FAR 52.229-11—Tax on Certain Foreign Procurements—Notice and Representation.
Plain-English Summary
FAR 52.229-11 is the solicitation provision that gives offerors notice of the 2 percent excise tax imposed by 26 U.S.C. 5000C on certain foreign procurement payments and collects the offeror’s representation about foreign-person status. It defines the key terms used in the provision, including foreign person, specified Federal procurement payment, and United States person, so parties can determine whether the tax may apply. The provision explains that, unless an exemption applies, payments to a foreign person for covered goods or services performed in a foreign country that is not party to an international procurement agreement with the United States may be subject to withholding. It also tells offerors how to claim an exemption using IRS Form W-14, notes that the form is submitted to the acquiring agency rather than the IRS, and warns that claimed exemptions are subject to IRS audit. In addition, it requires the offeror to represent whether it is a foreign person and, if so, whether it is claiming a full, partial, or no exemption. The provision further explains the contract consequences of a foreign-person representation, including incorporation of FAR 52.229-12 into the resulting contract and withholding if the W-14 is not submitted or if only partial/no exemption is claimed. Finally, it clarifies that disputes over the tax are tax matters for the IRS, not contract disputes, and points users to IRS guidance on private letter rulings and revenue rulings.
Key Rules
Key tax notice
The provision notifies offerors that a 2 percent tax may apply to specified Federal procurement payments made to foreign persons under 26 U.S.C. 5000C. This is a tax withholding issue, not a pricing or contract administration preference.
Covered payment definition
A specified Federal procurement payment is a payment under a contract with a foreign contracting party for goods manufactured or produced, or services provided, in a foreign country that is not party to an international procurement agreement with the United States. The definition excludes outlying areas from the term foreign country for this purpose.
Foreign person and U.S. person
The provision defines foreign person by reference to anyone who is not a United States person, and it incorporates the Internal Revenue Code definition of United States person. That definition includes U.S. citizens or residents, domestic partnerships, domestic corporations, certain estates, and certain trusts.
Exemptions require W-14
Exemptions from withholding are available only under the IRS rules cited in the provision, and the offeror claims them by submitting IRS Form W-14. Any exemption claimed on the form is self-certified and subject to IRS audit.
Offeror representation required
The offeror must state whether it is or is not a foreign person. If it is a foreign person, it must also indicate whether it is claiming a full exemption or partial/no exemption from the excise tax.
Foreign-person consequences
If the offeror represents that it is a foreign person, FAR 52.229-12 will be included in the resulting contract. If the W-14 is not submitted with the offer, the Government will withhold the full 2 percent from each payment and exemptions will not be applied.
Partial or no exemption withholding
If the offeror is a foreign person and claims partial or no exemption, the resulting contract will be subject to withholding under FAR 52.229-12. The withholding applies according to the IRS and contract clause rules.
IRS controls tax disputes
Questions about the tax’s interpretation, imposition, collection, exemptions, and related rulings are tax matters for the IRS, not contract issues for the contracting officer or boards of contract appeals.
Responsibilities
Contracting Officer
Include this provision in solicitations when prescribed by FAR 29.402-3(a). Review the offeror’s representation and ensure the resulting contract includes FAR 52.229-12 when the offeror states it is a foreign person. If the W-14 is missing, apply the full withholding rule in accordance with the provision and contract clause.
Offeror
Determine whether it is a foreign person under the provision’s definitions, complete the representation in paragraph (d), and submit IRS Form W-14 with the offer if claiming an exemption. If foreign, select whether the exemption is full, partial, or none, and understand that the IRS—not the contracting office—decides tax questions and audits claimed exemptions.
Foreign Contracting Party / Contractor
If awarded a contract and treated as a foreign person, comply with withholding under FAR 52.229-12 and maintain accurate tax status and exemption documentation. Provide any required IRS form information to support the claimed exemption and be prepared for IRS review.
Agency / Acquiring Agency
Receive and retain the IRS Form W-14 submitted with the offer, rather than forwarding it to the IRS. Apply the solicitation and contract clause requirements consistently and coordinate contract administration so withholding is handled correctly.
IRS
Administer 26 U.S.C. 5000C, evaluate exemption claims on Form W-14 through audit if necessary, and resolve disputes over the tax’s interpretation, imposition, and collection. Issue guidance such as private letter rulings and revenue rulings as applicable.
Practical Implications
Offerors must identify foreign-person status early, because the answer affects both the solicitation response and the payment withholding that may apply after award.
A missing IRS Form W-14 can have immediate payment consequences: the Government will withhold the full 2 percent, and exemptions will not be applied until the required documentation is provided and accepted under the IRS rules.
This provision is easy to confuse with a contract clause issue, but tax disputes belong to the IRS; contracting officers generally should not try to adjudicate the underlying tax question.
Contractors should make sure the W-14 matches the representation in the offer and that any claimed exemption is supportable, because self-certified exemptions can be audited.
If the offeror is a foreign person, expect FAR 52.229-12 to flow into the resulting contract and plan for withholding administration from the start, including cash-flow impacts.
Official Regulatory Text
As prescribed in 29.402-3 (a) , insert the following provision: Tax on Certain Foreign Procurements—Notice and Representation (Jun 2020) (a) Definitions . As used in this provision— Foreign person means any person other than a United States person. Specified Federal procurement payment means any payment made pursuant to a contract with a foreign contracting party that is for goods, manufactured or produced, or services provided in a foreign country that is not a party to an international procurement agreement with the United States. For purposes of the prior sentence, a foreign country does not include an outlying area. 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. 701 (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) Unless exempted, there is a 2 percent tax of the amount of a specified Federal procurement payment on any foreign person receiving such payment. See 26 U.S.C. 5000C and its implementing regulations at 26 CFR 1.5000C-1 through 1.5000C-7. (c) Exemptions from withholding under this provision are described at 26 CFR 1.5000C-1(d)(5) through (7). The Offeror would claim an exemption from the withholding by using the Department of the Treasury Internal Revenue Service Form W-14, Certificate of Foreign Contracting Party Receiving Federal Procurement Payments, available via the internet at www.irs.gov/w14 . 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. The IRS Form W-14 is provided to the acquiring agency rather than to the IRS. (d) For purposes of withholding under 26 U.S.C. 5000C , the Offeror represents that (1) It □ is □ is not a foreign person; and (2) If the Offeror indicates "is" in paragraph (d)(1) of this provision, then the Offeror represents that—I am claiming on the IRS Form W-14 □ a full exemption, or □ partial or no exemption [Offeror shall select one] from the excise tax. (e) If the Offeror represents it is a foreign person in paragraph (d)(1) of this provision, then— (1) The clause at FAR 52.229-12 , Tax on Certain Foreign Procurements, will be included in any resulting contract; and (2) The Offeror shall submit with its offer the IRS Form W-14. If the IRS Form W-14 is not submitted with the offer, exemptions will not be applied to any resulting contract and the Government will withhold a full 2 percent of each payment. (f) If the Offeror selects "is" in paragraph (d)(1) and "partial or no exemption" in paragraph (d)(2) of this provision, the Offeror will be subject to withholding in accordance with the clause at FAR 52.229-12 , Tax on Certain Foreign Procurements, in any resulting contract. (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 provision)