[Federal Register Volume 77, Number 35 (Wednesday, February 22, 2012)]
[Proposed Rules]
[Pages 10461-10463]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3905]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 31 and 52
[FAR Case 2011-011; Docket 2011-0011; Sequence 1]
RIN 9000-AM13
Federal Acquisition Regulation; Unallowability of Costs
Associated With Foreign Contractor Excise Tax
AGENCIES: 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 implement the requirements of the James
Zadroga 9/11 Health and Compensation Act of 2010 regarding the
imposition of a 2 percent tax on certain foreign procurements.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat at one of the addressees shown below on or
before April 23, 2012 to be considered in the formation of the final
rule.
ADDRESSES: Submit comments in response to FAR case 2011-011 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by inputting ``FAR Case
2011-011'' under the heading ``Enter Keyword or ID'' and selecting
``Search.'' Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2011-011.'' Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2011-011'' on your attached document.
Fax: (202) 501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), Attn: Hada Flowers, 1275 First
[[Page 10462]]
Street NE., 7th Floor, Washington, DC 20417.
Instructions: Please submit comments only and cite FAR Case 2011-
011, 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.
FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement
Analyst, at (202) 501-3221 for clarification of content. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAR Case 2011-
011.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are proposing to revise the FAR to implement a
policy that imposes on any foreign person that receives a specified
Federal procurement payment a tax equal to 2 percent of the amount of
such specified Federal procurement payment. Additionally, the law
stipulates that no funds are to be disbursed to any foreign contractor
in order to reimburse the tax imposed (26 U.S.C. 5000C Note).
The James Zadroga 9/11 Health and Compensation Act of 2010 (Pub. L.
111-347) was signed into law and effective on January 2, 2011. Section
301 of the law amends the Internal Revenue Code of 1986 by adding a new
Section 5000C, Imposition of tax on certain foreign procurements (26
U.S.C. 5000C). This new section imposes on any foreign person that
receives a specified Federal procurement payment a tax equal to 2
percent of the amount of such specified Federal procurement payment.
Additionally, the law stipulates that no funds are to be disbursed to
any foreign contractor in order to reimburse the tax imposed (26 U.S.C.
5000C Note).
II. Discussion and Analysis
To comply with the law, the FAR Council is proposing to amend FAR
31.205-41 to inform the Government and contractors that the costs of
the 2 percent tax are not allowable, and at FAR 52.229-3, 52.229-4,
52.229-6 and 52.229-7, to provide that the costs for the 2 percent tax
are not included in foreign fixed-price contracts and foreign fixed-
price contracts with foreign governments. The law states that it
``shall be applied in a manner consistent with international
agreements.'' The law states that the 2 percent excise tax is applied
to foreign persons that receive Federal procurement payments pursuant
to a contract with the Government of the United States for the
provision of goods, if such goods are manufactured or produced in a
covered country, or for the provision of services if those services are
provided in a covered country. ``Covered country'' means a country that
is not a country that is party to an international procurement
agreement with the United States. ``Foreign person'' means any person
(including any individual, partnership, corporation, or other form of
association) other than a United States person. The law applies to
contracts entered into on or after January 2, 2011. The procedures for
withholding this 2 percent tax are being handled in a separate FAR
case.
III. 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.
IV. Regulatory Flexibility Act
The change may have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act 5 U.S.C. 601, et seq. The Initial Regulatory
Flexibility Analysis (IRFA) is summarized as follows:
At this time an estimate of the number of small entities to
which this rule will apply is not available. The 2 percent excise
tax is only applied to foreign persons that receive Federal
procurement payments pursuant to a contract with the Government of
the United States for the provision of goods, if such goods are
manufactured or produced in a covered country, or for the provision
of services if those services are provided in a covered country.
``Foreign person'' means any person (including any individual,
partnership, corporation, or other form of association) other than a
United States person. ``Covered country'' means a country that is
not a country that is party to an international procurement
agreement with the United States.
The Regulatory Secretariat 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. 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 this 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 2011-011) in
correspondence.
V. Paperwork Reduction Act
The rule does not contain any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 31 and 52
Government procurement.
Dated: February 14, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 31 and
52 as set forth below:
1. The authority citation for 48 CFR parts 31 and 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURE
2. Amend section 31.205-41 by adding paragraph (b)(8) to read as
follows:
31.205-41 Taxes.
* * * * *
(b) * * *
(8) Any tax imposed under 26 U.S.C. 5000C.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Amend section 52.229-3 by revising the date of the clause and
paragraph (b) to read as follows:
52.229-3 Federal, State, and Local Taxes.
* * * * *
Federal, State, and Local Taxes (date)
* * * * *
(b)(1) The contract price includes all applicable Federal, State,
and local
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taxes and duties, except as provided in subparagraph (b)(2)(i) of this
clause.
(2) Taxes imposed under 26 U.S.C. 5000C may not be--
(i) Included in the contract price; nor
(ii) Reimbursed.
* * * * *
4. Amend section 52.229-4 by revising the date of the clause and
paragraph (b) to read as follows:
52.229-4 Federal, State, and Local Taxes (State and Local
Adjustments).
* * * * *
Federal, State, and Local Taxes (state and local adjustments) (Date)
* * * * *
(b)(1) Unless otherwise provided in this contract, the contract
price includes all applicable Federal, State, and local taxes and
duties, except as provided in subparagraph (b)(2)(i) of this clause.
(2) Taxes imposed under 26 U.S.C. 5000C may not be--
(i) Included in the contract price; nor
(ii) Reimbursed.
* * * * *
5. Amend section 52.229-6 by:
(a) Revising the date of the clause;
(b) Redesignating paragraph (c) as (c)(1); removing from the newly
designated paragraph (c)(1) ``States.'' and adding ``States, except as
provided in subparagraph (c)(2) of this clause.'' in its place;
(c) Adding a new paragraph (c)(2);
(d) Redesignating paragraph (d) as (d)(1); removing from the newly
designated paragraph (d)(1) ``The contract price shall'' and adding
``Except as provided in subparagraph (d)(2) of this clause, the
contract price shall'' in its place; and
(e) Adding a new paragraph (d)(2).
The revised and newly added text reads as follows:
52.229-6 Taxes-Foreign Fixed--Price Contracts.
* * * * *
Taxes-Foreign Fixed-Price Contracts (Date)
* * * * *
(c)(1) * * *
(2) Taxes imposed under 26 U.S.C. 5000C may not be--
(i) Included in the contract price; nor
(ii) Reimbursed.
(d)(1) * * *
(2) The contract price may not be increased to offset taxes imposed
under 26 U.S.C. 5000c.
* * * * *
6. Amend section 52.229-7 by:
a. Revising the date of the clause;
b. Redesignating paragraph (b) as (b)(1); and
c. Adding a new paragraph (b)(2).
The revised and newly added text reads as follows:
52.229-7 Taxes-Foreign Fixed-Price Contract With Foreign Governments.
* * * * *
Taxes-Foreign Fixed-Price Contracts With Foreign Governments (Date)
* * * * *
(b) * * *
(2) Taxes imposed under 26 U.S.C. 5000c may not be included in the
contract price.
* * * * *
[FR Doc. 2012-3905 Filed 2-21-12; 8:45 am]
BILLING CODE 6820-EP-P