sole loss member of a consolidated group in a
loss year is renegotiated separately for subse-
quent fiscal years, the amount of the consoli-
dated renegotiation loss sustained by the group
shall be a renegotiation loss carry forward for
such contractor to each of the 5 fiscal years fol-
lowing the loss year, and shall be subject to the
provisions of this section and § 1457.9 of this
subchapter. If the group included more than
one loss member and the members are renegoti-
ated separately thereafter, the consolidated re-
negotiation loss will be allocated among the loss
members in proportion to the amount of loss
sustained by each, and the share so allocated to
each loss member shall be a renegotiation loss
carryforward for such contractor to each of the
5 fiscal years following the loss year, and shall
be subject to the provisions of this section and
§ 1457.9 of this subchapter.

§ 1457.9 of this subchapter. Such losses will be
allowed as carry-forwards to the consolidated
group in the fiscal year under review; but no
such amount will be so allowed unless the mem-
bers of such group would have qualified for
consolidation in the loss year, and the aggregate
amount so allowed will be limited to the amount,
if any, which would have been the consolidated
renegotiation loss of such group in the loss year.
In computing such amount, if any member of
the consolidated group was not a renegotia-
ble contractor in the loss year, but succeeded
thereafter to the business of a renegotiable con-
tractor and was owned during the fiscal year
under review by the same person or substan-
tially the same persons who owned such prede-
cessor in the loss year, the receipts or accruals
and costs of such predecessor will be included
in the computation. The following examples
illustrate how the limitation in this subpara-
graph is computed and applied:

Example. In Year 1, A, B, and C were members of a consolidated group. A realized renegotiable profits of $240,000; B sustained a renegotiation loss of $200,000; and C sustained a renegotiation loss of $100,000. The consolidated renegotiation loss of the group was $60,000. If the members are renegotiated separately in Year 2, $40,000 will be allowed as a cost to B and $20,000 to C.

No amount of a consolidated renegotiation loss will be allowed as a carryforward (1) if such loss resulted from gross inefficiency; and (2) unless it is shown that any loss member of such group has reasonably pursued available remedies for obtaining relief from such loss.

year.

(1) Members were all separate in loss
(i) In Year 1, A, B, and C would have qualified
for consolidated renegotiation, but were not
consolidated. A realized renegotiable profits of
$240,000; B sustained a renegotiation loss of
$200,000; and C sustained a renegotiation loss
of $100,000. If A, B, and C were renegotiated
separately in Year 2, $200,000 would be allowed
as a cost to B and $100,000 to C. However, A,
B, and C are a consolidated group in Year 2,
with renegotiable profits of $40,000. Had they
been consolidated in Year 1, the consolidated
renegotiation loss of the group would have been
only $60,000. It is this amount of $60,000, and
not the aggregate of $300,000 of renegotiation
losses sustained by B and C, which is allowed
as a cost to the consolidated group in Year 2.
The $20,000 of loss remaining after such allow-
ance is carried forward to Year 3 and is allowed
as a cost to the consolidated group in that year.

(d) Carryforward to consolidated group.-
(1) When group was identical in loss year.-
If a group consolidated in the fiscal year under
review sustained a consolidated renegotiation
loss in a prior fiscal year, the amount of such
loss shall be a renegotiation loss carryforward
for the group to each of the 5 fiscal years fol-
lowing the loss year, and shall be carried for-
ward in the manner provided in this section
and § 1457.9 of this subchapter.

(2) When members were separate or in dif-
ferent groups in loss year.-If the members of
a group consolidated in the fiscal year under
review did not constitute a consolidated group
of identical membership in a prior fiscal year
in which one or more of such contractors sus-
tained renegotiation losses, such losses shall be
carried forward as provided in this section and

12-10-68

(ii) Members were in different groups in loss year.-In Year 1, A, B, and C were members of a consolidated group; D and E were members of another consolidated group; and all five would have qualified for consolidation as a single group. Their renegotiable profits and losses were as follows: A, profit $240,000; B, loss $200,000; C, loss $100,000; D, profit $100,000; and E, loss $150,000. The consolidated renegotiation loss of A, B, and C was $60,000,

285

H

allocable $40,000 to B and $20,000 to C. The
consolidated renegotiation loss of D and E was
$50,000, allocable entirely to E. In Year 2, A,
B, D, and E form a consolidated group, with-
out C. If A, B, D, and E had consolidated in
Year 1, the consolidated renegotiation loss of
the group would have been only $10,000. Al-
though the allocable shares of B and E as shown
above aggregate $90,000, the amount allowable
to the consolidated group in Year 2 is limited
to $10,000. The $20,000 allocable to C is allow-
able to C in that amount in Year 2.

(iii) Some members were separate and others
were in different group in loss year.~(a) In
Year 1, A (loss $500,000), B (profit $100,000),
and C (profit $300,000) were members of a
consolidated group. The consolidated renegotia-
tion loss of A, B, and C was $100,000, allocable
entirely to A, D (profit $200,000) was renego-
tiated separately for the same year and made a
renegotiation refund in the amount of $30,000,
retaining $170,000 after renegotiation. E, a
partnership (profit $40,000) was also renego-
tiated separately. In Year 2 the partners dis-
solved E and formed a corporation F, which
continued the partnership business. Assume A,
B, C, D and E would have qualified for con-
solidation in Year 1.

(b) In a Year 2 consolidated group composed of A, B, C, and D, no amount of loss carryforward would be allowed to the group because A, B, C, and D as a group in Year 1 would have realized a group profit of $70,000. In making this computation, D's profits are reduced by its $30,000 renegotiation refund.

(c) In a Year 2 consolidated group composed of A, B, and D, the full amount of the $100,000 consolidated renegotiation loss allocable to A would be allowed to the group.

(d) In a Year 2 consolidated group composed of A, B, C, and F, their consolidated renegotiation loss as a group in Year 1 would have been $60,000; hence that amount would be allowed as a loss carry forward to the group. (e) Carryforward upon acquisition of business. The provisions of § 1457.9 (e) of this subchapter shall apply to the carry forward of losses under this section.

(f) Withdrawal from consolidated renegotiation.-Removed to Appendix.

The corporation or corporations listed above have not joined in this request because each such corporation (a) was not a member of such affiliated group during the entire fiscal year of the common parent corporation, or its fiscal year for Federal income tax purposes did not end on the same date as the fiscal year of the common parent corporation, and (b) does not qualify for consolidated renegotiation with the undersigned within the exceptions provided in § 1464.2(b) of said regulations as set forth in Schedule A attached hereto; or because it had no renegotiable business during the year under review.

3. Each of the undersigned hereby consents, for said fiscal year, to the Renegotiation Board Regulations with respect to (a) the determination and elimination of excessive profits of the undersigned affiliated group and (b) the determination of the amount of the excessive profits of the undersigned affiliated group allocable, for the purposes of section 1481 of the Internal Revenue Code, to each of the undersigned. 4. (the common parent corporation of the undersigned affiliated group) is hereby designated as agent of the undersigned affiliated group and is hereby authorized to represent all members of the group in all respects in connection with the consolidated renegotiation proceedings requested herein for said fiscal year.

5. The undersigned represent that they (have) (have not) (delete inapplicable language) filed consolidated Federal income tax returns for said fiscal year; and that, except as indicated in Schedule A attached

same date as the fiscal year of the other members but began on a later date because such member was incorporated during such fiscal year, and such member during its entire first fiscal period was a member of such affiliated group (if none, write "None"):

tion of excessive profits of the undersigned related
group and (b) the determination of the amount of the
excessive profits of the undersigned related group al-
locable, for the purposes of section 1481 of the Internal
Revenue Code, to each of the undersigned.

4.
(one of the undersigned)
is hereby designated as agent of the undersigned re-
lated group and is hereby authorized to represent all
members of the group in all respects in connection
with the consolidated renegotiation proceeding re-
quested herein for said fiscal year.

5. The undersigned represent that all of the undersigned had the same fiscal year for Federal income tax purposes, except as indicated in Schedule A attached hereto.

6. The undersigned represents that Schedule B attached hereto is a consolidating income account showing separately the renegotiable and nonrenegotiable business of each member of the group in the detail specified in the Standard Form of Contractor's Report.

7. Each of the undersigned who participated in a consolidated renegotiation under the act for a prior fiscal year and whose fiscal year differed from the fiscal year of the related group in that renegotiation represents that it has adopted, under the Internal Revenue Code, a fiscal year in conformity with the fiscal year of the related group.

8. The undersigned are aware that under section 105 (e) (1) of the Renegotiation Act of 1951, criminal penalties may be incurred by any person who knowingly furnishes any statement, information, records or data required under said section 105(e) (1), containing information which is false or misleading in any material respect.

9. The person signing this request on behalf of each of the undersigned declares, under the criminal penalties provided in section 105(e)(1) of the Renegotiation Act of 1951, that such undersigned has authorized him to sign this request on its behalf.

NOTE. For each person listed above who became or ceased to be qualified for consolidated renegotiation as a member of the related group during the related group's fiscal year, state the applicable date of qualification or disqualification and indicate what qualified or disqualified such person on that date.

12-10-68

Sec.

Part 1466 Termination of Renegotiation

1466.1 Statutory provision.

1466.2 Definition of "termination date".

1466.3 Definition of "status termination date".
1466.4 Renegotiability of amounts received or accrued
and allowability of costs paid or incurred
after "date of termination".

1466.5 Fiscal year proceedings in which amounts re-
ceived or accrued and costs paid or incurred
after date of termination will be considered.
1466.6 Proration of statutory minimum for fiscal
years which include the termination date.
AUTHORITY: §§ 1466.1 to 1466.6 issued under sec. 109,
65 Stat. 22; 50 U.S.C. App. Sup. 1219. Interpret or
apply sec. 102, 65 Stat. 8; 50 U.S.C. App. Sup. 1212.
1466.1 Statutory provision.-Section 102
(c) of the act provides as follows:

1466.2 Definition of "termination date"."Termination date" means June 30, 1971.

1466.3 Definition of "status termination date". "Status termination date" means, with respect to any agency of the Government, the date on which the status of such agency as a Department within the meaning of section 103 (a) of the act is terminated.

1466.4 Renegotiability of amounts received or accrued and allowability of costs paid or incurred after "date of termination".-(a) Definition of "date of termination". The terms "termination date" and "status termination date" are referred to in this part collectively as the "date of termination."

(c) Termination (1) In general.-The provisions of this title shall apply only with respect to receipts and accruals, under contracts with the Departments and related subcontracts, which are determined under regulations prescribed by the Board to be reasonably attributable to performance prior to the close of the termination date. Notwithstanding the method of accounting employed by the contractor or subcontractor in keeping his records, receipts or accruals determined to be so attributable, even if received or accrued after the termination date, shall be considered as having been received or accrued not later than the termination date. For the purposes of this title, the term "termination date" means June 30, 1971.

(b) In general.-The act applies only to amounts received or accrued which are determined under regulations prescribed by the Board to be reasonably attributable to performance before the close of the date of termination. It is immaterial whether the contracts under which such amounts are derived are completed before or after the date of termination. The purpose of this section is to state the circumstances under which amounts received or accrued and costs paid or incurred after the date of termination from prime contracts or subcontracts performed in whole or in part before the close of the date of termination will be considered to be reasonably attributable to performance before the close of the date of termination.

(2) Termination of status as Department-When the status of any agency of the Government as a Department within the meaning of section 103 (a) is terminated, the provisions of this title shall apply only with respect to receipts and accruals, under contracts with such agency and related subcontracts, which are determined under regulations prescribed by the Board to be reasonably attributable to performance prior to the close of the status termination date. Notwithstanding the method of accounting employed by the contractor or subcontractor in keeping his records, receipts or accruals determined to be so attributable, even if received or accrued after the status termination date, shall be considered as having been received or accrued not later than the status termination date. For the purposes of this paragraph, the term "status termination date" means, with respect to any agency, the date on which the status of such agency as a Department within the meaning of section 103(a) is terminated.

(c) Amounts received or accrued.-(1) Completed contract method of accounting.-If a contractor, pursuant to § 1459.1(b) of this subchapter, employed a completed contract method of accounting for the fiscal year of the contractor which included the date of termination, there will be considered as attributable to performance on or before the date of termination an amount of receipts or accruals which bears the same relationship to the total income derived from the contract as the amount of work performed under the contract on or before the date of termination bears to the total amount of work performed under the contract.

321