96-1028. Federal Acquisition Regulation; Nonallowability of Excise Taxes on Nondeductible Contributions to Deferred Compensation Plans

[Federal Register Volume 61, Number 18 (Friday, January 26, 1996)]
[Rules and Regulations]
[Pages 2640-2641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1028]



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[[Page 2641]]



DEPARTMENT OF DEFENSE
DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31

[FAC 90-37; FAR Case 92-604; Item XIV]
RIN 9000-AF85


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: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on a final rule to amend 
the Federal Acquisition Regulation (FAR) by revising the cost principle 
concerning taxes. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:
Mr. Jeremy F. Olson at [phone] in reference to this FAR case. 
For general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405 [phone]. Please cite FAC 90-37, 
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 Code will be automatically reflected in the cost 
principle.
    A proposed rule was published in the Federal Register at 59 FR 
16393, April 6, 1994, with a request for comments. Three responses were 
received. The Councils' analysis of those comments did not result in 
any revisions to the proposed rule.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities under 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.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the 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 55 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: January 11, 1996.
Edward C. Loeb,
Acting Director, Office of Federal Acquisition Policy.

    Therefore, 48 CFR Part 31 is 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. 96-1028 Filed 1-25-96; 8:45 am]
BILLING CODE 6820-EP-M