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must be to perform services generally similar to those performed by the prime contractor of subcontractor as a common carrier or public utility. A contract which meets the tests prescribed herein qualifies for the exemption even though it is a contract by a common carrier for private carriage or is a contract by a public utility on terms not offered to the general public.

(d) Common carriers by water-(1) Fiscal years ending before December 31, 1953. -Removed to Appendix.

(2) Fiscal years ending on or after December 31, 1953.—(i) With respect to fiscal years ending on or after December 31, 1953, a contract with a common carrier for transportation by water is exempt only if the furnishing or sale of such transportation is subject to the jurisdiction of the Interstate Commerce Commission under the Interstate Commerce Act or subject to the jurisdiction of the Federal Maritime Board before August 12, 1961, or the Federal Maritime Commission on or after August 12, 1961, under the Intercoastal Shipping Act, 1933, or if the Board finds that the regulatory aspects of rates for the sale or furnishing of such transportation, or the type and nature of the contract for such furnishing or sale, are such as to indicate, in the opinion of the Board, that excessive profits are improbable. Pursuant to the foregoing authority, the Board has exempted from the provisions of the act, to the extent of amounts received or accrued before January 1, 1966, in any fiscal year ending on or after December 31, 1953:

(a) All prime contracts for transportation by common carrier by water at, or at rates below, rates or charges filed with, fixed, approved or regulated by the Federal Maritime Board before August 12, 1961, or by the Federal Maritime Commission on or after August 12, 1961.

(b) All prime contracts with the Military Sea Transportation Service for transportation of cargo at rates or charged based upon the manifest measurement or manifest weight of the cargo.

(ii) This exemption does not apply to time, voyage or bareboat charters.

(3) Exemption of individual prime contracts.—The Board will exempt any individ

ual prime contract with a common carrier for transportation by water when the Board finds, upon application of the contractor, that the regulatory aspects of rates for the sale or furnishing of such transportation, or the type and nature of the contract for such furnishing or sale, are such as to indicate, in the opinion of the Board, that excessive profits are improbable. Any application for such a finding shall be filed with the Board not later than the date when the contractor files the financial statement prescribed in section 105 (e) (1) of the act (see 1470.3 (a) of this subchapter) for the fiscal year in which the contractor received or accrued the amounts with respect to which the exemption is claimed. In any financial statement so filed, receipts or accruals under any contract with respect to which the Board is requested to make such a finding shall be included initially in computing the aggregate renegotiable receipts or accruals of the contractor for the fiscal year to which such statement relates.

(e) Exempt rates: Regulated and unregulated.—Section 106(a) (4) of the act exempts prime contracts and subcontracts of a public utility or a common carrier only if the rates charged thereunder fall into one of the three following types: (i) Rates filed with, fixed, approved or regulated by a public regulatory body; (ii) unregulated rates charged for services for which published rates are filed with, fixed, approved or regulated by a public regulatory body and which unregulated rates are not in excess of such regulated rates; (iii) unregulated rates which are not in excess of unregulated rates offered generally by such a public utility which are substantially as favorable to users and consumers as are comparable regulated rates.

(1) Published rates.-If a common carrier or public utility enters into a prime contract or subcontract to be performed at rates published or filed with, fixed, approved or regulated by a public regulatory body, State, Federal, or local, such prime contract or subcontract is exempt. Example: A prime contract entered into by a railroad for transporting Government personnel at rates not in excess of the tariff rates available to the general public is exempt from renegotiation under this section.

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uyucuted rates not in excess of tially as favorable to consumers as comparegulated rates.-- (i) If a common carrier or rable regulated rates in comparable areas. public utility enters into a contract for the The contract with the Department is exempt furnishing of services which are the same as from renegotiation under this section. those for which a rate has been published or 1453.4 Contracts or subcontracts with filed with, fixed, approved, or regulated by a tax-exempt charitable, religious and educapublic regulatory body and the rate provided tional institutions.-(a) Statutory proviby the transaction for such services is not in sion.--Section 106(a) (5) of the act exempts excess of such regulated rate, the contract is the following: exempt from renegotiation under this section (5) any contract or subcontract with an organizaeven though the services in question are not tion exempt from taxation under section 101 (6) of subject to regulation. For example, a price

the Internal Revenue Code, but only if the income

from such contract or subcontract is not includible contract entered into by a railroad for freight

under section 422 of such code in computing the uncarriage at a rate negotiated under section related business net income of such organization; 22 of the Interstate Commerce Act is exempt

(b) Related statutory provisions.--For since section 22 permits a railroad to nego the text of sections 101 (6) and 422 of the tiate contracts with the Government at spe

Internal Revenue Code, see sections 1499.10 cial rates which are below the public rates.

and 1499.11 of this subchapter, respectively. (ii) If, under a contract at unregulated

(c) Limitation. The exemption provided rates, the Government furnishes any benefits

in paragraph (5) of section 106(a) of the act to the contractor or otherwise relieves the

is limited to prime contracts or subcontracts contractor from furnishing any of the serv.

for the procurement of materials or services ices for which a rate has been published or

from organizations exempt from taxation as filed with, fixed, approved or regulated by a

prescribed in said paragraph (5). Subconpublic regulatory body, the contract is not

tracts for the procurement of materials or exempt under this section unless the contract

services by such organizations from other rate, aggregated with the prorated fair value

persons are not exempt under such provision; of such benefits or other advantages, does not

such subcontracts are also specifically exexceed the regulated rate.

cluded from the subcontract exemption proExample. An airline agrees to carry freight or personnel at vided in section 106(a) (7). See $ 1453.6. marges below the regulated general or charter tariff rate for

1453.5 Contracts that do not have a direct Errying similar loads for like distances. The services for which e tariff rate was established do not include the utilization by

and immediate connection with the national e airline of Government bases, facilities, or ground personnel.

defense. (a) Statutory provision. Subsecne contract, however, provides that the airline may utilize vernment bases, facilities, and ground personnel, and thus

tion 106 (a) (6) of the act exempts the fole airline is not required to furnish services not necessarily -ident to the transportation for which the tariff rate was lowing: ablished. When the prorated fair value of the benefits thus

(6) any contract which the Board determines does vided by the Government is added to the contract rate, if the

not have a direct and immediate connection with the alting aggregate exceeds the regulated rate, the contract is

national defense. The Board shall prescribe regulaexempt under this section. (3) Unregulated rates substantially as fa tions designating those classes and types of contracts

which shall be exempt under this paragraph; and the cable as regulated rates. If a public utility

Board shall, in accordance with regulations prenishes services to Departments and to

scribed by it, exempt any individual contract not faller consumers at rates which are unregu ing within any such class or type if it determines d but which are substantially as favor that such contract does not have a different and im

mediate connection with the national defense. In - as regulated rates for comparable serv

designating those classes and types of contracts which a contract for the furnishing of such

shall be exempt and in exempting any individual conices is exempt under this section. For

tract under this paragraph, the Board shall consider nple, a gas company delivers gas to a

as not having a direct or immediate connection with artment in a state where gas sales are national defense any contract for the furnishing of gulated. The rates charged under the materials or services to be used by the United States,

a Department or agency thereof, in the manufacture -act are the same as or lower than the

and sale of synthetic rubbers to a private person or offered by the contractor to the public

to private persons which are to be used for nondecally and such public rates are substan

fense purposes. If the use by such private person

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(b) Exemptions.-Subject to the limitation provided in paragraph (c) of this section, the Board has determined that the following classes and types of prime contracts do not have a direct and immediate connection with the national defense:

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or persons shall be partly for defense and partly for nondefense purposes, the Board shall consider as not having a director immediate connection with national defense that portion of the contract which is determined not to have been used for national defense purposes. The method used in making such determination shall be subject to approval by the Board. Notwithstanding section 108 of this title, regulations prescribed by the Board under this paragraph, and any determination of the Board that a contract is or is not exempt under this paragraph, shall not be reviewed or redetermined by the Tax Court or any other court or agency: [Matter in italics added by Pub. Law 764, 83d Cong., approved September 1, 1954.]

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(1) Building maintenance and repair.Contracts for maintenance and repair of buildings and structures. This exemption does not apply to contracts for the renovation or reactivation

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tion that such prime contract be determined to be exempt from renegotiation under section 106 (a) (6) of the act, through the Department entering into such prime contract.

(g) Revoked.

1453.6 Subcontracts under exempt contracts and subcontracts.- (a) Statutory provision.-Section 106(a) (7) of the act exempts the following:

(7) any subcontract directly or indirectly under a contract or subcontract to which this title does not apply by reason of any paragraph, oher than parugruph (1), (5), or (8) of this subsection; [Matter in italics added by sec. 5 (a) of Pub. Law 764, 83d Cong., approved September 1, 1954, as amended by sec. 8 (a), Pub. Law 870, 84th Cong., approved August 1, 1956. The latter amendment added the reference to paragraphs (1) and (5) and applies only with respect to subcontracts made after June 30, 1956.]

(b) Interpretation and application. (1) The foregoing exemption applies only when the subcontract is under a prime contract or subcontract exempted by any paragraph of section 106(a) of the act other than paragraph (1), (5), or (8). Thus, a subcontract under a prime contract or subcontract for a standard commercial article or service exempted under paragraph (8) is not exempt under paragraph (7); a subcontract made after June 30, 1956, under a prime contract with, for example, a State or municipal corporation exempted under paragraph (1), is not exempt under paragraph (7); and a subcontract made after June 30, 1956, under a prime contract or subcontract with, for example, a tax-exempt charitable institution exempted under paragraph (5), is not exempt under paragraph (7). The exemption in paragraph (7) does not apply to subcontracts under prime contracts or subcontracts for (i) standard commercial articles or services exempted under section 106(e), or (ii) new durable productive equipment partially exempted under section 106 (c) of the act.

(2) Subcontracts for the furnishing of packaging materials and containers in which there are delivered materials or products pursuant to prime contracts or subcontracts which are exempt under any paragraph of section 106(a) of the act, except paragraph (1), (5), or (8) thereof, are subcontracts under exempt contracts, and are exempt from renegotiation.

(3) Certain subcontracts related to prime contracts which the Board has exempted pursuant to section 106(d) of the act, have also been exempted by the Board. (See $ 1455.7 of this subchapter.)

1153.7 Construction contracts awarded as a result of competitive bidding.-(a) Statutory provision.-Section 106(a) (9) of the act (added by Pub. Law 216, 84th Cong., approved August 3, 1955) exempts the following:

(9) any contract, awarded as a result of competitive bidding, for the construction of any building, structure, improvement, or facility, other than a contract for the construction of housing financed with a mortgage or mortgages insured under the provisions of title VIII of the National Housing Act, as now or hereafter amended.

[The statutory provision set forth above applies only to contracts with the Departments made after December 31, 1954.]

(b) Scope of exemption.—(1) It is considered that a prime contract is exempt under paragraph (a) of this section, if it meets all of the following conditions:

(i) The contract was made after December 31, 1954.

(ii) The contract is for the construction or installation of the whole or any integral part of a building, structure, improvement or similar facility, and is not one for the constrution of housing financed with a mortgage or mortgages insured under the provisions of title VIII of the National Housing Act, as now or hereafter amended.

(iii) The contract was awarded in conformity with the requirements for procurement by formal advertising set forth in section 3 of the Armed Services Procurement Act of 1947. See Report of Senate Committee on Finance ((1955) S. Rept. 582, 84th Cong. 3, to accompany H. R. 4904.)

(c) Application of exemption. The exemption does not apply to contracts for the sale or furnishing of machinery and equipment, even if such machinery or equipment is to be used in the construction of a building, structure, improvement or similar facility, or is to be installed therein. Such contracts are subject to renegotiation under the provisions of $ 1452.5(b) (2) of this subchapter. When the construction or installation of the whole or any integral part of a building, structure,

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