Federal Acquisition Regulation; Nonallowability of Excise Taxes on Nondeductible Contributions To Deferred Compensation Plans

48 CFR Part 31

[FAR Case 92-604]

Federal Acquisition Regulation; Nonallowability of Excise Taxes

on Nondeductible Contributions To Deferred Compensation Plans

agencies: Department of Defense (DOD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

action: Proposed rule.

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summary: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council are proposing to revise the cost

principle concerning taxes. This regulatory action was not subject to

Office of Management and Budget review pursuant to Executive Order

12866, dated September 30, 1993.

dates: Comments should be submitted on or before June 6, 1994 to be

considered in the formulation of a final rule.

addresses: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (VRS), 18th & F

Streets, NW, room 4037, Washington, DC 20405.

Please cite FAR case 92-604 in all correspondence related to this

case.

for further information contact: Jeremy F. Olson at (202) 501-3221 in

reference to this FAR case. For general information, contact the FAR

Secretariat, room 4037, GS Building, Washington, DC 20405 (202) 501-

4755. Please cite Far case 92-604.

SUPPLEMENTARY INFORMATION:

A. Background

Under the current FAR 31.205-41(b)(6), excise taxes on accumulated

funding deficiencies or prohibited transactions involving employee

deferred compensation plans pursuant to sections 4971 and 4975 of the

Internal Revenue Code of 1954, as amended, are unallowable. This

reflects a long-standing Government policy that punitive-type excise

taxes are not reimbursable costs on Government contracts. Over the

years, subsequent legislation has added several new excise taxes to

subtitle D, chapter 43 of the Internal Revenue Service Code such that

the Code currently lists 13 such taxes. The Councils have agreed that

it is appropriate to revise FAR 31.205-41(b)(6) to insert a general

prohibition on all excise taxes found at subtitle D, chapter 43 of the

Internal Revenue Service Code. Such a general prohibition will ensure

that future legislative changes to subtitle D, chapter 43 of the

Internal Revenue Service Code will be automatically reflected in the

cost principle.

B. Regulatory Flexibility Act

The proposed rule is not expected to have a significant economic

impact on a substantial number of small entities within the meaning of

the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most

contracts awarded to small entities are awarded on a competitive,

fixed-price basis and the cost principles do not apply. An analysis of

data available for fiscal years 1989 through 1991 reveals that, in the

Department of Defense, the number of contract actions awarded to small

businesses which required the submission of cost or pricing data

averaged less than 1 percent of the total number of small business

actions during the three-year period. An Initial Regulatory Flexibility

Analysis has, therefore, not been performed. Comments from small

entities concerning the affected FAR subpart will be considered in

accordance with section 610 of the Act. Such comments must be submitted

separately and should cite 5 U.S.C. 601, et seq. (FAR case 92-604), in

correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed

changes to the FAR do not impose recordkeeping or information

collection requirements, or collections of information from offerors,

contractors, or members of the public which require the approval of the

Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 31

Government procurement.

Dated: March 28, 1994.

Albert A. Vicchiolla,

Director, Office of Federal Acquisition Policy.

Therefore, it is proposed that 48 CFR part 31 be amended as set

forth below:

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

1. The authority citation for 48 CFR part 31 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

2. Section 31.205-41 is amended by revising paragraph (b)(6) to

read as follows:

31.205-41 Taxes.

* * * * *

(b) * * *

(6) Any excise tax in subtitle D, chapter 43 of the Internal

Revenue Code of 1986, as amended. That chapter includes excise taxes

imposed in connection with qualified pension plans, welfare plans,

deferred compensation plans, or other similar types of plans.

* * * * *

[FR Doc. 94-8146 Filed 4-5-94; 8:45 am]

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