New Excise Tax on Foreign Procurement Payments

January 27, 2011, 9:59 AM

On December 22, 2010, Congress passed the James Zadroga 9/11 Health and Compensation Act of 2010 (the "Zadroga Act"). Most people recognize the Zadroga Act as being the act that provides financial and medical relief to our beloved first responders from 9/11 whose health was negatively impacted. In order to offset the cost of this act, Congress imposed a new excise tax on certain foreign persons that provide goods and services to the federal government. The tax is equal to 2 percent of the amount of the federal procurement payment which is any payment made pursuant to a contract with the government of the United States for either 1) the provision of goods that are manufactured or produced in a country that is not a party to an international procurement agreement with the United States; or 2) the provision of services that are provided in a country that is not a party to an international procurement agreement with the United States. The amount is collected as an additional amount to be deducted or withheld as part of the withholding of tax on foreign persons. An annual compliance review will be conducted by the Administrator for Federal Procurement Policy. --Elaina L. Blanks