An Act to amend section 433 (b), 457, and 459 of the Internal Revenue Code, and for other purposes
PL 82-594 (H.R.8271), enacted 07/21/1952

818 
PUBLIC LAW 594-JULY 21, 1952 
[66 S T A T . 
Public Law 594 
CHAPTER 951 
July 21, 1952 
^^ 
ACT 
[H. R. 8271] 
ijo amend sections 433 (b), 457, and 459 of the Intei-nal Revenue Code, and 
for other purposes. 
Internal R evenue 
Code,amendments. 
64 Stat. 1188. 
26 use 457. 
Post, p. 819. 
49 Stat. 2005. 
4 6 use 1177. 
65Stat. 553-557. 
26 u s e 459. 
26 use 4 4 3. 
26 use 444. 
26 use 141. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America 
in Congress assembled, That, effective 
with respect to taxable years ending after June 30, 1950, section 457 
of the Internal Revenue Code, as added by section 101 of the Excess 
Profits Tax Act of 1950, is hereby amended by changing its heading 
to read "CORPORATIONS COMPLETING CONTRACTS OR MAKING DEPOSITS 
UNDER MERCHANT MARINE ACT" and by adding to said section 457 the 
following new subsection: 
"(c) 
BASE PERIOD EARNINGS CREDIT FOR DEPOSITS UNDER MERCHANT 
MARINE ACT, 1936.—^The excess profits net income computed under 
section 433 (b) for any base period year shall be increased by the 
amount, if any, by which (1) the taxpayer's tax-deferred deposits 
of earnings, made in or accrued to reserve funds under section 607 of 
the Merchant Marine Act, 1936, in respect of such base period year, 
exceeds (2) the amount of such deposits of earnings for the taxable 
year. The Secretary shall provide, by regulation, for proper adjust-
ment of the deposits made in or accrued to the reserve funds for any 
taxable year so as to exclude therefrom any amount payable for such 
year as reimbursement of operating-differential subsidy." 
SEC. 2. Section 459 of the Internal Revenue Code (miscellaneous 
provisions relating to the computation of average base period net 
income) is hereby amended by adding at the end thereof the following 
new subsection: 
"(f) 
COMPANIES PRESERVING DEFENSE CAPACITY AND INCREASING 
CAPACITY FOR MANUFACTURING PEACETIME PRODUCTS FROM CERTAIN 
STRATEGIC AND CRITICAL METALS.— 
"(1) 
ELIGIBILITY REQUIREMENT.—In the case of a taxpayer 
which commenced business on or prior to January 1, 1936, and 
since such date has been primarily engaged in manufacturing, if— 
"(A) The percentage of the taxpayer's purchases of raw 
materials which were strategic and critical metals (as defined 
in paragraph (3)) was 80 per centum or more for each of 
the taxable years beginning with or within the taxpayer's 
base period; 
"(B) The taxpayer's average monthly excess profits net 
income (computed in the manner provided in section 443 
(e)) for the period comprising all taxable years ending with 
or within the first twenty-four months of its base period was 
250 per centum or more of the average monthly excess profits 
net income (so computed) of the taxpayer for the period 
comprising all taxable years ending with or within the last 
twenty-four months of its base period; 
"(C) The adjusted basis of the taxpayer's total facilities 
(as defined in section 444 (d)) as of the beginning of its base 
period (when added to the total facilities at such time of all 
corporations with which the taxpayer has the privilege 
under section 141 of filing a consolidated return for its first 
taxable 
year under 
this subchapter) 
did 
not 
exceed 
$10,000,000; and 
"(D) The adjusted basis of the taxpayer's total facilities 
(as defined in section 444 (d)) on the last day of its base 
period was 180 per centum or more of the adjusted basis 
of its total facilities on the first day of its base period. 
66 S T A T . ] 
PUBLIC LAW 5 9 4 - J U L Y 21, 1952 
819 
the taxpayer's average base period net income determined under 
this subsection shall be the amount computed under para-
graph (2). 
. 
. 
, 
" (2) COMPUTATION.—The average base period net income deter-
mined under this subsection for a taxpayer entitled to the benefits 
of this subsection shall be the amount computed under section 
435 (e) (2) (E) and (F) except that there shall be substituted 
26 use 435. 
for the aggregate of the excess profits net income for each of the 
six months in the period beginning July 1, 1949, and ending 
December 31, 1949, an amount computed by multiplying the 
aggregate of the excess profits net income for each of the six 
months in the period beginning July 1, 1946 and ending Decem-
ber 31, 1946, by the per centum determined by dividing the 
adjusted basis of taxpayer's total facilities (as defined in section 
444 (d)) on December 31, 1948, by the adjusted basis of its 
26 use 444. 
total facilities on the first day of its base period. The average 
base period net income computed under the preceding sentence 
shall not exceed 80 per centum of the excess profits tax net income 
for the taxpayer's first taxable year under this subchapter. 
•'(3) DEFINITION OF STRATEGIC AND CRITICAL METALS.-^AS used 
in this subsection, the term 'strategic and critical metals' means 
copper and zinc which on January 1, 1945, had been determined 
by proper authority to be strategic and critical under the pro-
visions of the Strategic and Critical Stock Piling Act and shall 
|o ^tat. 596. 
include scrap containing such metals." 
SEC. 3. The amendment made by section 2 shall be applicable with 
respect to all taxable ^ears ending after June 30, 1950. 
SEC. 4. Effective with respect to taxable years ending after June 
30, 1950, section 433 (b) of the Internal Kevenue Code (relating to 
|^u*sc4^33^' 
the computation of average base period net income) is hereby amended 
by inserting at the end thereof two new paragraphs reading as follows: 
"(18) 
ADJUSTMENT FOR BASE PERIOD LOSSES FROM BRANCH OPER-
ATIONS.—In the case of a taxpayer which during two or more such 
taxable years operated a branch at a loss, the excess profits net 
income for each such taxable year (determined without regard to 
this paragraph) shall be increased by the amount of the excess of 
such loss above the loss, if any, incurred by such branch during 
the taxable year for which the tax under this subchapter is being 
computed. As used in this paragraph, the term 'branch' means a 
unit or subdivision of the taxpayer's business which was operated 
in a separate place from its other business and differed substan-
tially from its other business with respect to character of products 
or services. A unit or subdivision of the taxpayer's business shall 
not be considered to differ substantially from the taxpayer's other 
business unless it is of a type classifiable by the Standard Indus-
trial Classification Manual in a different major industry group 
or in a different subgroup of the taxpayer's major industry group 
than that in which its other business is so classifiable: Provided^ 
however^ That this paragraph shall not apply unless the sum of 
the net losses of such branch during the base period exceeded 15 
per centum of the aggregate excess profits net income of the 
taxpayer during the base period. For the purposes of this para-
graph, the aggregate excess profits net income of the taxpayer 
during the base period shall be the sum of its excess profits net 
income for all years in the base period, increased by the sum of the 
net losses of such branch during the base period. 
93300 0 - 5 3 - 5 5 
820 
PUBLIC LAW 594-JULY 21, 1952 
[66 S T A T . 
"(19) RULES FOR APPLICATION OF PARAGRAPH (18).—For 
the 
purposes of paragraph (18)— 
"(A) A branch shall be deemed to have been operated at 
a loss during a taxable year if the portion of the deductions 
26 use 23. 
under section 23 for such year which is determined, under 
regulations prescribed by the Secretary, to be the portion 
thereof properly allocable to the operation of such branch 
exceeds the portion of the gross income during the taxable 
year which is determined under such regulations to be the 
portion thereof properly allocable to the operation of such 
branch; and the amount of the loss shall be an amount equal 
to such excess. 
"(B) If the portion of the gross income determined to 
be properly allocable to the operation of the branch is a 
minus quantity, the amount of such excess shall be the 
sum of the deductions under section 23 determined to be 
properly allocable to the operation of the branch plus an 
amount equal to such minus quantity." 
26u«;'ii4^note. 
SEC. 5. Section 319 (c) of the Revenue Act of 1951 is amended 
to read as follows: 
"(c) EFFECTIVE DATE.—^The amendments made by this section shall 
be effective on and after January 1, 1951." 
, 
. 
. 
Approved July 21, 1952.