Federal Acquisition Regulation; Unallowability of Costs Associated With Foreign Contractor Excise Tax, 6189-6191 [2013-01750]
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Federal Register / Vol. 78, No. 19 / Tuesday, January 29, 2013 / Rules and Regulations
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. The Office of Information
and Regulatory Affairs (OIRA) has
deemed that 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, and
that this rule is not a major rule under
5 U.S.C. 804.
III. Regulatory Flexibility Act
srobinson on DSK4SPTVN1PROD with
IV. Paperwork Reduction Act
Jkt 229001
Dated: January 23, 2013.
Laura Auletta,
Director, Office of Governmentwide
Acquisition Policy, Office of Acquisition
Policy.
certain Federal procurement payments
to foreign persons. The rule disallows
the cost associated with the 2 percent
excise tax on certain foreign
procurements.
DATES:
Effective Date: February 28,
2013.
Interim Rule Adopted as Final with
Change
Accordingly, the interim rule
amending 48 CFR parts 25 and 52,
which was published in the Federal
Register at 77 FR 27548, May 10, 2012,
is adopted as final with the following
change:
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
FAC 2005–65, FAR Case 2011–011.
SUPPLEMENTARY INFORMATION:
■
1. The authority citation for 48 CFR
parts 25 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.
25.401
[Amended]
2. Amend section 25.401, in the table
that follows paragraph (b), by removing
from the table heading ‘‘Colombia FTA,
Chile FTA,’’ and adding ‘‘Chile FTA,
Colombia FTA,’’ in its place.
■
[FR Doc. 2013–01748 Filed 1–28–13; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 31 and 52
[FAC 2005–65; FAR Case 2011–011; Item
IV; Docket 2011–0011, Sequence 1]
RIN 9000–AM13
The rule affects the certification and
information collection requirements in
the provisions at FAR 52.212–3, 52.225–
4, 52.225–6, and 52.225–11 currently
approved under the Office of
Management and Budget Control
Numbers 9000–0136, titled: Commercial
Item Acquisition; 9000–0130, titled: Buy
American Act-Free Trade AgreementsIsraeli Trade Act Certificate; 9000–0025,
titled: Trade Agreements certificate; and
9000–0141, titled: Buy AmericanConstruction, respectively, in
accordance with the Paperwork
Reduction Act (44 U.S.C. chapter 35).
The impact, however, is negligible
because it is just a question of which
17:58 Jan 28, 2013
List of Subjects in 48 CFR Parts 25 and
52
Government procurement.
PART 25—FOREIGN ACQUISITION
The Department of Defense, the
General Services Administration, and
the National Aeronautics and Space
Administration certify that this final
rule will not 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. Although the
rule now opens up Government
procurement to the goods and services
of Colombia, DoD, GSA, and NASA do
not anticipate any significant economic
impact on U.S. small businesses. The
Department of Defense only applies the
trade agreements to the non-defense
items listed at Defense Federal
Acquisition Regulation Supplement
225.401–70, and acquisitions that are set
aside or provide other form of
preference for small businesses are
exempt. FAR 19.502–2 states that
acquisitions of supplies or services with
an anticipated dollar value between
$3,000 and $150,000 (with some
exceptions) are automatically reserved
for small business concerns.
VerDate Mar<15>2010
category offered goods from Colombia
would be listed under.
6189
Federal Acquisition Regulation;
Unallowability of Costs Associated
With Foreign Contractor Excise Tax
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
DoD, GSA, and NASA are
issuing a final rule amending the
Federal Acquisition Regulation (FAR) to
implement certain requirements of
section 301 of the James Zadroga 9/11
Health and Compensation Act of 2010,
which imposes a 2 percent excise tax on
SUMMARY:
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Fmt 4701
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FOR FURTHER INFORMATION CONTACT:
I. Background
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
Act 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).
Section 5000C imposes a 2 percent
excise tax on payments made to foreign
persons pursuant to Government
contracts for the provision of goods or
services, if the goods are manufactured
or produced in, or the services are
performed in, a country that is not a
party to an international procurement
agreement with the United States. The
statute applies to contracts entered into
on or after January 2, 2011. The statute
does not apply, however, if the
imposition of the tax would be
inconsistent with any international
agreement. The tax is to be collected in
a manner similar to other U.S. taxes
withheld on payments to foreign
persons. Additionally, section 301
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).
On February 22, 2012, DoD, GSA, and
NASA published a proposed rule in the
Federal Register at 77 FR 10461
implementing the prohibition against
reimbursement of the 2 percent excise
tax, by revising the FAR rules so that the
cost of the tax cannot be included as
part of a payment, or as part of a costbased negotiated price.
Regulations under section 5000C will
be forthcoming from the Department of
the Treasury that will provide specific
guidance regarding the application of
the tax and the procedures for
withholding the tax. Once the
Department of the Treasury implements
procedures for withholding this 2
percent excise tax, the impact on
E:\FR\FM\29JAR2.SGM
29JAR2
6190
Federal Register / Vol. 78, No. 19 / Tuesday, January 29, 2013 / Rules and Regulations
applicable FAR provisions will be
handled in a separate FAR case.
II. Discussion and Analysis
The Civilian Agency Acquisition
Council and the Defense Acquisition
Regulations Council (the Councils)
reviewed the comments in the
development of the final rule. A
discussion of the comments and the
changes made to the rule as a result of
those comments are provided as
follows:
A. Summary of Significant Changes
To comply with the statute, FAR
31.205–41 is amended to inform the
Government and contractors that the
costs of the 2 percent excise tax are not
allowable. FAR 52.229–3, 52.229–4,
52.229–6, and 52.229–7 are amended to
provide that the costs for the 2 percent
excise tax are not included in either
foreign fixed-price contracts with a
foreign concern or foreign fixed-price
contracts with foreign governments.
Based on a review of the public
comments, discussed below, the
Councils have concluded that no change
to the proposed rule is necessary.
B. Analysis of Public Comments
The Regulatory Secretariat received
responses from two respondents to the
proposed rule which are discussed
below:
1. Intent of the rule.
Comment: One respondent believes
the intent of this rule is to encourage
countries to sign the World Trade
Organization (WTO) Government
Procurement Agreement (GPA) and
other Free Trade Agreements (FTAs)
identified under FAR part 25.
Response: The intent of the FAR rule
is to implement requirements in the
FAR to disallow the cost of the 2
percent excise tax mandated by the
Public Law 111–347. The FAR is the
primary document for uniform policies
and procedures for acquisition by all
executive agencies. FAR part 25
provides policies and procedures
applicable to acquisitions that are
covered by the trade agreements to
which the United States is a party.
srobinson on DSK4SPTVN1PROD with
2. Implementation of the 2 percent
excise tax and withholding procedures.
Comment: Both respondents
submitted comments regarding the
implementation of the 2 percent excise
tax and the Government’s intended
withholding procedures. These
comments included:
(a) Turkey is a member of the WTO,
but is only an observer of the WTO’s
VerDate Mar<15>2010
17:42 Jan 28, 2013
Jkt 229001
GPA. Will the 2 percent excise tax be
applied to Turkish contractors?
(b) The rule is considered to be a
violation of the trade and investment
agreements between Turkey and the
U.S.
(c) The rule will impose a tax that will
cause certain foreign contractors to
withdraw from contracting with the U.S.
Government.
(d) The rule should apply to future
contracts, not be retroactively applied to
already signed contracts.
(e) The rule degrades the U.S.
Government’s ability to procure
qualified contractors to perform in areas
of the world, such as Afghanistan.
(f) The rule creates unfair treatment to
non-signatories of the WTO GPA and
favors WTO GPA signatories and U.S.
contractors.
(g) The rule fails to define
‘‘international procurement agreement’’
and the respondent believes that it
refers only to the WTO GPA and other
Free Trade Agreements, as identified in
FAR part 25.
(h) The respondent believes that
contractors from WTO GPA signatory
countries will still be subject to the rule
in the event that goods are produced or
services rendered in a non-signatory
country.
(i) Will the 2 percent excise tax be
withheld from payments to
subcontractors?
Response: The intent of the rule is to
implement the requirements of Public
Law 111–347 in the FAR regarding the
disallowance of the cost of the 2 percent
excise tax. This rule does not determine
the extent to which contract payments
will be subject to the tax. Regulations
under section 5000C will be
forthcoming from the Department of the
Treasury, which will provide guidance
regarding the application of the tax and
the procedures for withholding the tax.
This rule simply disallows the tax as
part of a payment, or as part of a costbased negotiated price.
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. The Office of Information
and Regulatory Affairs (OIRA) has
deemed that this is a significant
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
regulatory action and, therefore, was
subject to review under section 6(b) of
E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993, and
that this rule is not a major rule under
5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared
a Final Regulatory Flexibility Analysis
(FRFA) consistent with the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The
FRFA is summarized as follows:
DoD, GSA, and NASA do not expect this
rule to 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. because the 2 percent
excise tax is applied only to foreign persons
that receive payments made pursuant to a
contract with the Government of the United
States for the provision of goods, if such
goods are manufactured or produced in any
country which is not a party to an
international procurement agreement with
the United States, or the provision of
services, if such services are provided in any
country which is not a 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. Therefore, this rule is expected to
have no impact on domestic small business
concerns. There are no reporting,
recordkeeping, or other compliance
requirements for this rule. The approach
described in this rule is the most practical
and beneficial for both Government and
industry.
Interested parties may obtain a copy
of the FRFA from the Regulatory
Secretariat. The Regulatory Secretariat
has submitted a copy of the FRFA to the
Chief Counsel for Advocacy of the Small
Business Administration.
V. Paperwork Reduction Act
The final 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: January 23, 2013.
Laura Auletta,
Director, Office of Governmentwide
Acquisition Policy, Office of Acquisition
Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA
amend 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:
E:\FR\FM\29JAR2.SGM
29JAR2
Federal Register / Vol. 78, No. 19 / Tuesday, January 29, 2013 / Rules and Regulations
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
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 paragraph (d)(2).
The revisions and additions read as
follows:
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
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 (FEB
2013)
*
*
*
*
*
(b)(1) 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.
*
*
*
*
*
■ 4. Amend section 52.229–4 by
revising the date of the clause and
paragraph (b) to read as follows:
52.229–6 Taxes—Foreign Fixed-Price
Contracts.
*
*
*
*
*
Taxes—Foreign Fixed-Price Contracts
(FEB 2013)
*
*
*
*
*
(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
paragraph (b)(1); and
■ c. Adding paragraph (b)(2).
The revision and addition read as
follows:
52.229–7 Taxes—Foreign Fixed-Price
Contracts with Foreign Governments.
*
*
*
*
*
srobinson on DSK4SPTVN1PROD with
*
*
*
*
*
*
(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 paragraph (c)(2);
■ d. Redesignating paragraph (d) as
(d)(1); removing from the newly
VerDate Mar<15>2010
17:42 Jan 28, 2013
Jkt 229001
Dated: January 23, 2013.
Laura Auletta,
Director, Office of Governmentwide
Acquisition Policy, Office of Acquisition
Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 1, 2, and 31 as set
forth below:
■ 1. The authority citation for 48 CFR
parts 1, 2, and 31 is revised to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
1.106
BILLING CODE 6820–EP–P
*
List of Subjects in 48 CFR Parts 1, 2,
and 31
Government procurement.
*
*
*
This document makes
amendments to the Federal Acquisition
Regulation (FAR) in order to make
editorial changes.
DATES: Effective Date: January 29, 2013.
FOR FURTHER INFORMATION CONTACT: The
Regulatory Secretariat, 1275 First Street
NE., 7th Floor, Washington, DC 20417,
202–501–4755, for information
pertaining to status or publication
schedules. Please cite FAC 2005–65,
Technical Amendments.
SUPPLEMENTARY INFORMATION: In order to
update certain elements in 48 CFR parts
1, 2, and 31, this document makes
editorial changes to the FAR.
SUMMARY:
PART 1—FEDERAL ACQUISITION
REGULATIONS SYSTEM
Federal, State, and Local Taxes (State
and Local Adjustments) (FEB 2013)
*
Final rule.
Taxes—Foreign Fixed-Price Contracts
With Foreign Governments (FEB 2013)
*
*
*
*
(b) * * *
(2) Taxes imposed under 26 U.S.C.
5000C may not be included in the
contract price.
*
*
*
*
*
52.229–4 Federal, State, and Local Taxes
(State and Local Adjustments).
ACTION:
6191
[Amended]
GENERAL SERVICES
ADMINISTRATION
1. Amend section 1.106 by—
a. Removing from the table following
the introductory text, FAR segments
‘‘52.234–1’’ and ‘‘34.1’’ and their
corresponding OMB Control Numbers
‘‘9000–0133’’ and ‘‘9000–0132’’,
respectively; and
■ b. Adding, in numerical sequence, in
the table following the introductory text,
FAR segments ‘‘27.2’’, ‘‘52.227–2’’,
‘‘52.227–6’’, and ‘‘52.227–9’’ and their
corresponding OMB Control Number
‘‘9000–0096’’.
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
PART 2—DEFINITIONS OF WORDS
AND TERMS
48 CFR Parts 1, 2, and 31
2.000
[FR Doc. 2013–01750 Filed 1–28–13; 8:45 am]
DEPARTMENT OF DEFENSE
[FAC 2005–65; Item V; Docket 2013–0080;
Sequence 1]
Federal Acquisition Regulation;
Technical Amendments
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
AGENCY:
PO 00000
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■
■
[Amended]
2. Amend section 2.000 by removing
from the last sentence of paragraph (b)
‘‘(see the Index for locations)’’.
■
PART 31—CONTRACT COST
PRINCIPLES AND PROCEDURES
31.205–6
[Amended]
3. Amend section 31.205–6 by
removing from paragraph
■
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]]>Agencies
[Federal Register Volume 78, Number 19 (Tuesday, January 29, 2013)]
[Rules and Regulations]
[Pages 6189-6191]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01750]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 31 and 52
[FAC 2005-65; FAR Case 2011-011; Item IV; Docket 2011-0011, Sequence 1]
RIN 9000-AM13
Federal Acquisition Regulation; Unallowability of Costs
Associated With Foreign Contractor Excise Tax
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to implement certain requirements
of section 301 of the James Zadroga 9/11 Health and Compensation Act of
2010, which imposes a 2 percent excise tax on certain Federal
procurement payments to foreign persons. The rule disallows the cost
associated with the 2 percent excise tax on certain foreign
procurements.
DATES: Effective Date: February 28, 2013.
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 FAC 2005-65, FAR Case 2011-
011.
SUPPLEMENTARY INFORMATION:
I. Background
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 Act 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). Section 5000C imposes a 2 percent excise tax on payments
made to foreign persons pursuant to Government contracts for the
provision of goods or services, if the goods are manufactured or
produced in, or the services are performed in, a country that is not a
party to an international procurement agreement with the United States.
The statute applies to contracts entered into on or after January 2,
2011. The statute does not apply, however, if the imposition of the tax
would be inconsistent with any international agreement. The tax is to
be collected in a manner similar to other U.S. taxes withheld on
payments to foreign persons. Additionally, section 301 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).
On February 22, 2012, DoD, GSA, and NASA published a proposed rule
in the Federal Register at 77 FR 10461 implementing the prohibition
against reimbursement of the 2 percent excise tax, by revising the FAR
rules so that the cost of the tax cannot be included as part of a
payment, or as part of a cost-based negotiated price.
Regulations under section 5000C will be forthcoming from the
Department of the Treasury that will provide specific guidance
regarding the application of the tax and the procedures for withholding
the tax. Once the Department of the Treasury implements procedures for
withholding this 2 percent excise tax, the impact on
[[Page 6190]]
applicable FAR provisions will be handled in a separate FAR case.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the comments in the
development of the final rule. A discussion of the comments and the
changes made to the rule as a result of those comments are provided as
follows:
A. Summary of Significant Changes
To comply with the statute, FAR 31.205-41 is amended to inform the
Government and contractors that the costs of the 2 percent excise tax
are not allowable. FAR 52.229-3, 52.229-4, 52.229-6, and 52.229-7 are
amended to provide that the costs for the 2 percent excise tax are not
included in either foreign fixed-price contracts with a foreign concern
or foreign fixed-price contracts with foreign governments.
Based on a review of the public comments, discussed below, the
Councils have concluded that no change to the proposed rule is
necessary.
B. Analysis of Public Comments
The Regulatory Secretariat received responses from two respondents
to the proposed rule which are discussed below:
1. Intent of the rule.
Comment: One respondent believes the intent of this rule is to
encourage countries to sign the World Trade Organization (WTO)
Government Procurement Agreement (GPA) and other Free Trade Agreements
(FTAs) identified under FAR part 25.
Response: The intent of the FAR rule is to implement requirements
in the FAR to disallow the cost of the 2 percent excise tax mandated by
the Public Law 111-347. The FAR is the primary document for uniform
policies and procedures for acquisition by all executive agencies. FAR
part 25 provides policies and procedures applicable to acquisitions
that are covered by the trade agreements to which the United States is
a party.
2. Implementation of the 2 percent excise tax and withholding
procedures.
Comment: Both respondents submitted comments regarding the
implementation of the 2 percent excise tax and the Government's
intended withholding procedures. These comments included:
(a) Turkey is a member of the WTO, but is only an observer of the
WTO's GPA. Will the 2 percent excise tax be applied to Turkish
contractors?
(b) The rule is considered to be a violation of the trade and
investment agreements between Turkey and the U.S.
(c) The rule will impose a tax that will cause certain foreign
contractors to withdraw from contracting with the U.S. Government.
(d) The rule should apply to future contracts, not be retroactively
applied to already signed contracts.
(e) The rule degrades the U.S. Government's ability to procure
qualified contractors to perform in areas of the world, such as
Afghanistan.
(f) The rule creates unfair treatment to non-signatories of the WTO
GPA and favors WTO GPA signatories and U.S. contractors.
(g) The rule fails to define ``international procurement
agreement'' and the respondent believes that it refers only to the WTO
GPA and other Free Trade Agreements, as identified in FAR part 25.
(h) The respondent believes that contractors from WTO GPA signatory
countries will still be subject to the rule in the event that goods are
produced or services rendered in a non-signatory country.
(i) Will the 2 percent excise tax be withheld from payments to
subcontractors?
Response: The intent of the rule is to implement the requirements
of Public Law 111-347 in the FAR regarding the disallowance of the cost
of the 2 percent excise tax. This rule does not determine the extent to
which contract payments will be subject to the tax. Regulations under
section 5000C will be forthcoming from the Department of the Treasury,
which will provide guidance regarding the application of the tax and
the procedures for withholding the tax. This rule simply disallows the
tax as part of a payment, or as part of a cost-based negotiated price.
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.
The Office of Information and Regulatory Affairs (OIRA) has deemed that
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, and that this rule is not a major
rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
DoD, GSA, and NASA do not expect this rule to 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.
because the 2 percent excise tax is applied only to foreign persons
that receive payments made pursuant to a contract with the
Government of the United States for the provision of goods, if such
goods are manufactured or produced in any country which is not a
party to an international procurement agreement with the United
States, or the provision of services, if such services are provided
in any country which is not a 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. Therefore,
this rule is expected to have no impact on domestic small business
concerns. There are no reporting, recordkeeping, or other compliance
requirements for this rule. The approach described in this rule is
the most practical and beneficial for both Government and industry.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat. The Regulatory Secretariat has submitted a copy
of the FRFA to the Chief Counsel for Advocacy of the Small Business
Administration.
V. Paperwork Reduction Act
The final 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: January 23, 2013.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 31 and 52 as set
forth below:
0
1. The authority citation for 48 CFR parts 31 and 52 continues to read
as follows:
[[Page 6191]]
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
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
0
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 (FEB 2013)
* * * * *
(b)(1) 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.
* * * * *
0
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) (FEB
2013)
* * * * *
(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.
* * * * *
0
5. Amend section 52.229-6 by--
0
a. Revising the date of the clause;
0
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;
0
c. Adding paragraph (c)(2);
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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
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e. Adding paragraph (d)(2).
The revisions and additions read as follows:
52.229-6 Taxes--Foreign Fixed-Price Contracts.
* * * * *
Taxes--Foreign Fixed-Price Contracts (FEB 2013)
* * * * *
(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.
* * * * *
0
6. Amend section 52.229-7 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraph (b) as paragraph (b)(1); and
0
c. Adding paragraph (b)(2).
The revision and addition read as follows:
52.229-7 Taxes--Foreign Fixed-Price Contracts with Foreign
Governments.
* * * * *
Taxes--Foreign Fixed-Price Contracts With Foreign Governments (FEB
2013)
* * * * *
(b) * * *
(2) Taxes imposed under 26 U.S.C. 5000C may not be included in the
contract price.
* * * * *
[FR Doc. 2013-01750 Filed 1-28-13; 8:45 am]
BILLING CODE 6820-EP-P
