revrul54-104

Internal Revenue Service
Revenue Ruling

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Rev. Rul. 54-104

1954-1 C.B. 391

IRS Headnote

Interim allowances in respect of net renegotiation rebates.

Full Text

Rev. Rul. 54-104 /1/

1. In the case of a renegotiation made prior to a recomputation of an amortization deduction pursuant to section 124(d) of the Internal Revenue Code in connection with the determination of taxes imposed by chapters 1, 2A, 2B, 2D and 2E of the Code for the fiscal year to which the excess profits determined by the renegotiation are attributable, the Renegotiation Act (Sixth Supplemental National Defense Appropriation Act, 1942, as amended) provides that there shall be repaid by the United States (without interest) to a contractor or subcontractor after such recomputation, the amount of a `net renegotiation rebate', as defined by the act. Under existing procedures (Mim. 6023, C.B. 1946-2, 187 and Mim. 6023, Supp. 1, C.B. 1951-1, 155) the `Federal tax benefit' from the renegotiation which is a necessary factor in determining the amount of the net renegotiation rebate to be repaid, is computed on the basis of the taxpayer's taxable income as adjusted and is furnished the Renegotiation Rebate Branch, General Services Administration, by the Internal Revenue Service, only after there has been a determination of the tax liability for the renegotiated year. In cases involving non-agreed or litigated issues, claims for relief under section 722 of the Code, and other features which preclude an early determination of the tax liability, this has resulted in substantial delays in completing action on contractors' applications for net renegotiation rebate payments under the act.

2. The purpose of this Revenue Ruling is to provide a procedure for the determination of a `tentative Federal tax benefit' in order that the Renegotiation Rebate Branch may approve interim payments of net renegotiation rebates in those cases where there has been a determination of the `gross renegotiation rebate' by the Renegotiation Rebate Branch but where the Federal tax benefit cannot be computed under existing procedures because there has been no final determination of the tax liability for the renegotiated year.

3. Contractors or subcontractors desiring to avail themselves of these interim payment provisions may do so by filing with the General Services Administration, Renegotiation Rebate Branch, an `Application for Interim Payment of Net Renegotiation Rebate' in the form of Exhibit A, page 21. The application should be submitted in triplicate and, as indicated therein, should include a computation of the Federal tax benefit which the contractor or subcontractor determines, from its own knowledge, to be applicable to the gross renegotiation rebate determined by the Renegotiation Rebate Branch.

4. Upon approval of the contractor's application by the Renegotiation Rebate Branch two copies will be transmitted to the National Office, Internal Revenue Service (Attention: O:C:ACR) with a request for a statement of the tentative Federal tax benefit applicable to the gross renegotiation rebate.

5. In order to adequately protect the interests of the Government and to assure that the interim payment will not exceed the net renegotiation rebate which would be due on the basis of a final determination of tax liability, the Federal tax benefit computed by corporation contractors, as shown in their applications, will be compared with the Federal tax benefit which would result if, in the case of the particular applicant, the maximum tax rates for the year involved were applicable. Since this will not be feasible in the cases of applicants other than corporations, and in view of the very limited number of such applicants, applications in other than corporation cases will be referred to the appropriate District Director's office for consideration and determination of a tentative Federal tax benefit on the basis of the facts existing in the particular case, using as a guide the general rule that each determination should be made upon the basis which will afford the contractor (taxpayer) the largest possible interim payment while at the same time safeguarding the Government's interests. The same procedure will be followed in certain corporation cases as described in paragraph 9 below. If the facts in the case are such that a tentative benefit may not be determined with sufficient definiteness to accomplish the purposes of this Revenue Ruling and at the same time assure protection of the Government's interest, the Renegotiation Rebate Branch will be advised that no tentative Federal tax benefit can be determined.

6. For the above purposes the gross renegotiation rebate as shown in any corporation application approved and forwarded by the Renegotiation Rebate Branch, will be multiplied by the appropriate percentage (maximum effective rate) from the following table according to the particular taxable year or years involved:

     Taxable years                              Applicable
                                                Percent
                                                (rate)
Calendar 1942 and 1943, or
fiscal years ended in 1943                      90
Fiscal years:
  Beginning        Ending
02/01/1943      01/31/1944                     90.424660
03/01/1943      02/29/1944                     90.819670
04/01/1943      03/31/1944                     91.243170
05/01/1943      04/30/1944                     91.653005
06/01/1943      05/31/1944                     92.076505
07/01/1943      06/30/1944                     92.486340
08/01/1943      07/31/1944                     92.909835
09/01/1943      08/31/1944                     93.333335
10/01/1943      09/30/1944                     93.743170
11/01/1943      10/31/1944                     94.166665
12/01/1943      11/30/1944                     94.576505
Calendar years 1944 and 1945, or
fiscal years ended in 1945                      85.5

7. If the Federal tax benefit as shown by the corporation in its application equals or exceeds the amount determined by the method described in the preceding paragraph, the amount shown in such application will be furnished the Renegotiation Rebate Branch by the Internal Revenue Service as the `tentative Federal tax benefit.'

8. If the Federal tax benefit as shown in the corporation's application is less than the amount determined by the method described in paragraph 6, but is at least 95 percent of such amount, then the amount determined by the method described in paragraph 6 will be furnished as the `tentative Federal tax benefit.'

9. If the tax benefit shown in the application is less than 95 percent of the amount determined by the method described in paragraph 6, a copy of the application will be forwarded to the office of the District Director having audit jurisdiction of the case for verification of the amount of the Federal tax benefits shown in the application on the basis of the facts existing in the particular case or, where necessary to protect the Government's interest, a recomputation of a different amount as a `tentative Federal tax benefit.'

10. Existing procedures for the determination of Federal tax benefits in renegotiation rebate cases, by field offices of the Internal Revenue Service, and for the furnishing of statements of such benefits to the Renegotiation Rebate Branch, General Services Administration, continue in effect and are not changed by this Revenue Ruling, irrespective of whether or not any application for an interim payment is made under its provisions. However, the statement of Federal tax benefit computed after there has been a determination of the tax liability for the renegotiated year under the provisions of Mimeograph 6023 (formerly forwarded with the file upon submission of the case for post-review action in Washington) will, in all cases not presently requiring routing to the National Office for review action, be routed to the National Office, Attention: O:C:ACR.

/1/ Originally issued as IR-Mimeograph No. 54-6, dated January 12, 1954.

EXHIBIT A

General Services Administration

Renegotiation Rebate Branch

18th and F Streets, N.W.

Washington 25, D.C.

On or about ________, 19___, the undersigned filed a claim for a

net renegotiation rebate in accordance with subsection (a)(4)(D) of

the Renegotiation Act, and the regulations promulgated thereunder.

Since no determination has been made of the amount of the net

renegotiation rebate properly payable on such claim, application is

hereby made for an interim-payment on account of such rebate, an in

support thereof the following facts are submitted:

(a) Name and address of claimant:

____________________________

(b) Fiscal year to which claim relates: __________________

(Ended)

agreement number_______ (or order) dated _________

(d) Amount of gross renegotiation rebate: _____________

(e) Federal tax benefit (Attach schedules showing

computation) /*/ __________

(f) Net renegotiation rebate ((d) minus (e)) __________

__________________

(Name of claimant)

By ____________________

________________________________

(Signature and title of authorized

official) /**/

I hereby certify that the facts set forth herein and in the

appended schedules and statements are true and correct to the best of

my knowledge, information and belief.

______________________________________________

(Title of officer authorized to execute claim) /**/

____________

(Date)

/*/ All applications and supporting documents must be filed in

triplicate.

/**/ An application filed by a corporation must be executed by an

authorized officer of corporation. For procedure for filing and

execution of applications by partnerships see par. RR

383.3(3)(c). Certification must be signed by same officer or

person executing application, if corporation or proprietorship, by

one general partner having knowledge of facts.

/***/ Title 18, U.S.C., sec. 1001, makes it a criminal offense to make

a willfully false statement or representation to any department or

agency of the United States as to any matter within its jurisdiction.