amount of excessive profits to be refunded and give notice thereof by registered mail to the contractor.

Subpart H-Review by the Tax Court AUTHORITY: The provisions of this Subpart H issued under sec. 109, 65 Stat. 22; 50 U.S.C. App. 1219.

SOURCE: The provisions of this Subpart H appear at 17 F.R. 1387, Feb. 13, 1952. § 1422.281 Statutory provisions. § 1422.281-1 Subsection (e) of act. Subsection (e) of the act provides as follows:

Agreements or orders determining excessive profits shall be final and conclusive in accordance with their terms and except upon a showing of fraud or malfeasance or willful misrepresentation of a material fact shall not be annulled, modified, reopened, or disregarded, except that in the case of orders determining excessive profits the amount of the excessive profits, if any, may be redetermined by The Tax Court of the United States in the manner prescribed in subsection (e) (1) of the Renegotiation Act of February 25, 1944, as amended, except that such redetermination shall be subject to review to the extent and in the manner provided by subchapter B of Chapter 5 of the Internal Revenue Code.

§ 1422.281-2

Subsection (e)(1) of Renegotiation Act of February 25, 1944. Subsection (e) (1) of the Renegotiation Act of February 25, 1944, as amended, provides as follows:

(1) Any contractor or subcontractor aggrieved by an order of the Board determining the amount of excessive profits received or accrued by such contractor or subcontractor may, within ninety days (not including Sunday or a legal holiday in the District of Columbia as the last day) after the mailing of the notice of such order under subsection (c) (1), fille a petition with the Tax Court of the United States for a redetermination thereof. Upon such filing such court shall have exclusive jurisdiction, by order, to finally determine the amount, if any, of such excessive profits received or accrued by the contractor or subcontractor, and such determination shall not be reviewed or redetermined by any court or agency. The court may determine as the amount of excessive profits an amount either less than, equal to, or greater than that determined by the Board. A proceeding before the Tax Court to finally determine the amount, if any, of excessive profits shall not be treated as a proceeding to review the determination of the Board, but shall be treated as a proceeding de novo. For the purposes of this subsection the court shall have the same powers and duties, insofar as applicable, in respect of the contractor, the subcontractor, the Board and the Secretary, and in respect of

the attendance of witnesses and the production of papers, notice of hearings, hearings before divisions, review by the Tax Court of decisions of divisions, stenographic reporting, and reports of proceedings, such as court has under sections 1110, 1111, 1113, 1114, 1115 (a), 1116, 1117 (a), 1118, 1120 and 1121 of the Internal Revenue Code in the case of a proceeding to redetermine a deficiency. In the case of any witness for the Board or Secretary, the fees and mileage, and the expenses of taking any deposition shall be paid out of the appropriations of the Board or Department available for that purpose, and in the case of any other witness, shall be paid, subject to rules prescribed by the court, by the party at whose instance the witness appears or the deposition is taken. The filing of a petition under this subsection shall not operate to stay the execution of the order of the Board under subsection (c) (2). § 1422.281-3 Subchapter B of Chapter 5 of the Internal Revenue Code. Subchapter B of Chapter 5 of the Internal Revenue Code sets forth procedures for review of decisions of the Tax Court by the United States Courts of Appeals. Reference is made to sections 1140 to 1146, inclusive, of the Internal Revenue Code for provisions dealing with the procedure for such review. Subpart 1-Statements to Contractors

AUTHORITY: The provisions of this Subpart I issued under sec. 109, 65 Stat. 22; 50 U.S.O. App. 1219.

SOURCE: The provisions of this Subpart I appear at 17 F.R. 1387, Feb. 13, 1952, unless otherwise noted.

§ 1422.291 Furnishing of statements of determinations by unilateral order.

When the Board makes a determination with respect to the amount of excessive profits and such determination is made by order, the Board will furnish the contractor a statement of such determination, of the facts used as a basis therefor, and of its reasons for such determination, provided that the contractor requests such a statement in writing within 30 days after the date the notice of the order is mailed by the Board to the contractor pursuant to § 1422.274. When a determination of a Regional Board is deemed to be the determination of the Board (see § 1422.272-2) the Regional Board will furnish the contractor a statement of such determination, of the facts used as a basis therefor, and of the reasons for such determination: Provided, That the contractor requests such statement in writing within 30 days after the Board mails to the contractor its

notice of its decision not to review the unilateral order of the Regional Board pursuant to § 1422.272-2.

§ 1422.292 Furnishing of other state

ments.

When a Regional Board or the Board has made a determination of excessive profits and the contractor is unable to decide whether to enter into an agreement for the refund of such excessive profits, the Regional Board or the Board, as the case may be, will furnish the contractor a written summary of the facts and reasons upon which such determination is based in order to assist the contractor in determining whether or not it will enter into an agreement: Provided, That the contractor requests such a statement within a reasonable time after it has been advised of the determination, and states that it has submitted all the evidence which it believes to be relevant to the renegotiation proceedings.

§ 1422.293 Requests for statements.

General rules applicable to the filing of requests pursuant to this subpart are set forth in § 1422.245.

[17 F. R. 5763, June 27, 1952]
Subpart J-Control of Renegotiation
Records and Information Contained
Therein

NOTE: The regulations on this subject are set forth in Part 1480 of this chapter. [17 F. R. 7218, Aug. 8, 1952]

PART 1423-DETERMINATION

OF

1423.333-1 General.

non-subject

Interpretation of term "subcontract."

1423.389-3 State income taxes imposed at a "flat rate."

1423.389-4 Graduated State income tax. 1423.389-5 Multiple State income taxes. 1423.389-6 State income tax measured by income for preceding year. 1423.389-7 State income tax of contractor operating as a partnership or sole proprietorship.

AUTHORITY: The provisions of this Part 1428 issued under sec. 8, 62 Stat. 259; 50 U.S.C. App. 1193.

SOURCE: The provisions of this Part 1428 appear at 14 FR. 1635, Apr. 7, 1949, unless otherwise noted.

Subpart A-Fiscal Year Basis for Re

negotiation and Exceptions

§ 1423.300 Scope of subpart.

This subpart deals with the application of the fiscal year basis for renegotiation, and exceptions to it.

§ 1423.301 Fiscal year basis for renegotiation.

§ 1423.301-1 Statutory provisions.

Subsection (b) of the act provides in part as follows:

... The powers hereby conferred upon the Secretary shall be exercised with respect to the aggregate of the amounts received or accrued under all such contracts and subcontracts by the contractor or subcontractor during his fiscal year or upon such other basis as may be mutually agreed upon;

§ 1423.301-2 Application of statutory provisions.

(a) Renegotiation will be conducted on the basis of the amounts received or accrued by a contractor from his renegotiable contracts and subcontracts for a fiscal year. Accordingly, excessive profits will be determined by examining the contractor's financial position and the profits from such contracts and subcontracts taken as a whole for a particular fiscal year rather than on an individual contract basis. This avoids problems of

allocation of costs and profits as between each contract and subcontract, allows the contractor to offset the results of one contract against the results of another, and simplifies administration.

(b) Since renegotiation will be conducted on a fiscal year basis, losses or inadequate profits in any year preceding the year being renegotiated shall not be used as an offset or adjustment in the determination of excessive profits for the year which is the subject of renegotiation. However, a loss on renegotiable business in a prior year subject to the Renegotiation Act of 1948 is a factor which may be considered in determining the reasonableness of profits for a later year.

§ 1423.302 Differing accounting meth. ods.

If there be employed in a renegotiation for any fiscal year a method of employed in renegotiation for the fiscal computing profit different from that year immediately preceding, the renegotiating agency must make adequate provision in the agreement or otherwise so that renegotiable business will not escape renegotiation because of the change. The interest of the Government with respect to the year which is the subject of renegotiation and future years must also be protected, and no item of cost which has been allowed in a previous renegotiation will be allowed in any subsequent renegotiation. Under ordinary circumstances a contractor will be renegotiated on the same basis as that used for the determination of his income for Federal income tax purposes and, where a contractor requests and is allowed to renegotiate on some other basis, he will be required to agree that future renegotiations will be conducted on the same basis unless the Policy and Review Board approves a variation therefrom by reason of unusual circumstances. With reference to special accounting procedures in the case of particular identified items see

§ 1423.381-6.

§ 1423.303

[Reserved]

§ 1423.304 Cost-plus-fixed-fee contracts. Amounts received or accrued and costs paid or incurred, with respect to costplus-fixed-fee contracts and subcontracts must be segregated from such amounts relating to other types of contracts and subcontracts, in order that

separate consideration may be given in renegotiation of such cost-plus-fixed-fee contracts.

[Amdt. 1, 14 F. R. 3080, June 8, 1949]
§ 1423.305 Joint venture contracts.

If two or more parties enter into an arrangement for the performance jointly of one or more contracts or subcontracts, the combination resulting from such arrangement is commonly referred to as a "joint venture." Such a joint venture is regarded as an entity which, with respect to its contracts or subcontracts within the scope of the act is a "contractor" or "subcontractor" within the meaning of the act. § 1423.306

§ 1423.307

[Reserved]

Treatments of contracts with price adjustment provisions.

§ 1423.307-1 Subject to renegotiation.

Certain contracts contain incentive provisions or provide for escalation, redetermination or other revision of the contract price during the life of the contract. These contracts are subject to renegotiation unless otherwise exempted, but their provisions necessitate special treatment. The method of handling certain situations arising in connection with such contracts is discussed in § 1423.307-2. § 1423.307-2 Method of renegotiation.

Upon over-all renegotiation involving such contracts, if the price for the period under review is expected to be retroactively reduced after the completion of the renegotiation proceedings and if excessive profits are determined by agreement, then in determining excessive profits the contractor may be permitted to set up a reasonable reserve to cover the estimated refund under the contract for the period under review. Similarly, if the contract clause is expected to result in a retroactive upward revision of the price for the period under review, adjustment therefor may be made on the basis of reasonable estimates and included in the renegotiable income of the contractor. § 1423.308 Treatment of receipts or accruals under termination claims. § 1423.308-1 Subject to renegotiation.

Termination compensation received or accrued under a subject contract or subcontract is renegotiable unless (a) received or accrued with respect to a terminated contract or subcontract which is exempt or has been exempted from renegotiation or (b) the termination settlement is exempted from renegotiation.

§ 1423.308-2 When received or accrued.

For purposes of renegotiation amounts payable to a contractor or subcontractor on account of any termination claim under a contract or subcontract will be deemed to have been received or accrued to the extent, and in the fiscal year for which, such amounts are estimated, upon the basis of the circumstances existing at the time of renegotiation, to be includible in the computation of taxable income. Renegotiation will not be postponed or delayed pending the settlement of a termination claim whether by a "no-cost" waiver, or otherwise.

§ 1423.308-3 Separate consideration.

Any contractor may, and in any case in which the aggregate of the amounts received or accrued under contracts and subcontracts includes any substantial amount on account of termination claims the contractor shall be required to, reflect in the financial and other data upon which the renegotiation is based the receipts or accruals on account of termination claims separately from other receipts or accruals subject to renegotiation. Such segregation may be required to be made in such general or such detailed manner as the renegotiating agency may deem necessary.

§ 1423.309 Renegotiation of commonly owned entities.

Renegotiation of commonly owned entities which desire to be consolidated for the purposes of renegotiation may, upon the application of such entities and, in the discretion of the Policy and Review Board, be conducted on a consolidated basis. An application for consolidation will be granted only if (a) less than 25% of the interest in any entity is owned by an outside minority group; (b) all such entities requesting consolidation have the same fiscal year for accounting purposes; (c) common ownership existed for the entire period for which consolidation is requested, and (d) all such entities have agreed that the $100,000 limitation will be applied to the aggregate receipts or accruals of all such entities in the same manner as though a single contractor were involved (see §§ 1423.347-2 and 1423.347-3).

[14 FR 1635, Apr. 7, 1949, as amended by Amdt. 10, 15 FR 6987, Oct. 19, 1950]