[Comments on Proposed FAR Amendment To Recoup Foreign Tax Credits Under FMS Contracts]

B-231158, Jun 9, 1988, Office of General Counsel

PROCUREMENT - Socio-Economic Policies - Federal procurement regulations/laws - Amendments - Tax credits DIGEST: In response to a request for comments on proposed changes to the Federal Acquisition Regulation Secs. 52.229-8 and 52.229-9, the General Accounting Office has no objection to the addition of two clauses for foreign military sales contracts which would require contractors and subcontractors to credit back to the United States Government the amount of any reduction in United States tax liability received as the result of credits given for taxes paid to foreign countries in the performance of the contracts. This will preclude double recoveries since contractors are entitled to foreign tax credits for such amounts and may also claim them as allowable costs to be reimbursed under the contracts.

Ms. Margaret A. Willis

FAR Secretariat

General Services Administration:

This responds to your request for comments on a proposal amend Federal Acquisition Regulation (FAR) Secs. 52.229-8 an 52.229-9 with respect to the recoupment of foreign tax credits from contractors performing Foreign Military Sale (FMS) contracts. This is FAR Case No. 88-22.

The proposal would add two FAR clauses requiring United States contractors and subcontractors performing FMS contracts in a foreign country to credit back to the United States Government the amount of any reduction in United States tax liability they may receive as the result of credits given for taxes paid to foreign countries in performance of the contracts. This will preclude the contractors and subcontractors from receiving double recoveries since they are entitled to foreign tax credits for such amounts and may also claim them as allowable costs to be reimbursed under the contracts.

We have no objection to the proposed changes.