Certain domestically controlled foreign persons performing services under contract with United States Government treated as American employers

(a)

FICA taxes

Section 3121 of the Internal Revenue Code of 1986 (relating to definitions) is amended by adding at the end the following new subsection:

(z)

Treatment of certain foreign persons as American employers

(1)

In general

If any employee of a foreign person is performing services in connection with a contract between the United States Government (or any instrumentality thereof) and any member of any domestically controlled group of entities which includes such foreign person, such foreign person shall be treated for purposes of this chapter as an American employer with respect to such services performed by such employee. (2)

Domestically controlled group of entities

For purposes of this subsection— (A)

In general

The term domestically controlled group of entities means a controlled group of entities the common parent of which is a domestic corporation. (B)

Controlled group of entities

The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1), except that— (i)more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and (ii)the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563.

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).

(3)

Liability of common parent

In the case of a foreign person who is a member of any domestically controlled group of entities, the common parent of such group shall be jointly and severally liable for any tax under this chapter for which such foreign person is liable by reason of this subsection. (4)

Cross reference

For relief from taxes in cases covered by certain international agreements, see sections 3101(c) and 3111(c).

(b)

Social Security benefits

Subsection (e) of section 210 of the Social Security Act (42 U.S.C. 410(e)) is amended— (1)by striking (e) The term and inserting (e)(1) The term, (2)by redesignating paragraphs (1) through (6) as subparagraphs (A) through (F), respectively, and (3)by adding at the end the following new paragraph:

(2)(A)If any employee of a foreign person is performing services in connection with a contract between the United States Government (or any instrumentality thereof) and any member of any domestically controlled group of entities which includes such foreign person, such foreign person shall be treated for purposes of this chapter as an American employer with respect to such services performed by such employee. (B)For purposes of this paragraph— (i)The term domestically controlled group of entities means a controlled group of entities the common parent of which is a domestic corporation. (ii)The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1) of the Internal Revenue Code of 1986, except that— (I)more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and (II)the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563 of such Code.

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3) of such Code) by members of such group (including any entity treated as a member of such group by reason of this sentence).

(c)

Effective date

The amendment made by this section shall apply to services performed after the date of the enactment of this Act.