(c) Audit of books and records of contractors or subcontractors; use of services of Bureau of Internal Revenue.

For the purpose of administering this section the Secretary of Defense shall have the right to audit the books and records of any contractor or subcontractor subject to this section. In the interest of economy and the avoidance of duplication of inspection and audit, the services of the Bureau of Internal Revenue shall, upon request of the Secretary of Defense and with the approval of the Secretary of the Treasury, be made available to the extent determined by the Secretary of the Treasury for the purpose of making examinations and audits under this section.

(d) Contracts excepted.

The provisions of this section shall not apply to any of the contracts or subcontracts specified in subsection (i) (1) of the Renegotiation Act of February 25, 1944, as amended [section 1191 (1) (1) of this Appendix], and the Secretary of Defense in his discretion may exempt from the provisions of this section any other contract or subcontract both individually and by general classes or types.

(e) Conclusiveness of agreements or orders; fraud or malfeasance; redetermination by Tax Court. Agreements or orders determining excessive profits shall be final and conclusive in accordance with their terms and except upon a showing of fraud or malfeasance or willful misrepresentation of a material fact shall not be annulled, modified, reopened, or disregarded, except that in the case of orders determining excessive profits the amount of the excessive profits, if any, may be redetermined by the Tax Court of the United States in the manner prescribed in subsection (e) (1) of the Renegotiation Act of February 25, 1944, as amended [section 1191 (a) (1) of this Appendix], except that such redetermination shall be subject to review to the extent and in the manner provided by subchapter B of chapter 5 of the Internal Revenue Code [I.R.C. 1939].

(f) Publication of regulations, standards and procedures.

The Secretary of Defense shall promulgate and publish in the Federal Register regulations interpreting and applying this section and prescribing standards and procedures for determining and eliminating excessive profits hereunder using so far as he deems practicable the principles and procedures of the Renegotiation Act of February 25, 1944, as amended [section 1191 of this Appendix], having regard for the different economic conditions existing on or after the effective date of this Act [May 21, 1948] from those prevailing during the period 1942 to 1945. In any case in which the contract price of any such contract or subcontract was based upon estimated costs, then the Secretary of Defense shall determine the difference between such estimated costs and actual costs and shall, in eliminating excessive profits, take into consideration as an element the extent to which such difference is the result of the efficiency of the contractor or subcontractor.

(g) Delegation of powers and duties of Secretary of Defense.

The powers and duties conferred upon the Secretary of Defense may be delegated by him to any officer (military or civilian) or agency of the De

(h) Penalties.

Any person who willfully fails or refuses to furnish any information, records, or data required of him under this section, or who knowingly furnishes any such information, records, or data containing information which is false or misleading in any material respect, shall, upon conviction thereof, be punished by a fine of not more than $10,000 or imprisonment for not more than two years, or both.

(i) Short title.

This section may be cited as the "Renegotiation Act of 1948." (May 21, 1948, ch. 333, § 3, 62 Stat. 259; Aug. 10, 1949, ch. 412, § 12 (a), 63 Stat. 591.)

CHANGE OF NAME

The National Military Establishment was changed to the Department of Defense by act Aug. 10, 1949.

The official title of the Bureau of Internal Revenue was changed to the Internal Revenue Service by Treas. Dept. Order 150-29, eff. July 9, 1953.

TRANSFER OF FUNCTIONS

All functions of all officers of the Department of the Treasury, and all functions of all agencies and employees of that Department, were transferred, with certain exceptions, to the Secretary of the Treasury, with power vested in him to authorize their performance or the performance of any of his functions, by any of those officers, agencies, and employees, by 1950 Reorg. Plan No. 26, §§ 1, 2, eff. July 31, 1950, 15 F.R. 4935, 64 Stat. 1280, set out in the Appendix to Title 5, Government Organization and Employees. The Bureau of Internal Revenue, referred to in this section, is an agency in the Treasury Department. DEPARTMENT OF DEFENSE PROCUREMENT CONTRACTS FOR

FISCAL YEAR 1950 SUBJECT TO THIS SECTION Section 622 (a) of act Oct. 29, 1949, ch. 787, 63 Stat. 1021, provided that: "All negotiated contracts for procurement in excess of $1,000 entered into during the fiscal year 1950 by or on behalf of the Department of Defense (including the Department of the Army, Department of the Navy, and Department of the Air Force), and all subcontracts thereunder in excess of $1,000, are hereby made subject to the Renegotiation Act of 1948 [this section] in the same manner and to the same extent as if such contracts and subcontracts were required by such Act [this section] to contain the renegotiation article prescribed in subsection (a) of such Act [this section]. Each contract and subcontract made subject to the Renegotiation Act of 1948 [this section] by this section shall contain an article stating that it is subject to the Renegotiation Act of 1948 [this section]. In determining whether the amounts received or accrued to a contractor or subcontractor during his fiscal year from contracts and subcontracts subject to the Renegotiation Act of 1948 [this section] amount in the aggregate to $100,000, receipts or accruals from contracts and subcontracts made subject to such Act [this section] by this section shall be added to receipts or accruals from all other contracts and subcontracts subject to such Act [this section]." PROCUREMENT CONTRACTS OF DEPARTMENTS OF THE ARMY, NAVY, AND AIR FORCE DURING FISCAL YEAR 1949 Section 401 of act June 25, 1948, ch. 658, title IV, 62 Stat. 1049, provided that: "The Secretary of Defense is authorized and directed, whenever in his judgment the best interests of the United States so require, to direct the insertion of a clause incorporating the Renegotiation Act of 1948 [this section] in any contracts for the procurement of ships, aircraft, aircraft parts, and the construction of facilities or installations outside continental United States entered into by or in behalf of the Department of the Army, the Department of the Navy or the Department of the Air Force which obligates any funds made available for obligation in the fiscal year 1949." SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1212 of this

ACT DEC. 17, 1942, CH. 739, 56 STAT. 1053

§ 1201. Acquisition and operation of buildings and facilities by Secretary of Navy.

Whenever the Secretary of the Navy finds it impossible to make contracts or obtain facilities in the procurement or construction of items authorized in connection with the prosecution of war or the maintenance of the national defense he is authorized to provide, out of appropriations available to the Navy Department for such purposes, the necessary buildings, facilities, utilities, and appurtenances thereto on Government-owned land or elsewhere, and to provide for their operation, either by means of Government personnel or otherwise. (Dec. 17, 1942, ch. 739, § 1, 56 Stat. 1053, Aug. 7, 1946, ch. 770, § 1 (32), 60 Stat. 868; July 3, 1952, ch. 570, § 1 (a) (1), 66 Stat. 330.)

Section 4 of act Dec. 17, 1942, provided as follows: "This Act shall be effective from June 30, 1942, and shall remain in force until the termination of the present war or until such earlier time as the Congress by concurrent resolution or the President by proclamation may designate."

SHORT TITLE OF 1952 AMENDMENT

Congress in enacting Joint Res. July 3, 1952, provided by section 8 thereof that it should be popularly known as the "Emergency Powers Continuation Act". For classification of Joint Res. July 3, 1952, see Tables Volume.

CONTINUATION OF PROVISIONS UNTIL AUGUST 1, 1953 Joint Res. June 30, 1953, ch. 172, 67 Stat. 132 and Joint Res. Mar. 31, 1953, ch. 13, § 1, 67 Stat. 18, amended Joint Res. July 3, 1952, ch. 570, 66 Stat. 332, to extend the time limitation on the effectiveness of the provisions of this section from April 1, 1953 to August 1, 1953.

REPEAL OF PRIOR ACTS CONTINUING SECTION Act Apr. 4, 1953, ch. 21, § 2, 67 Stat. 23, repealed Joint Res. July 3, 1952, ch. 570, § 1(a) (18) which continued the effectiveness of this section until Apr. 1, 1953. Section 6 of Joint Res. July 3, 1952, repealed Joint Res. Apr. 14, 1952, ch. 204, 66 Stat. 54 as amended by Joint Res. May 28, 1952, ch. 339, 66 Stat. 96; Joint Res. June 14, 1952, ch. 437, 66 Stat. 137; Joint Res. June 30, 1952, ch. 526, 66 Stat. 296, which continued provisions until July 3, 1952. This repeal took effect as of June 16, 1952, by section 7 of Joint Res. July 3, 1952.

SEPARABILITY OF PROVISIONS

Section 5 of Joint Res. July 3, 1952, provided that: "If any provision of this joint resolution, or the application thereof to any person or circumstances, is held invalid, the remaining provisions of this joint resolution, or the application of such provision to other persons or circumstances, shall not be affected thereby."

ACT MAR. 23, 1951, CH. 15, 65 STAT. 7 TITLE I.—RENEGOTIATION OF CONTRACTS TITLE REFERRED TO IN OTHER SECTIONS This title is referred to in title 26 section 2602.

§ 1211. Congressional declaration of policy.

It is recognized and declared that the Congress has made available for the execution of the national

defense program extensive funds, by appropriation and otherwise, for the procurement of property, processes, and services, and the construction of facilities necessary for the national defense; that sound execution of the national defense program requires the elimination of excessive profits from contracts made with the United States, and from related subcontracts, in the course of said program; and that the considered policy of the Congress, in the interests of the national defense and the general welfare of the Nation, requires that such excessive profits be eliminated as provided in this title [sections 1211 to 1224 of this Appendix]. (Mar. 23, 1951, ch. 15, title I, § 101, 65 Stat. 7.)

SHORT TITLE

Congress in enacting sections 1211-1233 of this Appendix and amending section 1191 of this Appendix and section 3806(a)(1) of Title 26, I.R.C. 1939, provided, by section 1 of act Mar. 23, 1951, that they should be popularly known as the "Renegotiation Act of 1951."

SEPARABILITY OF PROVISIONS

Section 204 of act Mar. 23, 1951, provided that: "If any provision of this Act [sections 1211-1233 of this Appendix] or the application of any provision to any person or circumstance is held invalid, the validity of the remainder of the Act [said sections] and of the application of its provisions to other persons and circumstances shall not be affected thereby."

STUDIES OF PROCUREMENT POLICIES AND PRACTICES Pub. L. 86-89, § 4, July 13, 1959, 73 Stat. 211, as amended by Pub. L. 87-4, Mar. 22, 1961, 75 Stat. 6; Pub. L. 87-55, June 21, 1961, 75 Stat. 95, provided that:

"(a) (1) The Committee on Armed Services of the Senate, or any duly authorized subcommittee thereof, and the Committee on Armed Services of the House of Representatives, or any duly authorized subcommittee thereof, are directed to make full and complete studies of the procurement policies and practices of the Department of Defense, the Department of the Air Force, the Department of the Army, and the Department of the Navy. Such studies shall include an examination of the experience of such Departments in the use of various methods of procurement and types of contractual instruments, with particular regard to the effectiveness thereof in achieving reasonable costs, prices, and profits.

"(2) Each committee shall, not later than September 30, 1960, report to its House the results of the study conducted by it pursuant to paragraph (1) of this subsection, together with such recommendations as it deems necessary or desirable. Each committee shall make all material and data collected in the course of the study conducted by it available to the Joint Committee on Internal Revenue Taxation to assist it in making the study required by subsection (b).

"(b) (1) The Joint Committee on Internal Revenue Taxation, or any duly authorized subcommittee thereof, is directed to make a full and complete study of the Renegotiation Act of 1951, as amended [sections 1191, and 1211-1233 of this Appendix], and of the policies and practices of the Renegotiation Board.

"(2) The Joint Committee shall, not later than January 31, 1962, report to the Senate and the House of Representatives the results of the study conducted pursuant to paragraph (1) of this subsection, together with such recommendations as it deems necessary or desirable.

"(3) For the purpose of making the study and report required by paragraph (1) of this subsection, the Joint Committee, and the Chief of Staff of the Joint Committee, may exercise any of the powers conferred upon the Joint Committee and the Chief of Staff of the Joint Committee by sections 8021 and 8023 of the Internal Revenue Code of 1954 [Title 26]. The provisions of section 8023 (b) of such Code shall apply to requests made under the authority of this paragraph to the same extent as in the case of other requests made under the authority of section 8023 (a) of such Code."

CROSS REFERENCES

Peace Corps program contracts subject to provisions of section 1211 et seq. of this Appendix, see section 2509 of Title 22, Foreign Relations and Intercourse.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1212 to 1224 of this Appendix.

§ 1212. Contracts subject to renegotiation. (a) Generally.

The provisions of this title [sections 1211 to 1224 of this Appendix] shall be applicable (1) to all contracts with the Departments specifically named in section 103 (a) [section 1213 (a) of this Appendix], and related subcontracts, to the extent of the amounts received or accrued by a contractor or subcontractor on or after the first day of January 1951, whether such contracts or subcontracts were made on, before, or after such first day, and (2) to all contracts with the Departments designated by the President under section 103 (a) [section 1213 (a) of this Appendix], and related subcontracts, to the extent of the amounts received or accrued by a contractor or subcontractor on or after the first day of the first month beginning after the date of such designation, whether such contracts or subcontracts were made on, before, or after such first day.

(b) Performance prior to July 1, 1950.

Notwithstanding the provisions of subsection (a) of this section, the provisions of this title [sections 1211 to 1224 of this Appendix] shall not apply to contracts with the Departments, or related subcontracts, to the extent of the amounts received or accrued by a contractor or subcontractor on or after the 1st day of January 1951, which are attributable to performance, under such contracts or subcontracts, prior to July 1, 1950. This subsection shall have no application in the case of contracts, or related subcontracts, which, but for subsection (c) of this section, would be subject to the Renegotiation Act of 1948 [section 1193 of this Appendix]. (c) Termination.

(1) In general.

The provisions of this title [sections 1211 to 1224 of this Appendix] shall apply only with respect to receipts and accruals, under contracts with the Departments and related subcontracts, which are determined under regulations prescribed by the Board to be reasonably attributable to performance prior to the close of the termination date. Notwithstanding the method of accounting employed by the contractor or subcontractor in keeping his records, receipts or accruals determined to be so attributable, even if received or accrued after the termination date, shall be considered as having been received or accrued not later than the termination date. For the purposes of this title [sections 1211 to 1224 of this Appendix], the term "termination date" means June 30, 1971. (2) Termination of status as department.

When the status of any agency of the Government as a Department within the meaning of section 103 (a) [section 1213 (a) of this Appendix] is terminated, the provisions of this title [sections 1211 to 1224 of this Appendix] shall apply only with respect to receipts and accruals, under contracts with such

agency and related subcontracts, which are determined under regulations prescribed by the Board to be reasonably attributable to performance prior to the close of the status termination date. Notwithstanding the method of accounting employed by the contractor or subcontractor in keeping his records, receipts or accruals determined to be so attributable, even if received or accrued after the status termination date, shall be considered as having been received or accrued not later than the status termination date. For the purposes of this paragraph, the term "status termination date" means, with respect to any agency, the date on which the status of such agency as a Department within the meaning of section 103 (a) [section 1213 (a) of this Appendix] is terminated.

(d) Renegotiation Act of 1948.

The Renegotiation Act of 1948 shall not be applicable to any contract or subcontract to the extent of the amounts received or accrued by a contractor or subcontractor on or after the 1st day of January 1951, whether such contract or subcontract was made on, before, or after such first day. In the case of a fiscal year beginning in 1950 and ending in 1951, if a contractor or subcontractor has receipts or accruals prior to January 1, 1951, from contracts or subcontracts subject to the Renegotiation Act of 1948, and also has receipts or accruals after December 31, 1950, to which the provisions of this title [sections 1211 ot 1224 of this Appendix] are applicable, the provisions of this title [sections 1211 to 1224 of this Appendix] shall, notwithstanding subsection (a), apply to such receipts and accruals prior to January 1, 1951, if the Board and such contractor or subcontractor agree to such application of this title [sections 1211 to 1224 of this Appendix]; and in the case of such an agreement the provisions of the Renegotiation Act of 1948 shall not apply to any of the receipts or accruals for such fiscal year. (e) Suspension of certain profit limitations.

Notwithstanding any agreement to the contrary, the profit-limitation provisions of the Act of March 27, 1934 (48 Stat. 503, 505), as amended and supplemented, and of section 505 (b) of the Merchant Marine Act, 1936, as amended and supplemented [section 1155 (b) of Title 461, shall not apply, in the case of such Act of March 27, 1934, to any contract or subcontract if any of the receipts or accruals therefrom are subject to this title [sections 1211 to 1224 of this Appendix] or would be subject to this title except for the provisions of section 106 (e) [section 1216 (e) of this Appendix], and, in the case of the Merchant Marine Act, 1936, to any contract or subcontract entered into after December 31, 1950, if any of the receipts or accruals therefrom are subject to this title [sections 1211-1224 of this Appendix] or would be subject to this title except for the provisions of section 106 (e) [section 1216 (e) of this Appendix]. (Mar. 23, 1951, ch. 15, title I, § 102, 65 Stat. 8; Sept. 1, 1954, ch. 1209, § 1, 68 Stat. 1116; Aug. 3, 1955, ch. 499, §§ 1, 2(a), 69 Stat. 447; Aug. 1, 1956, ch. 821, §§ 2, 9(b), 70 Stat. 786, 791; Sept. 6, 1958, Pub. L. 85-930, § 1, 72 Stat. 1789; July 13, 1959, Pub. L. 86-89, § 1, 73 Stat. 210; July 3, 1962, Pub. L. 87-520, § 1, 76 Stat. 134; June 30, 1964,

Pub L. 88-339, § 1, 78 Stat. 233; June 30, 1966, Pub. L. 89-480, 80 Stat. 232; Oct. 24, 1968, Pub. L. 90-634, title I, § 102, 82 Stat. 1345.)

REFERENCES IN TEXT

Act of Mar. 27, 1934, referred to in subsec. (e), which was classified to sections 494, 495, 496 and 497 of former Title 34, Navy, was repealed by act Aug. 10, 1956, ch. 1041, § 53, 70A Stat. 641 and is now covered by sections 2382, 7300, 7342, and 7343 of Title 10, Armed Forces. Section 494 of former Title 34, Navy, was omitted.

Merchant Marine Act, 1936, as amended, referred to in subsec. (e), is classified to chapter 27 of Title 46, Shipping.

AMENDMENTS

1968 Subsec. (c) (1). Pub. L. 90-634 extended the termination date from June 30, 1968, to June 30, 1971.

1966 Subsec. (c)(1). Pub. L. 89-480 extended termination date from June 30, 1966 to June 30, 1968.

1964 Subsec. (c) (1). Pub. L. 88-339 substituted "June 30, 1966" for "June 30, 1964."

1962 Subsec. (c)(1). Pub. L. 87-520 extended termination date from June 30, 1962, to June 30, 1964.

1959 Subsec. (c)(1). Pub. L. 86-89 extended termination date from June 30, 1959, to June 30, 1962.

1958 Subsec. (c). Pub. L. 85-930 extended termination date from Dec. 31, 1958, to June 30, 1959.

1956 Subsec. (a). Act Aug. 1, 1956, § 2, eliminated provisions which set Dec. 31, 1956, as the expiration date, which provisions are now covered by subsec. (c) of this section.

Subsec. (c). Act Aug. 1, 1956, § 2, added subsec. (c) and redesignated former subsec, (c) as (d).

Subsec. (d), formerly (c). Act Aug. 1, 1956, § 2, redesignated former subsec. (d) as (e).

Subsec. (e), formerly (d). Act Aug. 1, 1956, § 9(b), substituted "section 106(e)" for "section 106 (a) (8)". 1955-Subsec. (a). Act Aug. 3, 1955, § 1, extended expiration date from Dec. 31, 1954 to Dec. 31, 1956.

Subsec. (d). Act Aug. 3, 1955, § 2(a), exempted from the profit-limitation provisions contracts or subcontracts if any of the receipts or accruals therefrom are subject to sections 1211-1233 of this Appendix except for the proviзions of section 1216(a) (8) of this title.

1954 Subsec. (a). Act Sept. 1, 1954, extended expiration date from Dec. 31, 1953 to Dec. 31, 1954.

EFFECTIVE DATE OF 1968 AMENDMENT

Section 105 of Pub. L. 90-634 provided that: "The amendment made by section 102 [amending this section] shall take effect as of June 30, 1968. The amendments made by sections 103 and 104 [amending sections 1215 and 1216 of this Appendix] shall apply with respect to amounts received or accrued in fiscal years of contractors and subcontractors ending after the date of the enactment of this Act [Oct. 24, 1968]."

EFFECTIVE DATE OF 1956 AMENDMENT Amendment of subsec. (e) of this section by act Aug. 1. 1956, applicable only with respect to fiscal years (as defined in section 1213 (h) of this Appendix) ending after June 30, 1956, see section 9 (c) of act Aug. 1, 1956, set out as a note under section 1216 of this Appendix.

EFFECTIVE DATE OF 1955 AMENDMENT

Section 2 (b) of act Aug. 3, 1955, provided that the amendment of subsec. (d) shall apply to contracts with the Departments and subcontracts only to the extent of the amounts received or accrued by a contractor or subcontractor after Dec. 31, 1953.

SHORT TITLE OF 1968 AMENDMENTS Section 101 of Pub. L. 90-634 provided that: "This title [amending this section and sections 1215 and 1216 of this Appendix, and enacting provisions set out as a note under this section] may be cited as the 'Renegotiation Amendments Act of 1968'."

SHORT TITLE OF 1956 AMENDMENTS Congress, in enacting sections 1218a and 1224 of this Appendix, and amending sections 1212 (a), (c-e) 1213 (a) (b), (f), (m), 1215 (c), (e) (1), (f) (1, 3), 1216 (a) (7, 8), (e), 1217 (c), 1218, and 1223 of this Ap47-300 0-71-vol. 11-19

pendix, provided by section 1 of act Aug. 1, 1956, that those enactments and amendments should be popularly known as the "Renegotiation Amendments Act of 1956". STUDY BY JOINT COMMITTEE ON INTERNAL REVENUE TAXATION FOR DETERMINATION OF EXTENSION OF RENEGOTIATION ACT OF 1951

Section 6 of act Aug. 3, 1955, directed the Joint Committee on Internal Revenue Taxation, or any duly authorized subcommittee thereof, to make a complete study in order to determine whether there is any necessity of extending the Renegotiation Act of 1951 [sections 1211— 1233 of this Appendix] beyond December 31, 1956; and if any such further extension is found necessary, the extent to which renegotiation of Government contracts should apply after such date. The Joint Committee was required, not later than May 31, 1956, to report to the Senate and the House of Representatives the results of the study conducted, together with such recommendations as it deemed necessary or desirable.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1211, 1213 to 1224 of this Appendix.

§ 1213. Definitions.

For the purposes of this title [sections 1211 to 1224 of this Appendix](a) Department.

The term "Department" means the Department of Defense, the Department of the Army, the Department of the Navy, the Department of the Air Force, the Maritime Administration, the Federal Maritime Board, the General Services Administration, the National Aeronautics and Space Administration, the Federal Aviation Agency, and the Atomic Energy Commission. Such term also includes any other agency of the Government exercising functions having a direct and immediate connection with the national defense which is designated by the President during a national emergency proclaimed by the President, or declared by the Congress, after the date of the enactment of the Renegotiation Amendments Act of 1956 [August 1, 1956]; but such designation shall cease to be in effect on the last day of the month during which such national emergency is terminated.

(b) Secretary.

The term "Secretary" means the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, the Secretary of Commerce (with respect to the Maritime Administration), the Federal Maritime Board, the Administrator of General Services, the Administrator of the National Aeronautics and Space Administration, the Administrator of the Federal Aviation Agency, the Atomic Energy Commission, and the head of any other agency of the Government which the President shall designate as a Department pursuant to subsection (a) of this section. (c) Board.

The term "Board" means the Renegotiation Board created by section 107 (a) of this Act [section 1217 (a) of this Appendix].

(d) Renegotiate and renegotiation.

The terms "renegotiate" and "renegotiation" include a determination by agreement or order under this title [sections 1211 to 1224 of this Appendix] of the amount of any excessive profits.

(e) Excessive profits.

The term "excessive profits" means the portion of the profits derived from contracts with the Departments and subcontracts which is determined in accordance with this title [sections 1211 to 1224 of this Appendix] to be excessive. In determining excessive profits favorable recognition must be given to the efficiency of the contractor or subcontractor, with particular regard to attainment of quantity and quality production, reduction of costs, and economy in the use of materials, facilities, and manpower; and in addition, there shall be taken into consideration the following factors:

(1) Reasonableness of costs and profits, with particular regard to volume of production, normal earnings, and comparison of war and peacetime products;

(2) The net worth, with particular regard to the amount and source of public and private capital employed;

(3) Extent of risk assumed, including the risk incident to reasonable pricing policies;

(4) Nature and extent of contribution to the defense effort, including inventive and developmental contribution and cooperation with the Government and other contractors in supplying technical assistance;

(5) Character of business, including source and nature of materials, complexity of manufacturing technique, character and extent of subcontracting, and rate of turn-over;

(6) Such other factors the consideration of which the public interest and fair and equitable dealing may require, which factors shall be published in the regulations of the Board from time to time as adopted.

(f) Profits derived from contracts with the departments and subcontracts.

The term "profits derived from contracts with the Departments and subcontracts" means the excess of the amount received or accrued under such contracts and subcontracts over the costs paid or incurred with respect thereto and determined to be allocable thereto. All items estimated to be allowed as deductions and exclusions under chapter 1 of the Internal Revenue Code [chapter 1 of Title 26, I.R.C. 1939] (excluding taxes measured by income) shall, to the extent allocable to such contracts and subcontracts, be allowed as items of cost, except that no amount shall be allowed as an item of cost by reason of the application of a carry-over or carry-back. Notwithstanding any other provision of this section, there shall be allowed as an item of cost in any fiscal year ending before December 31, 1956, subject to regulations of the Board, an amount equal to the excess, if any, of costs (computed without the application of this sentence) paid or incurred in the preceding fiscal year with respect to receipts or accruals subject to the provisions of this title [sections 12111224 of this Appendix] over the amount of receipts or accruals subject to the provisions of this title [sections 1211 to 1224 of this Appendix] which were received or accrued in such preceding fiscal year, but only to the extent that such excess did not result from gross inefficiency of the contractor or subcontractor. For the purposes of the preceding sentence,

the term "preceding fiscal year" does not include any fiscal year ending prior to January 1, 1951. Costs shall be determined in accordance with the method of accounting regularly employed by the contractor or subcontractor in keeping his records, but, if no such method of accounting has been employed, or if the method so employed does not, in the opinion of the Board, or, upon redetermination, in the opinion of The Tax Court of the United States, properly reflect such costs, such costs shall be determined in accordance with such method as in the opinion of the Board, or, upon redetermination, in the opinion of The Tax Court of the United States, does properly reflect such costs. In determining the amount of excessive profits to be eliminated, proper adjustment shall be made on account of the taxes measured by income, other than Federal taxes, which are attributable to the portion of the profits which are not excessive.

(g) Subcontract.

The term "subcontract" means

(1) any purchase order or agreement (including purchase orders or agreements antedating the related prime contract or higher tier subcontract) to perform all or any part of the work, or to make or furnish any materials, required for the performance of any other contract or subcontract, but such term does not include any purchase order or agreement to furnish office supplies;

(2) any contract or arrangement covering the right to use any patented or secret method, formula, or device for the performance of a contract or subcontract; and

(3) any contract or arrangement (other than a contract or arrangement between two contracting parties, one of whom is found by the Board to be a bona fide executive officer, partner, or full-time employee of the other contracting party) under which

(A) any amount payable is contingent upon the procurement of a contract or contracts with a Department or of a subcontract or subcontracts; or

(B) any amount payable is determined with reference to the amount of a contract or contracts with a Department or of a subcontract or subcontracts; or

(C) any part of the services performed or to be performed consists of the soliciting, attempting to procure, or procuring a contract or contracts with a Department or a subcontract or subcontracts.

Nothing in this subsection shall be construed (i) to affect in any way the validity or construction of provisions in any contract with a Department or any subcontract, heretofore at any time or hereafter made, prohibiting the payment of contingent fees or commissions; or (ii) to restrict in any way the authority of the Board to determine the nature or amount of selling expense under subcontracts as defined in this subsection, as a proper element of the contract price or as a reimbursable item of cost, under a contract with a Department or a subcontract. (h) Fiscal year.

The term "fiscal year" means the taxable year of the contractor or subcontractor under chapter 1 of