Code Section

Internal Revenue Service, Treasury

§ 36.3121(l)(1)–1

The liabilities assumed under an agreement entered into pursuant to such
section are based on the remuneration
for services covered by the agreement.
Such agreement may not be effective
prior to January 1, 1955.
(b) Although the obligations incurred
under an agreement entered into pursuant to section 3121(1) of the Internal
Revenue Code of 1954, as amended,
must be distinguished from the obligations imposed on employers with respect to the taxes under the Federal Insurance Contributions Act, the two are
similar in many respects. Accordingly,
the regulations in this part are prescribed as a supplement to the regulations (26 CFR (1954), Part 31, Subpart B)
relating to the employee tax and the
employer tax imposed by the Federal
Insurance Contributions Act. The
terms used in the regulations in this
part have the same meaning, unless
otherwise provided, as when used in the
regulations relating to the taxes imposed by such act.
(c) The regulations in this part constitute Part 36 of title 26 of the Code of
Federal Regulations. As used in the
regulations in this part, the word
‘‘Code’’ means the Internal Revenue
Code of 1954, as amended, and the term
‘‘Federal Insurance Contributions Act’’
means chapter 21 of such Code. All references to sections of law are references to the Code unless otherwise
indicated. The number of each section
of the regulations begins with 36 followed by a decimal point (36.). Numbers
which do not begin with 36 followed by
a decimal point are numbers of sections of law unless otherwise indicated.
In identifying sections of regulations,
the symbol ‘‘§’’ is used.

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[T.D. 6145, 25 FR 14021, Dec. 31, 1960, as
amended by T.D. 7012, 34 FR 7693, May 15,
1969; T.D. 7665, 45 FR 6090, Jan. 25, 1980]

§ 36.3121(l)(1)–1 Agreements
entered
into by domestic corporations with
respect to foreign subsidiaries.
(a) In general. (1) Any domestic corporation having one or more foreign
subsidiaries may request the Internal
Revenue Service to enter into an agreement for the purpose of extending the
Federal old-age, survivors, and disability insurance system established by
title II of the Social Security Act to

certain services performed outside the
United States by all citizens of the
United States who are employees of
any such foreign subsidiary. See
§ 36.3121(l)(8)–1, relating to the definition of foreign subsidiary. Except as
provided in § 36.3121(l)(5)–1, relating to
the effect of the termination of an
agreement entered into pursuant to the
provisions of section 3121(l), the Internal Revenue Service shall, at the request of a domestic corporation enter
into such agreement on Form 2032 in
any case where a Form 2032 is executed, and submitted by the domestic
corporation in the manner prescribed
in this section. A domestic corporation
may not have in effect at the same moment of time more than one agreement
on Form 2032.
(2) An agreement authorized in section 3121(l)(1) may not be made applicable to any services performed outside
the United States which would not constitute employment, for purposes of
the taxes imposed under the Federal
Insurance Contributions Act, if the
services were performed within the
United States. Thus, such an agreement shall have no application with respect to any services performed outside
the United States which, if performed
within the United States, would be specifically excepted from employment
under any of the numbered paragraphs
of section 3121(b), or which, although
not so excepted, would be deemed not
to be employment by application of
section 3121(c), relating to included and
excluded services. Further, an agreement may not be made applicable with
respect to any services performed outside the United States which constitute employment, as defined in section 3121(b). Thus, an agreement may
not be made applicable to services for
any employer performed by any employee on or in connection with an
American vessel or American aircraft
when outside the United States, if (i)
performed under a contract of service
which is entered into within the United
States or (ii) during the performance of
which and while the employee is employed on the vessel or aircraft it
touches at a port in the United States,
because such services constitute employment as defined in section 3121(b).

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§ 36.3121(l)(1)–1

26 CFR Ch. I (4–1–13 Edition)

An agreement may not be made applicable to remuneration which would not
constitute wages, as defined in section
3121(a), even if the services to which
such remuneration is attributable had
constituted employment.
(3) The terms ‘‘corporation’’, ‘‘domestic’’, and ‘‘foreign’’, as used in the
regulations in this part, have the
meaning assigned by paragraphs (3),
(4), and (5), respectively, of section
7701(a). Section 701(a) (3), (4), and (5)
provides as follows:
SEC. 7701. Definitions. (a) When used in this
title [Internal Revenue Code of 1954], where
not otherwise distinctly expressed or manifestly incompatible with the intent thereof—

*

*

*

*

*

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(3) Corporation. The term ‘‘corporation’’ includes associations, joint-stock companies,
and insurance companies.
(4) Domestic. The term ‘‘domestic’’ when
applied to a corporation * * * means created
or organized in the United States or under
the law of the United States or of any State
or Territory.
(5) Foreign. The term ‘‘foreign’’ when applied to a corporation * * * means a corporation * * * which is not domestic.

(b) Form and contents of agreement.
Form 2032 is the form prescribed for
the agreement authorized in section
3121(l)(1). The agreement shall include
provisions substantially as follows:
(1) That the agreement shall apply to
all services performed outside the
United States by all citizens of the
United States who are in the employ of
the foreign subsidiary or subsidiaries
to which the agreement is made applicable, but only to the extent that the
remuneration paid each employee for
such services would constitute wages if
paid by one employer for services performed in the United States;
(2) That the agreement shall not
apply to any services which constitute
employment within the meaning of
section 3121;
(3) That the agreement shall become
effective on the first day of the calendar quarter in which the Form 2032 is
signed by the district director or director of the service center or on the first
day of the next succeeding calendar
quarter, whichever is specified in the
agreement;

(4) That the domestic corporation
will pay, as required by the regulations
in this part, amounts equivalent to the
sum of the taxes which would be imposed by sections 3101 and 3111, respectively, if the remuneration for the
services covered by the agreement constituted wages;
(5) That the domestic corporation
will pay, in accordance with written
notification and demand therefor to
the domestic corporation, amounts
equivalent to the interest, additions to
the taxes, additional amounts, and penalties which would be applicable if the
remuneration for services covered by
the agreement constituted wages; and
(6) That the domestic corporation
will comply with all provisions of the
regulations in this part.
(c) Execution and filing of Form 2032.
The request of any domestic corporation that the Internal Revenue Service
enter into an agreement with the corporation on Form 2032 shall be signified
by the corporation by executing and
filing Form 2032 in triplicate. Such
form shall be executed and filed in accordance with the regulations in this
part and the instructions relating to
the form. Each copy of the form shall
be signed and dated by the officer of
the corporation authorized to enter
into the agreement, shall show the
title of such officer, and shall have the
corporate seal affixed thereto. A certified copy of the minutes of the meeting of the board of directors of the domestic corporation, or other evidence,
showing the authority of such officer
so to act shall accompany the form.
Form 2032 executed and filed as provided in this paragraph shall be signed
and dated by the district director or director of the service center and, upon
such signing, the Form 2032 so executed
and filed will constitute the agreement
authorized in section 3121(l)(1). The Internal Revenue Service will return one
copy of the agreement to the domestic
corporation, will transmit one copy of
the Department of Health, Education,
and Welfare, and will retain one copy
(together with all related papers).
[T.D. 6145, 20 FR 6577, Sept. 8, 1955, as amended by T.D. 7012, 34 FR 7693, May 15, 1969]

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