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 23637-7 - JSF Contract Bidding

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
JSF Contract Bidding -- (See Regulation
						23637-0
						for Table of Contents.)
(a) In
					 General. The JSF Property Credit shall not be allowed unless the credit is
					 reflected within the bid that forms the basis for the qualified taxpayer's
					 contract or subcontract to manufacture property for ultimate use in a Joint
					 Strike Fighter.
(b) Bid. For
					 purposes of this regulation, the term "bid" shall mean a written bid or offer
					 to perform a contract to produce a product that is designed to be physically
					 attached to or installed in a Joint Strike Fighter in response to a request for
					 bids to construct all or a portion of the Joint Strike Fighter Aircraft. The
					 bid shall be submitted in a competitive process where the contract will be
					 awarded to the lowest possible bidder or as otherwise indicated in the
					 conditions under which the bids will be received and the contract awarded.
					 Where the scope of work, request for proposal or relationship of the
					 contracting parties is such that only a single party will be submitting a
					 proposal or contract to construct all or a portion of the Joint Strike Fighter,
					 the term "bid" shall include the proposal or contract ultimately
					 executed.
(c) JSF Property Credit
					 Reflected Within the Bid. For purposes of this regulation, the term "reflected
					 within the bid" shall mean:
(1) the bid that
					 forms the basis of the contact or subcontract is reduced by the amount of the
					 JSF Property Credit allowable, and
(2) the amount of the JSF Property Credit
					 allowable is included on the face of the bid or an attachment to the bid that
					 forms the basis of the contract or subcontract.
The JSF Property Credit allowable shall be a lump sum
						number reflected on the contract or subcontract and the aggregate credit
						allowable over the term of the contract or subcontract is not required to be
						calculated on the basis of the year in which the credit amount is expected to
						be claimed.
EXAMPLE 1: X, a qualified taxpayer, submits a bid to the
						prime contractor in the amount of $90 to manufacture retractable landing gear
						for the Joint Strike Fighter. The bid price without the JSF Property Credit
						would have been $100. The bid form includes an attachment that states the JSF
						Property Credit allowable for the subcontract is $10 ($100 contract price less
						JSF Property Credit in the amount of $10, for a reduced contract price of $90).
						X is the successful bidder on the retractable landing gear and thereafter is
						awarded the contract to produce the part for the Joint Strike Fighter. X and
						the prime contractor execute a contract in the amount of $90. Under these
						facts, the $10 JSF Property Credit amount is reflected within the bid that
						forms the basis for X's subcontract to manufacture property for ultimate use in
						a Joint Strike Fighter and X may claim the $10 JSF Property Credit if all of
						the other requirements of Section
						23637
						of the Revenue and Taxation Code and this regulation are met.
EXAMPLE 2: Assume the same facts as in EXAMPLE 1, except
						that the bid form reflects a price of $100. In this circumstance, X is not
						eligible to claim the credit because X has not reduced the amount of the bid by
						the amount of the JSF Property Credit allowable.
EXAMPLE 3: Assume the same facts as in Example 1, except
						that the bid form reflects a price of $90, but the bid form does not contain an
						attachment showing the amount of the JSF Property Credit allowable. In this
						circumstance, X is not eligible to claim the credit because even though the bid
						amount has been reduced by the amount of the credit allowable, the amount of
						the credit allowable is not included on the face of the bid or in an attachment
						to the bid.
EXAMPLE 4: Assume the same facts as in EXAMPLE 1, except
						that the scope of the project changes after the bid is submitted and X and the
						prime contractor execute a contract in the amount of $120, reflecting an
						increase of $30 dollars in the original bid amount. In this circumstance, the
						cost for the expanded scope of the contract was added to the original bid
						amount. As a result, X would only be allowed to claim a $10 JSF Property Credit
						since that amount was reflected within the original bid.
EXAMPLE 5: X, a qualified taxpayer, is the prime
						contractor awarded the initial contract from the United States government for
						the Engineering and Manufacturing Development Phase of the Joint Strike Fighter
						Program. X does not include any amount for the Joint Strike Fighter credit in
						its bid for the Engineering and Manufacturing Development Phase accepted by the
						United States government. Under these facts, X is not able to claim the JSF
						Property Credit since the credit amount was not reflected within the bid that
						formed the basis for the initial contract for the Engineering and Manufacturing
						Development Phase.
EXAMPLE 6: Assume the same facts as in Example 5, and Y
						responds to a request from X and submits a bid to subcontract a portion of the
						scope of the work covered in the Engineering and Manufacturing Development
						Phase of the Joint Strike Fighter Program. The bid form includes an attachment
						that shows the JSF Property Credit allowable for the subcontract is $10 ($100
						contract price less JSF Property Credit in the amount of $10 for a reduced
						contract price of $90). Y is the successful bidder on that portion of the scope
						of the work and thereafter is awarded the contract to produce the part for the
						Joint Strike Fighter. X and Y execute a contract in the amount of $90. Under
						these facts, the $10 JSF Property Credit amount is reflected within the bid
						that forms the basis for Y's subcontract to manufacture property for ultimate
						use in a Joint Strike Fighter. Even though X, the prime contractor, did not
						reduce its bid for the prime contract and is not eligible to claim the JSF
						Property Credit, Y's bid met the bidding requirements for claiming the credit
						and Y may claim the $10 JSF Property Credit if all of the other requirements of
						Revenue and Taxation Code section
						23637
						and this regulation are met.
(3) With respect to a contract to construct
					 all or a portion of the Joint Strike Fighter that is executed on a "cost plus"
					 basis, the term "reflected within the bid" shall mean that (1) California
					 income or franchise taxes are treated as an item of cost to be reimbursed under
					 the terms of the contract, (2) the cost plus contract, or an attachment to the
					 contract, contains a calculation showing the amount of the JSF Property Credit
					 allowable, and (3) the California income or franchise taxes reimbursed under
					 the contract reflect the reduction for the amount of the JSF Property Credit
					 allowable.