2% tax on payments made by U.S. government

2% tax on payments made by U.S. government

The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-103281-11) under section 5000C, relating to the 2% tax on payments made by the U.S. government to foreign persons pursuant to certain contracts.

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Today’s release also includes proposed regulations under section 6114, with respect to foreign persons claiming an exemption from the tax under an income tax treaty.

The proposed regulations [PDF 473 KB] will appear in the Federal Register on April 22, 2015.


Section 5000C imposes on any foreign person a 2% tax on certain payments received from the U.S. government for goods and services, and applies to payments received pursuant to contracts entered into on and after January 2, 2011.

Section 6114(a) generally requires reporting when a taxpayer takes the position that a treaty of the United States overrules (or otherwise modifies) an internal revenue law. Section 6114(b) provides that the Treasury Secretary may waive the reporting requirement under section 6114(a) with respect to classes of cases for which the Secretary determines that the waiver will not impede assessment or collection of the tax.

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