[Federal Register Volume 84, Number 183 (Friday, September 20, 2019)]
[Proposed Rules]
[Pages 49498-49502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20227]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 12, 25, 29, and 52
[FAR Case 2016-013; Docket No. FAR-2016-0013, Sequence No. 1]
RIN 9000-AN38
Federal Acquisition Regulation: Tax on Certain Foreign
Procurement
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to withhold a 2 percent tax on contract
payments made by the United States Government to foreign persons
pursuant to certain contracts. This rule applies to Federal government
contracts for goods or services that are awarded to foreign persons.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat Division at one of the addresses shown below on
or before November 19, 2019 to be considered in the formation of the
final rule.
ADDRESSES: Submit comments in response to FAR Case 2016-013 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by searching for ``FAR Case
2016-013''. Select the link ``Comment Now'' that corresponds with ``FAR
Case 2016-013''. Follow the instructions provided on the screen. Please
include your name, company name (if any), and ``FAR Case 2016-013'' on
your attached document.
Mail: General Services Administration, Regulatory
Secretariat Division (MVCB), ATTN: Lois Mandell, 1800 F Street NW, 2nd
Floor, Washington, DC 20405.
Instructions: Please submit comments only and cite ``FAR Case 2016-
013'' in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided. To
confirm receipt of your comment(s), please check http://www.regulations.gov, approximately 2 to 3 days after submission to
verify posting (except allow 30 days for posting of comments submitted
by mail).
FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement
Analyst, at 202-969-7207 or [email protected] for clarification
of content. For information pertaining to status or publication
schedules, contact the Regulatory Secretariat Division at 202-501-4755.
Please cite ``FAR Case 2016-013''.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are proposing to amend the FAR to implement the
Department of the Treasury final regulations published in the Federal
Register at 81 FR 55133 on August 18, 2016, under section 5000C of the
Internal Revenue Code relating to the 2 percent tax on payments made by
the United States (U.S.) Government to foreign entities pursuant to
certain contracts. This proposed rule only addresses the collection of
the section 5000C tax from contract payments on certain foreign
contracts by withholding up to 2 percent of the payment. The agency
merely withholds the tax for the Internal Revenue Service (IRS). All
substantive issues regarding the underlying section 5000C tax, e.g.,
the imposition of, and exemption from the tax, are matters under the
jurisdiction of the IRS. FAR 29.204 and 29.402-3 give more information
on the contracts that are covered, and exemptions or exceptions that
might apply.
On January 2, 2011, section 301 of the James Zadroga 9/11 Health
and Compensation Act of 2010, Public Law 111-347 (the Act), added
section 5000C to the Internal Revenue Code (Code). 26 U.S.C. 5000C,
Imposition of tax on certain foreign procurement, and its implementing
regulations at 26 CFR 1.5000C-1 through 1.5000C-7, imposed, unless
exempted, a 2 percent excise tax of the amount of a specified Federal
procurement payment on any foreign person receiving such payment. 26
CFR 1.5000C-1(c) defines the term specified Federal procurement payment
as any payment made pursuant to a contract with the U.S. Government for
goods or services if the goods are manufactured or produced, or the
services are provided, in any country that is not a party to an
international procurement agreement with the United States (see FAR
25.003 for the definitions of ``World Trade Organization Government
Procurement Agreement (WTO GPA) country'' and ``Free Trade Agreement
country'', per the IRS definition at 1.5000C-1(a)(8)). Section
301(a)(3) of the Act provides that section 5000C applies to payments
received pursuant to contracts entered into on and after the date of
enactment of the Act, January 2, 2011. Additionally, section 301(c) of
the Act states that this section must be applied in a manner consistent
with U.S. obligations under international agreements. Section
5000C(d)(1) provides that the amount deducted and withheld under
chapter 3 shall be increased by the amount of tax imposed under 26
U.S.C. 5000C.
DoD, GSA, and NASA issued a final rule under FAR Case 2011-011,
Unallowability of Costs Associated With Foreign Contractor Excise Tax,
amending the FAR to disallow the cost associated with the 2 percent
excise tax on certain foreign procurements. The final rule was
published in the Federal Register at 78 FR 6189 on January 29, 2013.
[[Page 49499]]
II. Discussion and Analysis
As required by the Code, DoD, GSA, and NASA are proposing to
implement the withholding of a 2 percent tax on payments made by the
U.S. Government to foreign persons pursuant to certain contracts.
A. The following summarizes the proposed changes to FAR parts 1,
12, 25, and 29:
1. Adds segments for the new provision FAR 52.229-WW, Tax on
Certain Foreign Procurements--Notice and Representation, and the new
clause at FAR 52.229-XX, Tax on Certain Foreign Procurements, at FAR
1.106, OMB approval under the Paperwork Reduction Act.
2. Adds the new provision FAR 52.229-WW, Tax on Certain Foreign
Procurements--Notice and Representation, to paragraph (d) in FAR
12.301, Solicitation provisions and contract clauses for the
acquisition of commercial items.
3. Adds a new section 25.1003, Tax on certain foreign procurements,
under subpart 25.10, Additional Foreign Acquisition Regulations, that
provides a reference to a new FAR section at FAR 29.204.
4. Adds a new section at FAR 29.204, Federal excise tax on specific
foreign contract payments, explaining the excise tax requirements to
contracting officers.
5. Adds a new section 29.402-3, Tax on certain foreign
procurements, under 29.402, Foreign contracts, to prescribe the use of
the new provision FAR 52.229-WW, Tax on Certain Foreign Procurements--
Notice and Representation, and the new clause at FAR 52.229-XX, Tax on
Certain Foreign Procurements.
B. The following summarizes proposed changes to FAR part 52.
1. Amends paragraph (b) of the clause at FAR 52.212-5, Contract
Terms and Conditions Required To Implement Statutes or Executive
Orders--Commercial Items, to add the new clause 52.229-XX, Tax on
Certain Foreign Procurements.
2. Adds a new provision at FAR 52.229-WW, Tax on Certain Foreign
Procurements--Notice and Representation, to notify offerors of the
excise tax withholding requirements and to have them represent whether
they are a foreign person; and whether they would claim an exemption on
the Department of the Treasury Internal Revenue Service Form W-14,
Certificate of Foreign Contracting Party Receiving Federal Procurement
Payments. This form is available at www.irs.gov/w14.
3. Adds a new clause at FAR 52.229-XX, Tax on Certain Foreign
Procurements, to establish the excise tax withholding requirements in
the FAR.
III. Expected Impact of the Rule
Acquiring agencies are required to withhold the excise tax under 26
U.S.C. 5000C. The exemptions from the withholding in the IRS
regulations at 26 CFR 1.5000C-1(d)(1) through (d)(4) are captured under
the new provision prescription at FAR 29.402-3(a). If any of the
conditions listed at FAR 29.402-3(a) are met, the payments under the
contract will not be subject to the withholding. The other exemptions
at 26 CFR 1.5000C-1(d), (d)(5) through (d)(7), must be claimed by the
offeror by submitting an IRS Form W-14 with the offer. If no exemption
applies or is claimed, contractors will be subject to the tax and will
be required to complete IRS Form W-14, and submit this form with each
voucher or invoice for the agency to withhold the tax as appropriate.
Federal Procurement Data System (FPDS) data for Fiscal Year (FY)
2018 was obtained for contracts valued over $150,000 awarded to foreign
vendors. There were 8,395 total awards made to a total of 1,595 unique
foreign entities. The IRS regulations defined the term ``international
procurement agreement'' as the World Trade Organization GPA (WTO GPA)
within the meaning of FAR 25.400(a)(1) and any free trade agreement to
which the United States is a party that includes government procurement
obligations that provide appropriate competitive government procurement
opportunities to U.S. goods, services, and suppliers. Excluding the
countries listed in the definitions of ``World Trade Organization
Government Procurement Agreement (WTO GPA) country'' and ``Free Trade
Agreement country'' in FAR 25.003 (see exemption at 26 CFR 1.5000C-
1(d)(7)), a more accurate number of impacted entities may be estimated
to be 461 unique foreign vendors. This number is minimal when compared
to the total number of unique vendors for FY 2018 of 142,051, or
approximately 0.32 percent. The FAR regulation covers withholding, not
the imposition of the tax, which was implemented in the IRS regulation.
Any monies which the contractor thinks a contracting agency has
wrongfully withheld can be reclaimed by the contractor when it files
its U.S. tax return.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf (COTS) Items
Pursuant to 41 U.S.C. 1905-1907, a provision of law is not
applicable to: contracts or subcontracts in amounts not greater than
the simplified acquisition threshold (SAT) (as defined in FAR 2.101);
and the acquisition of commercial items, including COTS items. However,
the provision of law is applicable when the law (i) contains criminal
or civil penalties; (ii) specifically refers to 41 U.S.C. 1905-1907 and
states that the law applies to contracts or subcontracts in amounts not
greater than the SAT, or the acquisition of commercial items including
COTS items; (iii) the FAR Council makes a written determination that it
is not in the best interest of the Federal Government to exempt
contracts or subcontracts at or below the SAT and for acquisition of
commercial items; or the Administrator for Federal Procurement Policy
makes a written determination that it would not be in the best interest
of the Federal Government to exempt contracts for the procurement of
COTS items from this law. United States tax laws contain criminal and
civil penalties; thus, commercial items, including commercially
available off-the-shelf items, are subject to the new provision and
clause unless otherwise exempted.
The new provision and clause are not applicable to acquisitions
using simplified acquisition procedures that do not exceed the
simplified acquisition threshold because the IRS regulations at 26 CFR
1.5000C-1(d)(1) exempted them from the tax--see the prescriptions at
FAR 29.402-3(a)(1) and (b)(1).
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is a significant regulatory action and, therefore, was subject to
review under section 6(b) of E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993. This rule is not a major rule under 5
U.S.C. 804.
[[Page 49500]]
VI. Executive Order 13771
This proposed rule is not expected to be an E.O. 13771 regulatory
action, because this rule imposes de minimis costs on the public as
explained in section III, Expected Impact of the Rule, of this
preamble. The FAR Council invites comments from the regulated community
on the analysis provided in this rule.
VII. Regulatory Flexibility Act
The Treasury final rule concluded that a Regulatory Flexibility
Analysis was not required and that the rule will not have a significant
economic impact on a substantial number of small entities. The Treasury
final rule stated that because section 5000C(a) of the Internal Revenue
Code applies to foreign persons, regardless of the size of the entity,
only a limited number of small foreign entities that received specified
Federal procurement payments are affected by the regulation. FPDS data
for FY 2018 shows only 59 unique small foreign entities were awarded
contracts valued over $150,000. This rule is not expected to have a
significant economic impact on a substantial number of small entities
based in the United States because this only applies to Federal
government contracts for goods or services that are awarded to foreign
persons. The FAR regulation covers withholding, not the imposition of
the tax, which was implemented in the IRS regulation. Any monies which
the contractor thinks a contracting agency has wrongfully withheld can
be reclaimed by the contractor when it files its U.S. tax return. DoD,
GSA, and NASA have, however, prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the FAR rule consistent with 5 U.S.C. 603, which is
summarized as follows:
DoD, GSA, and NASA are proposing to amend the FAR to withhold a
2 percent tax on payments made by the U.S. Government to foreign
persons pursuant to certain contracts.
The objective is to implement a final rule issued by the
Department of the Treasury (published at 81 FR 55133) that
implements section 301 of the James Zadroga 9/11 Health and
Compensation Act of 2010, Public Law 111-347 (the Act), adding
section 5000C to the Internal Revenue Code (Code). 26 U.S.C. 5000C,
Imposition of tax on certain foreign procurement, and its
implementing regulations at 26 CFR 1.5000C-1 through 1.5000C-7,
imposed, unless exempted, a 2 percent excise tax of the amount of a
specified Federal procurement payment on any foreign person
receiving such payment.
The rule would apply to Federal government contracts that are
awarded to foreign persons for goods or services, if the goods are
manufactured or produced or the services are provided in any country
that is not a party to an international procurement agreement with
the United States (see FAR 25.003 for the definitions of ``World
Trade Organization Government Procurement Agreement (WTO GPA)
country'' and ``Free Trade Agreement country''). FPDS data for FY
2018 was obtained for contracts valued over $150,000 awarded to
foreign vendors. There were 8,395 total awards, 8,178 were to large
vendors; 217 were to small vendors. Of these, 1,536 were unique
large foreign entities while 59 were unique small foreign entities
for a total of 1,595 unique foreign entities. Accordingly, the
proposed rule is not expected to have a significant economic impact
on a substantial number of small entities based in the United
States.
The rule does not duplicate, overlap, or conflict with any other
Federal rules. There are no available alternatives to the proposed
rule to accomplish the desired objective of the statute.
The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. DoD, GSA and NASA invite comments from small
business concerns and other interested parties on the expected impact
of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2016-013),
in correspondence.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. Chapter 35) does apply.
However, these changes to the FAR do not impose additional information
collection requirements to the paperwork burden previously approved for
the IRS, Department of the Treasury regulations under the Office of
Management and Budget (OMB) Control Number 1545-2263, Tax on Certain
Foreign Procurement (see 80 FR 22449, April 22, 2015 and 82 FR 41310 at
41312, August 30, 2017).
List of Subjects in 48 CFR Parts 1, 12, 25, 29, and 52
Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-Wide Policy.
Therefore, DoD, GSA, and NASA are proposing to amend 48 CFR parts
1, 12, 25, 29, and 52 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 12, 25, 29, and 52
continues to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
0
2. In section 1.106 amend the table by adding entries for ``52.229-WW''
and ``52.229-XX'' in numerical order to read as follows:
------------------------------------------------------------------------
OMB control
FAR segment No.
------------------------------------------------------------------------
* * * * *
52.229-WW............................................... 1545-2263
52.229-XX............................................... 1545-2263
* * * * *
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PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
3. Amend section 12.301, by redesignating paragraph (d)(12) as (d)(13)
and adding a new paragraph (d)(12) to read as follows:
12.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(d) * * *
(12) Insert the provision at 52.229-WW, Tax on Certain Foreign
Procurements--Notice and Representation, in solicitations as prescribed
in 29.402-3(a). The representation in this provision is not in the
System for Award Management.
* * * * *
PART 25--FOREIGN ACQUISITION
0
4. Add section 25.1003 to read as follows:
25.1003 Tax on certain foreign procurements.
See 29.204 for the imposition of the tax on certain foreign
procurements pursuant to the James Zadroga 9/11 Health and Compensation
Act of 2010 (Pub. L. 111-347), 26 U.S.C. 5000C, Imposition of tax on
certain foreign procurement, and its implementing regulations at 26 CFR
1.5000C-1 through 1.5000C-7.
PART 29--TAXES
0
5. Add sections 29.204 and 29.402-3 to read as follows:
29.204 Federal excise tax on specific foreign contract payments.
(a) 26 U.S.C. 5000C, Imposition of tax on certain foreign
procurement, and its
[[Page 49501]]
implementing regulations at 26 CFR 1.5000C-1 through 1.5000C-7 require
acquiring agencies to collect this excise tax via withholding on
applicable contract payments (see 29.402-3, 31.205-41(b)(8)). Agencies
merely withhold the tax (section 5000C tax) for the Internal Revenue
Service (IRS). All substantive issues regarding the underlying section
5000C tax, e.g., the imposition of, and exemption from the tax, are
matters under the jurisdiction of the IRS. The contracting officer will
refer all questions relating to the interpretation of the IRS
regulations to https://www.irs.gov/help/tax-law-questions.
(b) In accordance with the clause 52.229-XX, Tax on Certain Foreign
Procurements, contractors that are subject to the section 5000C tax
will complete IRS Form W-14, Certificate of Foreign Contracting Party
Receiving Federal Procurement Payments, and submit this form with each
voucher or invoice. In the absence of a completed IRS Form W-14
accompanying a payment request, the default withholding percentage is 2
percent for the section 5000C withholding for that payment request.
Information about IRS Form W-14 is available via the internet at
www.irs.gov/w14.
(c)(1) Exemptions from the withholding in the IRS regulations at 26
CFR 1.5000C-1(d)(1) through (d)(4) are captured under the provision
prescription at 29.402-3(a) (i.e., the contracting officer will not
include the provision when one of the 29.402-3(a) exceptions applies).
(2) The exemptions at 26 CFR 1.5000C-1(d)(5) through (d)(7) must be
claimed by the offeror when it submits an IRS Form W-14 with the offer.
If not submitted with the offer, exemptions will not be applied to the
contract.
(3) Any exemption claimed and self-certified on the IRS Form W-14
is subject to audit by the IRS. Any disputes regarding the imposition
and collection of the section 5000C tax are adjudicated by the IRS as
the section 5000C tax is a tax matter, not a contract issue.
(d) The exemptions in 29.201 through 29.302 do not apply to this
section 5000C tax.
(e) Additional information about this excise tax on specific
foreign contract payments is available via the internet at https://www.irs.gov/government-entities/excise-tax-on-specified-federal-foreign-procurement-payments.
29.402-3 Tax on certain foreign procurements.
(a) Insert the provision at 52.229-WW, Tax on Certain Foreign
Procurements--Notice and Representation, in solicitations, including
solicitations using FAR part 12 procedures for the acquisition of
commercial items, unless one of the following exceptions applies:
(1) Acquisitions using simplified acquisition procedures that do
not exceed the simplified acquisition threshold (as defined in 2.101).
(2) Emergency acquisitions using the emergency acquisition
flexibilities defined in part 18.
(3) Acquisitions using the unusual and compelling urgency authority
per 6.302-2.
(4) Contracts with a single individual for personal services that
will not exceed the simplified acquisition threshold on an annual
calendar year basis for all years of the contract.
(5) Acquisitions if the requiring activity identifies that the
requirement is for certain foreign humanitarian assistance contracts
which are payments made by the U.S. Government agencies pursuant to a
contract with a foreign contracting party to obtain goods or services
described in or authorized under 7 U.S.C. 1691, et seq., 22 U.S.C.
2151, et seq., 22 U.S.C. 2601 et seq., 22 U.S.C. 5801 et seq., 22
U.S.C. 5401 et seq., 10 U.S.C. 402, 10 U.S.C. 404, 10 U.S.C. 407, 10
U.S.C. 2557, and 10 U.S.C. 2561.
(b) Insert the clause at 52.229-XX, Tax on Certain Foreign
Procurements, in--
(1) Solicitations that contain the provision at 52.229-WW, Tax on
Certain Foreign Procurements--Notice and Representation; and
(2) Resultant contracts in which the contractor has indicated that
it was a foreign person in solicitation provision 52.229-WW, Tax on
Certain Foreign Procurements--Notice and Representation.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
6. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (b)(53) through (60) as paragraphs (b)(54)
through (61) and adding a new paragraph (b)(53) to read as follows:
52.212-5 Contract Terms and Conditions Required To Implement Statutes
or Executive Orders--Commercial Items.
* * * * *
Contract Terms and Conditions Required to Implement Statutes or
Executive Orders--Commercial Items ([DATE])
* * * * *
(b) * * *
___(53) 52.229-XX, Tax on Certain Foreign Procurements ([DATE]).
* * * * *
0
7. Add sections 52.229-WW and 52.229-XX to read as follows:
52.229-WW Tax on Certain Foreign Procurements--Notice and
Representation.
As prescribed in 29.402-3(a), insert the following provision:
Tax on Certain Foreign Procurements--Notice and Representation ([DATE])
(a) Definitions. As used in this provision--
Foreign person means any person other than a United States
person.
Specified Federal procurement payment means any payment made
pursuant to a contract with a foreign contracting party that is for
goods, manufactured or produced, or services provided in a foreign
country that is not a party to an international procurement
agreement with the United States. For purposes of the prior
sentence, a foreign country does not include an outlying area.
United States person as defined in 26 U.S.C. 7701(a)(30) means--
(1) A citizen or resident of the United States,
(2) A domestic partnership,
(3) A domestic corporation,
(4) Any estate (other than a foreign estate, within the meaning
of paragraph (31)), and
(5) Any trust if--
(i) A court within the United States is able to exercise primary
supervision over the administration of the trust, and
(ii) One or more United States persons have the authority to
control all substantial decisions of the trust.
(b) Unless exempted, there is a 2 percent tax of the amount of a
specified Federal procurement payment on any foreign person
receiving such payment. See 26 U.S.C. 5000C, Imposition of tax on
certain foreign procurement, and its implementing regulations at 26
CFR 1.5000C-1 through 1.5000C-7.
(c) Exemptions from withholding under this provision are
described at 26 CFR 1.5000C-1(d)(5) through (d)(7). The Offeror
would claim an exemption from the withholding by using the
Department of the Treasury Internal Revenue Service Form W-14,
Certificate of Foreign Contracting Party Receiving Federal
Procurement Payments, available via the internet at www.irs.gov/w14.
Any exemption claimed and self-certified on the IRS Form W-14 is
subject to audit by the IRS. Any disputes regarding the imposition
and collection of the section 5000C tax are adjudicated by the IRS
as the section 5000C tax is a tax matter, not a contract issue. The
IRS Form W-14 is provided to the acquiring agency rather than to the
IRS.
(d) For purposes of withholding under 26 U.S.C. 5000C,
Imposition of tax on certain foreign procurement, the Offeror
represents that--
(1) It [_]is [_]is not a foreign person; and
(2) If the Offeror indicates ``is'' in paragraph (d)(1) of this
provision, then the Offeror represents that--I am claiming on the
IRS Form W-14 [__] a full exemption, or [__] partial or no exemption
[Offeror shall select one] from the excise tax.
[[Page 49502]]
(e) If the Offeror represents it is a foreign person in
paragraph (d)(1) of this provision, then--
(1) The clause at FAR 52.229-XX, Tax on Certain Foreign
Procurements, will be included in any resulting contract; and
(2) The Offeror shall submit with its offer the IRS Form W-14.
If the IRS Form W-14 is not submitted with the offer, exemptions
will not be applied to any resulting contract and the Government
will withhold a full 2 percent of each payment.
(f) If the Offeror selects ``is'' in paragraph (d)(1) and
``partial or no exemption'' in paragraph (d)(2) of this provision,
the Offeror will be subject to withholding in accordance with the
clause at FAR 52.229-XX, Tax on Certain Foreign Procurements, in any
resulting contract.
(g) A taxpayer may, for a fee, seek advice from the Internal
Revenue Service (IRS) as to the proper tax treatment of a
transaction. This is called a private letter ruling. Also, the IRS
may publish a revenue ruling, which is an official interpretation by
the IRS of the Internal Revenue Code, related statutes, tax
treaties, and regulations. A revenue ruling is the conclusion of the
IRS on how the law is applied to a specific set of facts. For
questions relating to the interpretation of the IRS regulations go
to https://www.irs.gov/help/tax-law-questions.
(End of provision)
52.229-XX Tax on Certain Foreign Procurements.
As prescribed in 29.402-3(b), insert the following clause:
Tax on Certain Foreign Procurements ([DATE])
(a) Definitions.
Foreign person means any person other than a United States
person.
United States person, as defined in 26 U.S.C. 7701(a)(30),
means--
(1) A citizen or resident of the United States,
(2) A domestic partnership,
(3) A domestic corporation,
(4) Any estate (other than a foreign estate, within the meaning
of paragraph (31)), and
(5) Any trust if--
(i) A court within the United States is able to exercise primary
supervision over the administration of the trust; and
(ii) One or more United States persons have the authority to
control all substantial decisions of the trust.
(b) This clause applies to foreign persons. It implements 26
U.S.C. 5000C, Imposition of tax on certain foreign procurement, and
its implementing regulations at 26 CFR 1.5000C-1 through 1.5000C-7.
(c)(1) If the Contractor is a foreign person and has only a
partial or no exemption to the withholding, the Contractor shall
include the Department of the Treasury Internal Revenue Service Form
W-14, Certificate of Foreign Contracting Party Receiving Federal
Procurement Payments, with each voucher or invoice submitted under
this contract throughout the period in which this status is
applicable. The excise tax withholding is applied at the payment
level, not at the contract level. The Contractor should revise each
IRS Form W-14 submission to reflect the exemption (if any) that
applies to that particular invoice, such as a different exemption
applying. In the absence of a completed IRS Form W-14 accompanying a
payment request, the default withholding percentage is 2 percent for
the section 5000C withholding for that payment request. Information
about IRS Form W-14 and its separate instructions is available via
the internet at www.irs.gov/w14.
(2) If the Contractor is a foreign person and has indicated in
its offer in the provision 52.229-WW, Tax on Certain Foreign
Procurements--Notice and Representation, that it is fully exempt
from the withholding, and certified the full exemption on the IRS
Form W-14, and if that full exemption no longer applies due to a
change in circumstances during the performance of the contract that
causes the Contractor to become subject to the withholding for the 2
percent excise tax then the Contractor shall--
(i) Notify the Contracting Officer within 30 days of a change in
circumstances that causes the Contractor to be subject to the excise
tax withholding under 26 U.S.C. 5000C, Imposition of tax on certain
foreign procurement; and
(ii) Comply with paragraph (c)(1) of this clause.
(d) The Government will withhold a full 2 percent of each
payment unless the Contractor claims an exemption. If the Contractor
enters a ratio in Line 12 of the IRS Form W-14, the result of Line
11 divided by Line 10, the Government will withhold from each
payment an amount equal to 2 percent multiplied by the contract
ratio. If the Contractor marks box 9 of the IRS Form W-14 (rather
than completes Lines 10 through 12), the Contractor must identify
and enter the specific exempt and nonexempt amounts in Line 15 of
the IRS Form W-14; the Government will then withhold 2 percent only
from the nonexempt amount. See the IRS Form W-14 and its
instructions.
(e) Exemptions from the withholding under this clause are
described at 26 CFR 1.5000C-1(d)(5) through (d)(7). Any exemption
claimed and self-certified on the IRS Form W-14 is subject to audit
by the IRS. Any disputes regarding the imposition and collection of
the section 5000C tax are adjudicated by the IRS as the section
5000C tax is a tax matter, not a contract issue.
(f) Taxes imposed under 26 U.S.C. 5000C may not be--
(1) Included in the contract price; nor
(2) Reimbursed.
(g) A taxpayer may, for a fee, seek advice from the Internal
Revenue Service (IRS) as to the proper tax treatment of a
transaction. This is called a private letter ruling. Also, the IRS
may publish a revenue ruling, which is an official interpretation by
the IRS of the Internal Revenue Code, related statutes, tax
treaties, and regulations. A revenue ruling is the conclusion of the
IRS on how the law is applied to a specific set of facts. For
questions relating to the interpretation of the IRS regulations go
to https://www.irs.gov/help/tax-law-questions.
(End of clause)
[FR Doc. 2019-20227 Filed 9-19-19; 8:45 am]
BILLING CODE 6820-EP-P