Key Reporting Requirements for Engaging with Boycott Countries

In 1976, Congress enacted Section 999 to discourage U.S.-based businesses from engaging with Arab nations that were boycotting Israel. As part of this, an often overlooked form requires U.S. persons with operations in a “boycott country” to report their activities.

The IRS defines “operations” as:

“All forms of business or commercial activities and transactions (or parts of transactions), whether or not productive of income, including, but not limited to: selling; purchasing; leasing; licensing; banking, financing, and similar activities; extracting; processing; manufacturing; producing; constructing; transporting; performing activities related to the activities above (for example, contract negotiating, advertising, site selecting, etc.); and performing services, whether or not related to the activities above.”

Essentially, if a U.S. person, as defined in 7701(a)(30), engages in any form of business or transaction with a country on the boycott list, they must file Form 5713. A U.S. person can include individuals, partnerships, corporations, trusts, or estates.

The primary purpose of Form 5713 is to identify companies conducting business in boycott countries, not to penalize U.S. persons for such activity. However, there can be punitive provisions under certain circumstances. For example, if a U.S. person is asked to “refrain from doing business with or in a country which is the object of an international boycott or with the government, companies, or nationals of that country,” consequences may occur. A U.S. person participating in such activities could face reductions or disallowances of their foreign tax credits under Section 908(a).

The current list of boycott countries is as follows:

• Iraq
• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• Yemen

This list has been unchanged since May 2024. The Treasury Department is required to report the list on at least a quarterly basis. The latest report may be found here. If you have any questions or concerns about how this list may affect your client’s operations, please contact our Global Business Services team.