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Congress Has A "Heart"?

June 20, 2008

On June, 17, 2008, the President signed the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008 (H.R. 6081), which, for the first time, requires contractors to pay FICA (Social Security and Medicare) payroll taxes on the wages of ex-pat employees of foreign subsidiaries (including some subsidiaries in which the contractor has only partial ownership), if the employees are working on contracts for the United States Government. The increased costs resulting from the change in the law (effective August 1, 2008) should be allowable and recoverable costs, reimbursed by the Government in full on cost-reimbursement contracts, but whether contractors performing fixed-price and fixed-hourly-rate contracts will be eligible for equitable adjustments to recover increased costs resulting from the change in law may be more controversial.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Charles C. Hwang
Partner – Washington, D.C.
Phone: +1.202.624.2626