Code Section 5000C

Code Section Effective Date Name of Act Name of Provision 10yr Revenue Estimate ($millions)
5000C 1/2/2011 James Zadroga 9/11 Health and Compensation Act of 2010 Excise Tax on Foreign Procurement 4,585

Excise Tax on Foreign Procurement

Explanation of Provision

Under this provision, foreign persons are subject to an excise tax of two percent on any specified procurement payment. A specified procurement payment is a payment made by the United States government or its agents, pursuant to a contract under which the United States purchases goods or services from a source in a country that is not party to an international procurement agreement with the United States. Goods are from such a source if produced or manufactured in such country. Payments for services are subject to the tax if the services are provided in a country that is not a party to such an agreement with the United States. If the origin of the goods or services is in a country that is not a member of the GPA, payments made to a foreign parent located in a country that is a member of the GPA are subject to the excise tax.

The excise tax is imposed on the gross amount of the payment. For purposes of subtitle F of the Internal Revenue Code, it is treated as an income tax, permitting assessment and collection of the amounts in a manner similar to the withholding taxes under chapter 3.

Executive agencies are required to ensure that funds disbursed to foreign contractors are not used to reimburse the tax imposed by this section. Contracting activities are to be monitored and reviewed annually to comply with this provision. Finally, the statute requires that the provision be administered in a manner consistent with U.S. obligations under international agreements.

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