California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 3 - Corporation Income Tax › Article 3 - Tax Credits › Section 23637-3 - Qualified Taxpayer

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
Qualified Taxpayer - (See Regulation
						23637-0
						for Table of Contents.)
(a) In
					 General. For purposes of Regulations 23637-1 through 23637-11, inclusive, a
					 qualified taxpayer is any taxpayer under an initial contract or initial
					 subcontract to manufacture property for ultimate use in a Joint Strike Fighter.
					 The term "initial contract" shall mean the contract executed by the United
					 States government and a prime contractor for any phase, including the
					 Engineering and Manufacturing Development Phase, of the Joint Strike Fighter
					 Program to produce the Joint Strike Fighter Aircraft. The term "initial
					 subcontract" shall mean a contract between a prime contractor and any other
					 contractor, or between two contractors where one of those contractors is under
					 contract with the prime contractor or where the prime contractor or a
					 contractor under contract with the prime contractor has consented to the
					 contract in writing, to produce a product that is physically attached to or
					 installed in a Joint Strike Fighter Aircraft under the initial contract.
EXAMPLE 1: X is awarded the contract for the Engineering
						and Manufacturing Development Phase of the Joint Strike Fighter Program and
						executes a contract with the United States government for completion of that
						phase. Under these facts, X is a qualified taxpayer because X is a prime
						contractor awarded the initial contract from the United States government for a
						phase of the Joint Strike Fighter Program.
EXAMPLE 2: Assume the same facts as EXAMPLE 1, except
						that X and Y are both awarded a portion of the contract for the Engineering and
						Manufacturing Development Phase of the Joint Strike Fighter Program and both
						execute contracts with the United States government for completion of their
						respective portions of that phase. Under these facts, both X and Y are
						qualified taxpayers because they are prime contractors awarded initial
						contracts from the United States government for a phase of the Joint Strike
						Fighter Program.
EXAMPLE 3: Assume the same facts as EXAMPLE 1, except
						that Z submits a bid to X, the prime contractor, and is awarded a subcontract
						to manufacture a product for ultimate use in a Joint Strike Fighter under the
						scope of the initial contract. Under these facts, Z is a qualified taxpayer
						because Z is a subcontractor under an initial subcontract for a phase of the
						Joint Strike Fighter Program.
EXAMPLE 4: Assume the same facts as EXAMPLE 3, except
						that A submits a bid to Z and is awarded a contract with Z to perform a portion
						of Z's work under the scope of Z's contract with X. Under these facts, A is
						also a qualified taxpayer because Z is under contract with one of the prime
						contractors and A is therefore a subcontractor under an initial subcontract for
						a phase of the Joint Strike Fighter Program.
EXAMPLE 5: Assume the same facts as EXAMPLE 4, except
						that A contracts with B to complete a portion of the work under A's contract
						with Z. Neither X nor Z consent in writing to the contract between A and B. B
						thereafter completes all of the work in its contract with A. Even though A has
						assisted in manufacturing a product for ultimate use in a Joint Strike Fighter
						under the scope of the initial contract, A is not a qualified taxpayer because
						X has not consented in writing to the contract and B is thus not a
						subcontractor under an initial subcontract for a phase of the Joint Strike
						Fighter Program.
(b)
					 Pass-Through Entities. For purposes of Regulations 23637-1 through 23637-11,
					 inclusive, in the case of any partnership or S corporation, the determination
					 of whether a taxpayer is a qualified taxpayer shall be made at the entity
					 level. Any credit allowed under Revenue and Taxation Code section
					 23637 and this regulation shall be
					 passed through to the partners or shareholders in accordance with applicable
					 provisions of Part 10 (commencing with section
					 17001) or Part 11 (commencing with
					 section 23001) of the Revenue and Taxation
					 Code.
1. New
						section filed 1-23-2003; operative 2-22-2003 (Register 2003, No.
						4).
Note: Authority cited: Section
						  19503,
						  Revenue and Taxation Code. Reference: Section
						  23637,
						  Revenue and Taxation Code.