of an agency acquiring property or service from a business
concern, who does not pay the concern for each complete delivered item
of property or service by the required payment date, shall pay an
interest penalty to the concern on the amount of the payment due. The
interest shall be computed at the rate of interest established by the
Secretary of the Treasury, and published in the Federal Register, for
interest payments under section 12 of the Contract Disputes Act of 1978
(41 U.S.C. 611), which is in effect at the time the agency accrues the
obligation to pay a late payment interest penalty.
(b) The interest penalty shall be paid for the period beginning on
the day after the required payment date and ending on the date on which
payment is made.
(c)(1) A business concern shall be entitled to an interest penalty
of $1.00 or more which is owed such business concern under this section,
and such penalty shall be paid without regard to whether the business
concern has requested payment of such penalty.
(2) Each payment subject to this chapter for which a late payment
interest penalty is required to be paid shall be accompanied by a notice
stating the amount of the interest penalty included in such payment and
the rate by which, and period for which, such penalty was computed.
(3) If a business concern--
(A) is owed an interest penalty by an agency;
(B) is not paid the interest penalty in a payment made to the
business concern by the agency on or after the date on which the
interest penalty becomes due;
(C) is not paid the interest penalty by the agency within 10
days after the date on which such payment is made; and
(D) makes a written demand, not later than 40 days after the
date on which such payment is made, that the agency pay such a
penalty,
such business concern shall be entitled to an amount equal to the sum of
the late payment interest penalty to which the contractor is entitled
and an additional penalty equal to a percentage of such late payment
interest penalty specified by regulation by the Director of the Office
of Management and Budget, subject to such maximum as may be specified in
such regulations.
(d) The temporary unavailability of funds to make a timely payment
due for property or services does not relieve the head of an agency from
the obligation to pay interest penalties under this section.
(e) An amount of an interest penalty unpaid after any 30-day period
shall be added to the principal amount of the debt, and a penalty
accrues thereafter on the added amount.
(f) This section does not authorize the appropriation of additional
amounts to pay an interest penalty. The head of an agency shall pay a
penalty under this section out of amounts made available to carry out
the program for which the penalty is incurred.
(g) A recipient of a grant from the head of an agency may provide in
a contract for the acquisition of property or service from a business
concern that, consistent with the usual business practices of the
recipient and applicable State and local law, the recipient will pay an
interest penalty on amounts overdue under the contract under conditions
agreed to by the recipient and the concern. The recipient may not pay
the penalty from amounts received from an agency. Amounts expended for
the penalty may not be counted toward a matching requirement applicable
to the grant. An obligation to pay the penalty is not an obligation of
the United States Government.
(h)(1) This section shall apply to contracts for the procurement of
property or services entered into pursuant to section 4(h) of the Act of
June 29, 1948 (15 U.S.C. 714b(h)).
(2)(A) In the case of a payment to which producers on a farm are
entitled under the terms of an agreement entered into under the
Agricultural Act of 1949 (7 U.S.C. 1421 et seq.), an interest penalty
shall be paid to the producers if the payment has not been made by the
required payment or loan closing date. The interest penalty shall be
paid--
(i) on the amount of payment or loan due; and
(ii) for the period beginning on the first day beginning after
the required payment or loan closing date and ending on the date the
amount is paid or loaned.
(B) As used in this subsection, the ``required payment or loan
closing date'' means--
(i) for a purchase agreement, the 30th day after delivery of the
warehouse receipt for the commodity subject to the purchase
agreement;
(ii) for a loan agreement, the 30th day beginning after the date
of receipt of an application with all requisite documentation and
signatures, unless the applicant requests that the disbursement be
deferred;
(iii) for refund of amounts received greater than the amount
required to repay a commodity loan, the first business day after the
Commodity Credit Corporation receives payment for such loan;
(iv) for land diversion payments (other than advance payments),
the 30th day beginning after the date of completion of the
production adjustment contract by the producer;
(v) for an advance land diversion payment, 30 days after the
date the Commodity Credit Corporation executes the contract with the
producer;
(vi) for a deficiency payment (other than advance payments)
based upon a 12-month or 5-month period, 91 days after the end of
such period; or
(vii) for an advance deficiency payment, 30 days after the date
the Commodity Credit Corporation executes the contract with the
producer.
(3) Payment of the interest penalty under this subsection shall be
made out of funds available under section 8 of the Act of June 29, 1948
(15 U.S.C. 714f).
(4) Section 3907 of this title shall not apply to interest penalty
payments made under this subsection.
(Added Pub. L. 97-452, Sec. 1(18)(A), Jan. 12, 1983, 96 Stat. 2475;
amended Pub. L. 98-216, Sec. 1(6), Feb. 14, 1984, 98 Stat. 4; Pub. L.
100-496, Sec. 3, Oct. 17, 1988, 102 Stat. 2456; Pub. L. 105-362, title
XIII, Sec. 1301(c)(2)(B), Nov. 10, 1998, 112 Stat. 3293.)
Historical and Revision Notes
1982 Act
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Revised Section Source (U.S. Code) Source (Statutes at Large)
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3902(a).............................. 31 App.:1801(a)(1), (b)(1) May 21, 1982, Pub. L. 97-177, Sec.
(2d, last sentences). 2(a)(1), (b)-(d), 96 Stat. 85.
3902(b).............................. 31 App.:1801(b)(1) (1st
sentence).
3902(c).............................. 31 App.:1801(b)(2).
3902(d).............................. 31 App.:1801(c).
3902(e).............................. 31 App.:1801(d).
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In subsection (a), the words ``under section 3903 of this title''
are substituted for ``by the Director of the Office of Management and
Budget'' because of the restatement. The words ``in accordance with this
section'' are omitted as surplus.
In subsection (b), before clause (1), the words ``on amounts due to
a business concern under this chapter . . . to the business concern'',
``of the amount due'', and ``complete delivered . . . of property or
service concerned'' are omitted as surplus.
In subsection (c), the words ``which remains'' are omitted as
surplus.
In subsection (e), the words ``terms and'' and ``non-Federal'' are
omitted as surplus. The word ``Government'' is added for consistency in
the revised title and with other titles of the United States Code.
1984 Act
This is necessary to correct cross-references in section 3902(b).
References in Text
The Agricultural Act of 1949, referred to in subsec. (h)(2)(A), is
act Oct. 31, 1949, ch. 792, 63 Stat. 1051, as amended, which is
classified principally to chapter 35A (Sec. 1421 et seq.) of Title 7,
Agriculture. For complete classification of this Act to the Code, see
Short Title note set out under section 1421 of Title 7 and Tables.
Amendments
1998--Subsec. (b). Pub. L. 105-362 substituted ``The'' for ``Except
as provided in section 3906 of this title, the''.
1988--Subsec. (a). Pub. L. 100-496, Sec. 3(a)(1), substituted ``The
interest shall be computed at the rate of interest established by the
Secretary of the Treasury, and published in the Federal Register, for
interest payments under section 12 of the Contract Disputes Act of 1978
(41 U.S.C. 611), which is in effect at the time the agency accrues the
obligation to pay a late payment interest penalty'' for ``The interest
shall be computed at the rate the Secretary of the Treasury establishes
for interest payments under section 12 of the Contract Disputes Act of
1978 (41 U.S.C. 611). The Secretary shall publish each rate in the
Federal Register''.
Subsec. (b). Pub. L. 100-496, Sec. 3(a)(2), struck out second
sentence which read as follows: ``However, a penalty may not be paid if
payment for the item is made--
``(1) when the item is a meat or meat food product described in
section 3903(2) of this title, before the 4th day after the required
payment date;
``(2) when the item is an agricultural commodity described in
section 3903(3) of this title, before the 6th day after the required
payment date; or
``(3) when the item is not an item referred to in clauses (1)
and (2) of this subsection, before the 16th day after the required
payment date.''
Subsecs. (c) to (g). Pub. L. 100-496, Sec. 3(b), added subsecs. (c)
and (d) and redesignated former subsecs. (c) to (e) as (e) to (g),
respectively.
Subsec. (h). Pub. L. 100-496, Sec. 3(c), added subsec. (h).
1984--Subsec. (b). Pub. L. 98-216 substituted ``3903(2)'' for
``3903(2)(A)'' in par. (1) and ``3903(3)'' for ``3903(2)(B)'' in par.
(2).
Effective Date of 1988 Amendment
Section 14(a)-(c) of Pub. L. 100-496 provided that:
``(a) The amendments made by sections 2(a), 2(b), 3(a), 4 through 9,
12, and 13 of this Act [enacting section 3905 of this title, amending
this section, sections 3901, 3903, and 3904 of this title and section
644 of Title 15, Commerce and Trade, renumbering sections 3905 and 3906
of this title as sections 3906 and 3907, respectively, and repealing
provisions set out as a note under section 3903 of this title] shall
apply to payments under contracts awarded, contracts renewed, and
contract options exercised during or after the first fiscal quarter
which begins more than 90 days after the date of the enactment of this
Act [Oct. 17, 1988].
``(b) The requirements of section 3902(c)(2) of title 31, United
States Code, as added by section 3(b) of this Act, shall apply to
payments under contracts awarded on or after October 1, 1989.
``(c) The amendments made by sections 2(c) and 3(c) of this Act
[amending this section, section 3901 of this title, and section 410 of
Title 39, Postal Service] shall be applicable with respect to all
obligations incurred on or after January 1, 1989.''
Payment of Interest Penalties by Department of Defense
Pub. L. 107-117, div. A, title VIII, Sec. 8084, Jan. 10, 2002, 115
Stat. 2266, provided that: ``Notwithstanding 31 U.S.C. 3902, during the
current fiscal year and hereafter, interest penalties may be paid by the
Department of Defense from funds financing the operation of the military
department or defense agency with which the invoice or contract payment
is associated.''
Similar provisions were contained in the following prior
appropriation acts:
Pub. L. 106-259, title VIII, Sec. 8083, Aug. 9, 2000, 114 Stat. 692.
Pub. L. 106-79, title VIII, Sec. 8088, Oct. 25, 1999, 113 Stat.
1252.
Pub. L. 105-262, title VIII, Sec. 8092, Oct. 17, 1998, 112 Stat.
2319.
Pub. L. 105-56, title VIII, Sec. 8103, Oct. 8, 1997, 111 Stat. 1243.
Interest Penalties for Late Payment of Interim Payments Due Under
Government Service Contracts
Pub. L. 106-398, Sec. 1 [[div. A], title X, Sec. 1010], Oct. 30,
2000, 114 Stat. 1654, 1654A-251, as amended by Pub. L. 107-107, div. A,
title X, Sec. 1007, Dec. 28, 2001, 115 Stat. 1204, provided that:
``(a) Prompt Payment Requirement for Interim Payments.--Under
regulations prescribed under subsection (c), the head of an agency
acquiring services from a business concern under a cost reimbursement
contract requiring interim payments who does not pay the concern a
required interim payment by the date that is 30 days after the date of
the receipt of a proper invoice shall pay an interest penalty to the
concern on the amount of the payment due. The interest shall be computed
as provided in section 3902(a) of title 31, United States Code.
``(b) Regulations.--The Director of the Office of Management and
Budget shall prescribe regulations to carry out this section. Such
regulations shall be prescribed as part of the regulations prescribed
under section 3903 of title 31, United States Code.
``(c) Incorporation of Certain Provisions of Law.--The provisions of
chapter 39 of title 31, United States Code, shall apply to this section
in the same manner as if this section were enacted as part of such
chapter.
``(d) Effective Date.--Subsection (a) shall take effect on December
15, 2000, and shall apply with respect to interim payments that are due
on or after such date under contracts entered into before, on, or after
that date. No interest shall accrue by reason of that subsection for any
period before that date.''
Section Referred to in Other Sections
This section is referred to in sections 3903, 3904, 3905 of this
title; title 42 sections 1395h, 1395u.
