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2734

F E D E R A L R E G I S T E R , Saturday , July 1, 1939

construction and/or manufacture of any complete naval vessel or portion thereof, and in excess of 12 per centum of the total con tract prices for the construction and/or manufacture of any complete aircraft or portion thereof; by inserting in the first proviso after the words That if there is a net loss on all such contracts or subcon tracts the words for the construction and/or manufacture of any complete naval vessel or portion thereof; and by inserting at the end of the first proviso after the words income taxable year a comma and the words and that if there is a net loss, or a net profit less than 12 per centum, as aforesaid on all such contracts or subcon tracts for the construction and/or m anu facture of any complete aircraft or portion thereof completed by the particular con tractor or subcontractor within any income taxable year, such net loss or deficiency in profit shall be allowed as a credit in deter mining the excess profit, if any, during the next succeeding four income taxable years, and that the method of ascertaining the amount of excess profit, initially fixed upon shall be determined on or before June 30, 1939 : Provided further, That when aircraft are procured by the Secretary of W ar as a result of competitive bids requiring the sub mission of sample aircraft with bid, the Secretary is authorized, in his discretion, to purchase sample aircraft of competitors to whom an award is not made, not more than one each from not more than three such competitors, in order of merit, at prices not exceeding 75, 60, and 50 per centum, respec tively, of the cost applicable in the opinion of the Secretary to the development and manufacture of such sample aircraft.

b Section 3 of the Act entitled An Act to establish the composition of the United States Navy with respect to the categories of vessels limited by the trea ties signed at Washington, February 6, 1922, and at London, April 22, 1930, at the limits prescribed by those treaties;
to authorize the construction of certain naval vessels; and for other purposes, approved March 27, 1934, 48 Stat. 505
34 U.S.C. 496, as amended by the Act of June 25, 1936, 49 Stat. 1926 34 U.S.C., Sup. IV, 496 and as further amended by the Act of April 3, 1939 Public, No.
18, 76th Cong., 1st sess.; I.R.B. 1939-20, 13, reads as follows:
S ec . 3. The Secretary of the Navy is hereby directed to submit annually to the Bureau of the Budget estimates for the construction of the foregoing vessels and aircraft; and there is hereby authorized to be appropriated such sums as may be necessary to carry into effect the provisions of this Act: Provided, That no contract shall be made by the Sec retary of the Navy for the construction and/or manufacture of any complete naval vessel or aircraft, or any portion thereof, herein, heretofore, or hereafter authorized unless the contractor agrees a To make a report, as hereinafter de scribed, under oath, to the Secretary o f the Navy upon the completion of the contract.
b To pay into the Treasury profit, as hereinafter provided shall be determined by the Treasury Department, in excess of 10
per centum of the total contract prices for the construction and or manufacture of any complete naval vessel or portion thereof, and in excess of 12 per centum of the total contract prices for the construction and or manufacture of any complete aircraft or portion thereof, of such contracts within the scope of this section as are completed by the particular contracting party within the income taxable year, such amount to become the property of the United States, but the surety under such contracts shall not be liable for the payment of such excess profit: Provided, That if there is a net loss on all such contracts or subcon
tracts for the construction and or m anu The contract or subcontracts referred to facture of any complete naval vessel or herein are limited to those where the award portion thereof completed by the particular exceeds $10,000.
contractor or subcontractor within any in Pursuant to the authority prescribed come taxable year, such net loss shall be allowed as a credit in determining the by section 14 of the Act of April 3, 1939
excess profit, if any, for the next succeeding Public, No. 18, 76th Cong., 1st sess.
income taxable year, and that if there is a net loss, or a net profit less than 12 per and section 3 of the Act of March 27, centum, as aforesaid on all such contracts 1934, as amended, the following regula or subcontracts for the construction and tions are hereby prescribed:!
or manufacture of any complete aircraft or portion thereof completed by the particular 16.1 Definitions. As used in these contractor or subcontractor within any in regulations the term come taxable year, such net loss or deficiency in profit shall be allowed as a credit in a Act means the Act of April 3,1939
determining the excess profit, if any, during Public, No. 18, 76th Cong., 1st sess.;
the next succeeding four income taxable years, and that the method of ascertaining I.R.B. 1939-20,13, together with the ap the amount of excess profit, initially fixed plicable provisions of section 3 of the Act upon shall be determined on or before June of March 27, 1934, 48 Stat. 505 34 UJ3.C.
30, 1939: Provided further, That if such 496 as amended by the Act of June 25, amount is not voluntarily paid the Secre tary of the Treasury shall collect the same 1936, 49 Stat. 1926 34 UJS.C., Sup. IV, under the usual methods employed under 496 and as further amended by the Act the internal-revenue laws to collect Federal of April 3,1939 Public, No. 18,76th Cong., income taxes: Provided further, That all provisions of law including penalties ap 1st sess.; IJR.B. 1939-20, 13.
b Person includes an individual, a plicable with respect to the taxes imposed by Title I of the Revenue Act of 1934, and corporation, a partnership, a trust or es not inconsistent with this section, shall tate, a joint-stock company, an associa be applicable with respect to the assessment, collection, or payment of excess profits to tion, or a syndicate, group, pool, joint the Treasury as provided by this section, venture or other unincorporated organi and to refunds by the Treasury of overpay zation or group, through or by means of ments of excess profits into the Treasury:
And provided further, That this section which any business, financial operation or shall not apply to contracts or subcontracts venture is carried on.
for scientific equipment used for communi c Contract means an agreement cation, target detection, navigation, and fire control as may be so designated by the made by authority of the Secretary of Secretary of the Navy, and the Secretary W ar for the construction or manufacture of the Navy shall report annually to the of any complete aircraft or any portion Congress the names of such contractors and thereof for the Army.
subcontractors affected by this provision, d Contractor means a person enter together with the applicable contracts and the amounts thereof: And provided further, ing into a direct contract with the Sec That the income-taxable years shall be such retary of W ar or his duly authorized taxable years beginning after December 31, 1935, except that the above provisos relat representative.
ing to the assessment, collection, payment, e Subcontract means an agreement or refunding of excess profit to or by the entered into by one person with another Treasury shall be retroactive to March 27, person for the construction or manufac 1934.
c To make no subdivisions of any con ture of any complete aircraft or any por tract or subcontract for the same article tion thereof for the Army, the prime or articles for the purpose of evading the provisions of this Act, bu t any subdivision contract for such aircraft or portion of any contract or subcontract involving an thereof having been entered into between amount in excess of $10,000 shall be sub a contractor and the Secretary of War or ject to the conditions herein prescribed.
his duly authorized representative.
d That the manufacturing spaces and f Subcontractor means any person books of its own plant, affiliates, and sub divisions shall at all times be subject other than a contractor entering into a to inspection and audit by any person designated by the Secretary of the Navy, subcontract.
the Secretary of the Treasury, and/or by a g Contracting party means a con duly authorized committee of Congress.
tractor or subcontractor as the case may e To make no subcontract unless the subcontractor agrees to the foregoing con be.
ditions.
h Contract price or total contract The report shall be in form prescribed by the Secretary of the Navy and shall state the total contract price, the cost of per forming the contract, the net Income, and the per centum such net income bears to the contract price. A copy of such report shall be transmitted to the Secretary of the Treasury for consideration in connection with the Federal income tax returns of the contractor for the taxable year or years concerned.
The method of ascertaining the amount of excess profit to be paid into the Treasury shall be determined by the Secretary of the Treasury in agreement with the Secretary of the Navy and made available to the public.
The method initially fixed upon shall be so determined on or before June 30, 1934: Provided, That in any case where an excess profit may be found to be owing to the United States in consequence hereof, the Secretary of the Treasury shall allow credit for any Federal income taxes paid or remaining to be paid upon the amount of such excess profit.

price means the amount or total amount to be received under a contract or sub contract as the case may be.
. i Income-taxable year means the calendar year, the fiscal year ending during such calendar year, or the frac tional part of such calendar or fiscal year, upon the basis of which the con tracting partys net income is computed and for which its income tax returns are made for Federal income tax pur poses.!
16.2 Contracts and subcontracts under which excess profit liability may be incurred. Except as otherwise pro vided with respect to contracts or sub contracts for certain scientific equip ment see section 16.3 of these regula tions, every contract awarded for an