52.229-12 Tax on Certain Foreign

Procurements.

As prescribed in 29.402-3(b), insert the following clause:

Tax on Certain Foreign Procurements—Notice and Representation (Feb 2021)

(a) Definitions. As used in this clause—

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 26 U.S.C. 7701(a)(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 only to foreign persons. It implements 26 U.S.C. 5000C 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 52.229-11, 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; 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 (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 26 U.S.C. 5000C tax are

adjudicated by the IRS as the 26 U.S.C. 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)

Parent topic: 52.229 [Reserved]