Overview
This section serves as a regulatory pointer to FAR 29.204, establishing the legal basis for a 2% excise tax on specific federal procurement payments made to foreign entities under the James Zadroga 9/11 Health and Compensation Act of 2010.
Key Rules
- Tax Rate: Imposes a 2% excise tax on the amount of specified Federal procurement payments.
- Legal Authority: Derived from 26 U.S.C. 5000C and implemented through Department of the Treasury regulations (26 CFR 1.5000C-1 through 1.5000C-7).
- Applicability: Targets foreign persons or entities providing goods or services under a government contract, unless an exemption applies (such as a qualified income tax treaty).
- Cross-Reference: Directs practitioners to FAR Subpart 29.2 (Federal Excise Taxes) for specific procedures and implementation details regarding the tax.
Practical Implications
- Withholding Requirement: The U.S. Government is generally required to withhold the 2% tax from contract payments rather than the contractor paying it after the fact.
- Contractor Self-Certification: Foreign contractors must typically submit specific IRS forms (such as Form W-14) to certify their exemption status or determine the applicable withholding amount.