Part 1464 Consolidated Renegotiation of Affiliated Groups and Related Groups renegotiation of affiliated Request for consolidated renegotiation of 1464.4 Request for consolidated renegotiation of re- Miscellaneous provisions applicable to con- Allocation of excessive profits. Liability of members of affiliated or related 1464.10 When consolidated basis not used. 14564.12 Renegotiation losses of consolidated con 1464.90 tractors. FORMS Letter form of request for renegotiation on consolidated basis (affiliated group). 1464.91 Letter form of request for renegotiation on consolidated basis (related group). AUTHORITY: §§ 1464.1 to 1464.91 issued under sec. 109, Pub. Law 9, 82d Cong. Interpret or apply sec. 105, Pub. Law 9, 82d Cong. 1464.1 Consolidated renegotiation of affiliated group.-(a) Statutory provision.Section 105 (a) of the act provides in part as follows: Renegotiation shall be conducted on a consolidated basis with a parent and its subsidiary corporations which constitute an affiliated group under section 141 (d) of the Internal Revenue Code if all of the corporations included in such affiliated group request renegotiation on such basis and consent to such regulations as the Board shall prescribe with respect to (1) the determination and elimination of excessive profits of such affiliated group, and (2) the determination of the amount of the excessive profits of such affiliated group allocable, for the purposes of section 3806 of the Internal Revenue Code, to each corporation included in such affiliated group. 7-15-67 (b) Definition of "affiliated group".-(1) Section 141 (d) of the Internal Revenue Code of 1939 provides as follows: (d) Definition of "affiliated group". As used in this section, an "affiliated group" means one or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation if— (1) Stock possessing at least 95 per centum of the voting power of all classes of stock and at least 95 per centum of each class of the nonvoting stock of each of the includible corporations (except the common parent corporation) is owned directly by one or more of the other includible corporations; and (2) The common parent corporation owns directly stock possessing at least 95 per centum of the voting power of all classes of stock and at least 95 per centum of each class of the nonvoting stock of at least one of the other includible corporations. As used in this subsection, the term "stock" does not include non-voting stock which is limited and preferred as to dividends. (2) Section 1504 (a) of the Internal Revenue Code of 1954 (corresponding with section 141 (d) of the Internal Revenue Code of 1939 and incorporated in the act by the provisions of section 7852 (b) of the Internal Revenue Code of 1954) provides as follows: (a) Definition of "affiliated group". As used in this chapter, the term "affiliated group" means one or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation if (1) Stock possessing at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock of each of the includible corporations (except the common parent corporation) is owned directly by one or more of the other includible corporations; and (2) The common parent corporation owns directly stock possessing at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock of at least one of the other includible corporations. As used in this subsection, the term "stock" does not include nonvoting stock which is limited and preferred as to dividends. (3) The term "affiliated group" as used in this part means a group of corporations which qualify under the definition quoted in subparagraph (1) of this paragraph, with respect to fiscal years to which the Internal Revenue Code of 1939 is applicable, or under the definition quoted in subparagraph (2) of this paragraph, with respect to fiscal years to which the Internal Revenue Code of 1954 is applicable. A corporation cannot be a member of an affiliated group unless it is an "includible corporation" as defined in subsections. (e), (f), (g) and (j) of section 141 of the Internal Revenue Code of 1939, or subsections (b), (c), and (d of section 1504 of the Internal Revenue Code of 1954, whichever is applicable (see § 1451.33 of this subchapter). (c) Fiscal year of an affiliated group. The fiscal year of an affiliated group for the purpose of consolidated renegotiation shall be the fiscal year of the common parent corporation. 1464.2 Request for consolidated renegotiation of affiliated group; when approved.The Board will approve a request for consolidated renegotiation of all members of an affiliated group who qualify therefor. A member of an affiliated group other than the common parent corporation shall not be deemed to qualify for consolidated renegotiation unless: (a) Such member had renegotiable receipts or accruals during the fiscal year under review; (b) Except as provided hereafter in this paragraph, such member was a member of the affiliated group during the entire fiscal year of the common parent corporation and its fiscal year for Federal income tax purended on the same date as the fiscal year poses of the common parent corporation. The foregoing limitation shall not disqualify a member: (1) if the fiscal period of such member ended on the same date as the fiscal year of the other member or members but began on a later date because such member was incorporated during such fiscal year, and if such member of the group; or (2) if the fiscal period of such member began the same date as the fiscal year of the other member or members but ended on an earlier date because such member was dissolved during such fiscal year and if such member during its entire last fiscal period was a member of the group. 1464.3 Consolidated renegotiation of a related group.-(a) Statutory provision.Section 105 (a) of the act provides in part as follows: By agreement with any contractor or subcontractor, and pursuant to regulations promoulgated by it, the Board may in its discretion conduct renegotiation on a consolidated basis in order properly to reflect excessive profits of two or more related contractors or subcontractors. (b) Definition of "related group.”—A “related group" means two or more related contractors, one of whom controls the other, or others, or who are under common control (see § 1451.31 of this subchapter). The members of the group may consist of persons including corporations, partnerships, joint ventures, associations, sole proprietorships, or a combination of some or all of these. (c) Fiscal year of a related group.-The fiscal year of a related group shall be the fiscal year of the member of the related group designated as agent in accordance with § 1464.7 (b), except that the Board may, upon application of the group made with the letter requesting consolidated renegotiation (§ 1464.91), permit such related group to adopt a different fiscal year unless adoption of such different fiscal year would hinder conduct of the renegotiation. The fiscal year of the agent or the fiscal year adopted, as the case may be, will be referred to hereafter in this part as the related group's fiscal year. 1464.4 Request for consolidated renegotiation of related group; when granted.-In order properly to reflect excessive profits, the Board may, in its discretion, grant a request for a consolidated proceeding with respect to a related group if all the following conditions exist: (a) Each person in the group had renegotiable receipts or accruals during the related group's fiscal year under review. (b) Each of such persons who participated in a consolidated renegotiation for a prior fiscal year and whose fiscal year differed from the fiscal year of the related group in that renegotiation has, before the close of the renegotiation proceeding for the related group's fiscal year under review, adopted under the Internal Revenue Code a fiscal year in con 7-15-67 formity with the related group's fiscal year: Provided, however, That this requirement may be waived by the Board, in its discretion, in the case of any contractor who for any reason has ceased to engage in renegotiable business before the close of the renegotiation proceeding for the related group's fiscal year under review. (c) Stock possessing at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock of each corporate member of the group (except the common parent, if any), and the right to at least 80 percent of the profits of each unincorporated member of the group (except the common parent, if any), are owned directly or indirectly by one or more of the other members of the group, or by the same person or persons other than a member or members of the group. it to separate renegotiation proceedings or consolidate a different group, if satisfied that the consolidation was improperly effected pursuant to the regulations in this subchapter or, if satisfied in the case of a related group, one or more of whose members has a fiscal year not conforming with the related group's fiscal year, that the accounting rec ords of such member or members do not properly reflect excessive profits for the related group's fiscal year. 1464.5 Partial fiscal years.-If during a related group's fiscal year under review a person came under control of, acquired control over or came under common control with another member or members of such group, such person may, in the discretion of the Board, be included in the consolidated proceeding with respect to his receipts or accruals from the date such control became effective, if such person otherwise meets the qualifications for consolidated renegotiation set set forth forth in § 1464.4. Similarly, if during a related group's fiscal year under review such control ceases with respect to a person who is a member of such group, such person may, in the discretion of the Board, be included in the consolidated proceeding with respect to his receipts or accruals up to the date such control ceased, if such person otherwise meets the qualifications for consolidated renegotiation set forth in § 1464.4. 1464.7 Miscellaneous provisions applicable to consolidated renegotiation.-A request for consolidated renegotiation proceedings shall conform to the following requirements: (a) A request made by an affiliated group shall be made in the form prescribed by § 1464.90. A request made by a related group shall be made in the form prescribed by § 1464.91. A request by either group shall include 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. See § 1470.3 (h) of this subchapter. A request by either group shall constitute a consent by each member of such group to the application of the regulations governing consolidated renegotiation. The request shall be duly executed by each eligible member of the affiliated group or by each member of the related group. The request shall be filed with the Board on or before the first date on which any member of the group completes the filing of the Standard Form of Contractor's Report. The Board may grant requests filed after that date if no inconvenience to the Board will result. 1464.6 Effect of consolidation.-Once the Board has granted a request for renegotiation of an affiliated group or related group on a consolidated basis, then, except as otherwise provided herein, the proceeding will remain consolidated for all purposes, regardless of whether a clearance issues or excessive profits are determined by agreement or order. However, on request of any member of the group or on its own motion, the Board may discontinue the consolidated proceeding and convert 7-15-67 (b) A request filed by the members of an affiliated group shall designate the common parent corporation as agent of the group and shall authorize such parent corporation to represent all members of the group in all respects in connection with the consolidated proceeding. A request filed by the members of a related group shall designate one member of the group as agent of the group and shall authorize such member to represent all members of the group in all respects in connection with the consolidated proceeding. Such authorization in either case shall be irrevocable as long as renegotiation is conducted on a consolidated basis, and shall apply to all (c) The Board will commence renegotiation 1464.8 Allocation of excessive profits.Excessive profits, whether determined by agreement or order, will be allocated among the members of the consolidated group and when necessary among different fiscal years of any member in an equitable manner, and the agreement or order will disclose the allocation. The excessive profits will be so allocated even though some or all of the members of the consolidated group participate in filing a consolidated Federal tax return. If excessive profits have been realized and if the renegotiation agreement or order were to impose liability generally on the entire consolidated group for the profits found to be excessive, without fixing the separate allocations, the members of the group might not be allowed appropriate deductions for Federal income and excess profits tax purposes under section 3806 of the Internal Revenue Code. 1464.9 Liability of members of affiliated or related groups. Although excessive profits to be eliminated will be allocated to members of an affiliated or related group, each member of the affiliated or related group shall be jointly and severally liable for the total amount of excessive profits, if any, to be eliminated as determined in the consolidated proceeding. 1464.10 When consolidated basis not used. Whenever the members of an affiliated group or a related group are renegoiated separately, renegotiations with the individual members of such group will if practicable be conducted concurrently. 1464.11 Separate renegotiation of partial fiscal years.-When amounts received or accrued during a portion of a person's fiscal year or years are included in a consolidated proceeding, such person shall, notwithstanding the provisions of § 1470.3 (h) of this subchapter, file in full a Standard Form of Contractor's Report for each of such fiscal years. Such Standard Form of Contractor's Report shall reflect separately the amounts received or accrued by such person which are included in the consolidated proceeding. Such person will be renegotiated separately with respect to the receipts or accruals reflected on such Standard Form of Contractor's Report which are not included in the consolidated proceeding: Provided, however, That such separate renegotiation will be conducted concurrently with the consolidated proceeding, if practicable. 1464.12 Renegotiation losses of consoli- (b) Definitions. As used in this section: 7-15-67 |