with respect to such fiscal year, then the excess of the prepayment, or the full amount thereof, as the case may be, shall constitute a payment in elimination of "excessive profits" as such term is defined in section 3806 of the Internal Revenue Code even though not constituting an elimination of excessive profits determined within the meaning of the Renegotiation Act of 1951.

It is further agreed that no part of this prepayment shall be refunded to the undersigned, provided, however, that if this prepayment, or a portion thereof, shall be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951, nothing herein contained shall prejudice any right which the undersigned may have to receive any refund or rebate which may be provided by law with respect to the excessive profits so determined.

If this prepayment is acceptable on the foregoing terms, please so indicate by indorsement of one of the three (3) copies inclosed and return such copy to us.

Washington 25, D. C. GENTLEMEN: Of the profits received or accrued in our fiscal year ended (hereinafter referred to as "such fiscal year") derived from prime contracts and/or subcontracts subject to the provisions of the Renegotiation Act of 1951, we intend to pay to you as a prepayment of excessive profits, the sum $-(hereinafter referred to

as the "gross prepayment”).

This prepayment is to be made on the understanding (1) that the gross prepayment shall be deemed to be a payment in elimination of "excessive profits" within the meaning of such terms as defined in section 3806 of the Internal Revenue Code; (2) that the gross prepayment has been included in the Federal income and excess profits tax returns filed by the undersigned for such fiscal year; (3) that the undersigned will promptly apply for a computation by the Bureau of Internal Revenue based upon the assessments made to the date of such computation, of the amount by which the taxes of the undersigned for such fiscal year pay

able under the Internal Revenue Code, will be decreased by reason of the elimination from income of the gross prepayment pursuant to section 3806 of the Internal Revenue Code; and (4) that the undersigned will, upon receiving such computation, pay to the Government the gross prepayment, less the amount of the tax credit, if any, so computed by the Bureau of Internal Revenue. The undersigned represents that this prepayment is not made in satisfaction or discharge, in whole or in part, of any legally binding obligation heretofore existing.

It is agreed that neither acceptance of this letter nor acceptance of the prepayment to be made hereunder constitutes a commencement of renegotiation pursuant to the Renegotiation Act of 1951 and that, except as provided herein, renegotiation may be conducted in all respects as though this prepayment had not been made. It is further agreed that if renegotiation pursuant to the Renegotiation Act of 1951 shall hereafter be concluded with respect to such fiscal year, (1) the amount of the gross prepayment will, for the purpose of such renegotiation, be included in renegotiable receipts or accruals; (2) upon such basis, excessive profits, if any, will be determined under the Renegotiation Act of 1951 and the regulations promulgated thereunder, and (3) upon such determination of excessive profits, the amount of gross prepayment will be applied in elimination of the excessive profits so determined, and, to the extent so applied, the gross prepayment will be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951. It is intended that, if the amount of excessive profits so determined is less than the amount of the gross prepayment, or if for any reason renegotiation pursuant to the Renegotiation Act of 1951 shall not be concluded with respect to such fiscal year, then the excess of this gross prepayment, or the full amount thereof, as the case may be, shall constitute a payment in elimination of "excessive profits" as such term is defined in section 3806 of the Internal Revenue Code, even though not constituting an elimination of excessive profits determined within the meaning of the Renegotiation Act of 1951.

It is further agreed that no part of this prepayment shall be refunded to the undersigned, provided, however, that if this gross prepayment, or a portion thereof, shall be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951, nothing herein contained shall prejudice any right which the undersigned may have to receive any refund or rebate which may be provided by law with respect to the excessive profits so determined. The undersigned further agrees that if this gross prepayment, or a portion thereof, shall be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951, the undersigned shall not be entitled to any tax credit with respect to the gross prepayment, or portion thereof, as the case

THE RENEGOTIATION BOARD

WASHINGTON 25, D. C. GENTLEMEN: The undersigned, desiring to eliminate excessive profits likely to be received or accrued in its fiscal year ending (hereinafter referred to as "such fiscal year") from prime contracts and/or subcontracts subject to the provisions of the Renegotiation Act of 1951, hereby agrees to pay monthly (or: quarterly) on the day of each month (or: quarter) to the United States of America a sum equal to percent (%) of the amounts received or accrued (or: the profits realized) during the preceding month (or: quarter) of such fiscal year. The first payment shall be made on the

-----

day of

All payments pursuant to this agreement will be made by check drawn to the order of the Treasurer of the United States and delivered to The Renegotiation Board, Washington 25, D. C.

All payments hereunder will be made on the understanding (1) that such amounts shall be deemed to be payments in elimination of "excessive profits" within the meaning of such term as defined in section 3806 of the Internal Revenue Code; and (2) that such amounts will not be included in income in the computation of taxable income for such fiscal year under the Internal Revenue Code and, accordingly, no tax credit will be allowable against such amounts.

It is agreed that the execution of this agreement does not constitute a commence

ment of renegotiation pursuant to the Renegotiation Act of 1951 and that, except as provided herein, renegotiation may be conducted in all respects as though this agreement had not been made. It is further agreed that if renegotiation pursuant to the Renegotiation Act of 1951 shall hereafter be concluded with respect to such fiscal year, (1) the amounts paid hereunder will, for the purpose of such renegotiation, be included in renegotiable receipts or accruals, (2) upon such basis, excessive profits, if any, will be determined under the Renegotiation Act of 1951 and the regulations promulgated thereunder and (3) upon such determination of excessive profits, the payments made hereunder will be applied in elimination of the excessive profits so determined, and, to the extent so applied, the payments made hereunder will be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951. It is intended that, if any amount of excessive profits so determined is less than the amount of the payments made hereunder, or if for any reason renegotiation pursuant to the Renegotiation Act of 1951 shall not be concluded with respect to such fiscal year, then the excess of the payments made hereunder, or the full amount thereof, as the case may be, shall constitute a payment in elimination of excessive profits as such term is defined in section 3806 of the Internal Revenue Code even though not constituting an elimination of excessive profits determined within the meaning of the Renegotiation Act of 1951.

It is further agreed that no part of the payments made hereunder shall be refunded to the undersigned, provided, however, that if the payments made hereunder, or any portion thereof, shall be deemed to be excessive profits determined within the meaning of the Renegotiation Act of 1951, nothing herein contained shall prejudice any right which the undersigned may have to receive any refund or rebate which may be provided by law with respect to the excessive profits so determined.

If this letter agreement is acceptable on the foregoing terms, please so indicate by indorsement of one of the three (3) copies enclosed and return such copy to us. Yours very truly.

§ 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.

(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

(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 non-voting 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 non-voting 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 Rev

enue 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.

[17 F.R. 5983, July 3, 1952, as amended at 20 F.R. 4322, June 21, 1955; 27 F.R. 3138, Mar. 31, 1962]

§ 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 purposes ended on the same date as the fiscal year 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 during its entire first fiscal period was a member of the group; or (2) if the fiscal period of such member began on 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 promulgated 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.

[17 F.R. 5983, July 3, 1952, as amended at 28 F.R. 225, Jan. 9, 1963]

§ 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 conformity 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

A request for consolidated renegotiation proceedings shall conform to the following requirements:

§ 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 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.

§ 1464.6 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 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 records of such member or members do not properly reflect excessive profits for the related group's fiscal year.

(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.

(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 phases of the proceeding including commencement of renegotiation, submission of data, the making and execution of renegotiation agreements administrative review, and petition to the Tax Court.

(c) The Board will commence renegotiation with an affiliated group on a consolidated basis by sending a registered letter to the common parent corporation of such group, and such letter will constitute an acknowledgment by the Board that the group has complied