The U.S. Department of the Treasury (Treasury) periodically publishes an official boycott list to alert the public to those countries that require or may require participation in, or cooperation with, an international boycott. On January 27, 2016, Treasury published its current list of boycotting countries, which includes: Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

Notably, each of these countries has been previously designated as a boycotting country. Indeed, the most recent major change to this list occurred in August 2012 when Treasury officially added Iraq to the list of boycotting countries.

Treasury administers an anti-boycott law and associated guidelines in response to the Arab League’s boycott of Israel. Treasury’s rules apply to U.S. taxpayers, including members of a controlled group, regardless of whether a transaction involves any U.S. goods or services. The agency’s requirements do not prohibit conduct, but rather impose reporting requirements on U.S. taxpayers and their related companies, and deny certain tax benefits as a penalty for participating in or cooperating with an international boycott that is not sanctioned by the United States. Reports of operations in or related to boycotting countries, boycott requests, and boycott agreements must be filed on IRS Form 5713 and attached to the taxpayer’s federal income tax return.

U.S. anti-boycott laws and regulations impact both U.S. and foreign companies that conduct business overseas, particularly in the Middle East. Although often overlooked, the failure to comply with these complex laws and regulations may result in significant penalties. As a result, it is important to screen transactions for anti-boycott issues and carefully review and analyze such issues to determine whether regulatory requirements apply.