Agricultural commodity Tobacco---. Tree nuts, edible_-- Vegetables---- Vegetable seeds____ Agricultural Commodities Exemption List-Continued Last form or state at which exemption is to apply Fresh. Not processed beyond the form or state at which they may be used as seeds Wheat, rye, oats, and barley--- As threshed grain. Wool____. In the grease (as clipped from live animals). (3-15-66) 62.1 must be to perform services generally similar to those performed by the prime contractor or 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 if it meets the conditions set forth in subparagraph (1) of this paragraph 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, 1964, 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 charges based upon the manifest measurement or manifest weight of the cargo. (ii) This exemption does not apply to time, voyage or bareboat charters. 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. (3) Exemption of individual prime contracts. The Board will exempt any individual 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, (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. (2) Unregulated rates not in excess of regulated rates.-(i) If a common carrier or public utility enters into a contract for the furnishing of services which are the same as those for which a rate has been published or filed with, fixed, approved, or regulated by a public regulatory body and the rate provided by the transaction for such services is not in excess of such regulated rate, the contract is exempt from renego tiation under this section even though the services in question are not subject to regulation. For example, a prime contract entered into by a railroad for freight carriage at a rate negotiated under section 22 of the Interstate Commerce Act is exempt since section 22 permits a railroad to negotiate contracts with the Government at special rates which are below the public rates. (ii) If, under a contract at unregulated rates, the Government furnishes any benefits to the contractor or otherwise relieves the contractor from furnishing any of the services for which a rate has been published or filed with, fixed, approved or regulated by a public regulatory body, the contract is not exempt under this section unless the contract rate, aggregated with the prorated fair value of such benefits or other advantages, does not exceed the regulated rate. Example. An airline agrees to carry freight or personnel at charges below the regulated general or charter tariff rate for carrying similar loads for like distances. The services for which the tariff rate was established do not include the utilization by the airline of Government bases, facilities or ground personnel. The contract, however, provides that the airline may utilize Government bases, facilities and ground personnel, and thus the airline is not required to furnish services necessarily incident to the transportation for which the tariff rate was established. prorated fair value of the benefits thus provided by the Government is When the added to the contract rate, if the resulting aggregate exceeds the regulated rate, the contract is not exempt under this section. (3) Unregulated rates substantially as favorable as regulated rates.-If a public utility furnishes services to Departments and to other consumers at rates which are unregulated but which are substantially as favorable as regulated rates for comparable services, a contract for the furnishing of such services is exempt under this section. For example, a gas company delivers gas to a Department in a state where gas sales are unregulated. The rates charged under the contract are the same as or lower than the rates offered by the contractor to the public generally and such public rates are substantially as favorable to consumers as comparable regulated rates in comparable areas. The contract with the Department is exempt from renegotiation under this section. 1453.4 Contracts or subcontracts tax-exempt charitable, religous and educawith tional institutions. (a) sion.-Section 106(a)(5) of the act exempts the Statutory provifollowing: 70 (5) any contract or subcontract with an organization exempt from taxation under section 101(6) of the Internal Revenue Code, but only if the income from such contract or subcontract is not includible under section 422 of such code in computing the unrelated business net income of such organization; (b) Related statutory provisions. For the text of sections 101(6) and 422 of the Internal Revenue Code, see sections 1499.10 and 1499.11 of this subchapter, respectively. (c) Limitation.-The exemption provided in paragraph (5) of section 106 (a) of the act is limited to prime contracts or subcontracts for the procurement of materials or services from organizations exempt from taxation as prescribed in said paragraph (5). Subcontracts for the procurement of materials or services by such organizations from other persons are not exempt under such provision; such subcontracts are also specifically excluded from the subcontract exemption provided in section 106 (a) (7). See § 1453.6. 1453.5 Contracts that do not have a direct and immediate connection with the national defense. (a) Statutory Statutory provision.-Subsection 106(a)(6) of the act exempts the following: (6) any contract which the Board determines does not have a direct and immediate connection with the national defense. The Board shall prescribe regulations designating those classes and types of contracts which shall be exempt under this paragraph; and the Board shall, in accordance with regulations prescribed by it, exempt any individual contract not falling within any such class or type if it determines that such contract does not have a direct and immediate connection with the national defense. and types of contracts which shall be exempt and in In designating those classes exempting any individual contract under this paragraph, the Board shall consider as not having a direct or immediate connection with national defense any contract for the furnishing of materials or services to be used by the United States, a Department or agency thereof, in the manufacture and sale of synthetic rubbers to a private person or to private persons which are to be used for nondefense purposes. such private person or persons shall be partly for If the use by defense and partly for nondefense purposes, the Board shall consider as not having a direct or immediate connection with national defense that portion of the contract which is determined not to have been used for national defense purposes. ing such determination shall be subject to approval by The method used in makthe 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 |