Attach additional sheets as required and continue to number items in consecutive order. COST (Dollars) EXHIBIT 47 ODM PRESS RELEASE REGARDING POLICY DIRECTIVE AND REQUEST FOR 60-DAY MORATORIUM ON GRANTING OF TAX AMORTIZATION CERTIFICATES EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF DEFENSE MOBILIZATION Washington 25, D. C. For immediate release OD-SB (8-13-51) Defense Mobilization Director Charles E. Wilson today issued the following policy documents, with regard to the tax amortization program under which defense producers are permitted to depreciate their expanded facilities at a rapid rate for tax purposes: 1. A policy directive modifying the standards for issuance of tax amortization: certificates, and defining the extent to which accelerated amortization can be allowed as a cost in the determination of prices in defense contracts negotiated by the Government. 2. A letter to Manly Fleischmann, Defense Production Administrator, requesting a general moratorium on the granting of tax amortization certificates for at least 60 days, beginning August 18, during which time a review is to be made of administrative procedures and of the criteria on which certificates are to be granted and percentages determined. EXHIBIT 48 LETTER OF AUGUST 14, 1951, FROM ODM DIRECTOR C. E. WILSON TO NPA ADMINISTRATOR MANLY FLEISCHMANN, REQUESTING 60-DAY MORATORIUM ON GRANTING TAX AMORTIZATION CERTIFICATES Hon. MANLY FLEISCHMANN, Administrator, Defense Production Administration, (AUGUST 13, 1951.) Washington 25, D. C. DEAR MR. FLEISCHMANN: Following an extensive series of discussions among the various governmental agencies concerned with the tax amortization program, I am issuing the attached directive, which will be effective upon its publication in the Federal Register. This directive, as you know, represents a position which has the general agreement of each agency concerned. The tax amortization program has proved to be of great value in accomplishing the steps thus far taken to provide the industrial expansion required for our mobilization effort. The bulk of the certificates issued have gone to necessary expansions of facilities for the production and fabrication of basic materials, facilities for military production, and facilities for related producton efforts. The benefits of this program have been widespread geographically and have encouraged expansion on the part of many small producers as well as the larger corporations. At no point in this program has the Government indicated that the granting of a tax amortization certificate guaranteed the timely allocation of critical materials needed to proceed with the facility. Nevertheless we should maintain a reasonable balance between the granting of tax amortization certificates and our material situation. The extremely tight situation in the availability of critical materials, such as structural steel, makes it unlikely that new facility construction beyond that now planned can proceed for several months except for the most urgent projects. In the light of this situation I am hereby requesting you to effect a general moratorium on the granting of additional tax amortization certificates for a period of at least 60 days, beginning August 18. In my judgment there should be a minimum of exceptions to the general moratorium. In your discretion, however, exceptions may be made for urgent. cases in the following categories: (a) Requests for amortization which expire September 2 in accordance with the provisions of the act. (b) Requests for amortization of facilities urgently required for pro duction of specific military end items. (c) Requests for amortization of facilities urgently required for the expansion of critical raw materials. (d) Requests for amortization of facilities required to round out urgently needed expansion projects now under way. (e) Requests for amortization which will not require amounts of critied materials in excess of standards recently prescribed by you for facility construction or where the amount of critical materials needed is very smail but will result in a substantial contribution to the mobilization effort. This moratorium will afford an opportunity for a complete review of add istrative procedures and of the criteria on which certificates should be granted and percentages determined. During the early stages of the mobilization pregram, it was essential to get the expansion of facilities under way as rapidly as possible, and the present material shortages were not a factor. As we mote closer to the realization of our expansion goals within specific categories, we should tighten our standards and adhere to specific rules wherever possible This should result in generally lower percentages of amortization, although there will be specific instances which will not fit this pattern. The directive calls for a review of certificates already granted to determine the portion of the amortization permissible for tax purposes that it is appropriate to allow as a cost in the negotiation of Government contracts. I expect DPA to organize this work in cooperation with the Department of Defense and the other procurement agencies. This review will call for the exercise of a great deal of experienced judgment. You may find it desirable to enlist a special expert staff for this purpose. The review of the actions already taken should provide useful guides to the improvements in administrative procedure that we should look forward to in the future. The directive calls for close coordination of all the financial incentives pro vided by the Government for facilities expansion. We must ensure that incen tives are not duplicated and that the Government does not support poor credit risks in cases where other businesses which are in a sound financial position can undertake the needed expansion at less cost to the Government. Sincerely, Attachments. CHARLES E. WILSON. EXHIBIT 49 ODM-DEFENSE MOBILIZATION ORDER NO. 11-POLICY DIRECTIVE GOVERNING THE ISSUANCE OF TAX AMORTIZATION CERTIFICATES DMO-L AUGUST 14, 11 EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF DEFENSE MOBILIZATION DEFENSE MOBILIZATION ORDER NO. 11 POLICY DIRECTIVE GOVERNING THE ISSUANCE OF TAX AMORTIZATION CERTIFICATES UNDER SECTION 124A OF THE INTERNAL REVENUE CODE, AND DEFINING THE EXTENT TO WHICH ACCELERATED AMORTIZATION CAN BE ALLOWED AS A COST IN NEGOTIATED CONTRACT PRICING By virtue of the authority vested in me by Executive Order 10193 of December 16, 1950, it is hereby ordered as follows: 1. To assure consistency between the granting of necessity certificates and the determination of expansion goals, certificates shall be granted only facilities that are included within expansion goals determined by the Defense Production Administration to be necessary to meet established requirements 2. Certificates of necessity for tax amortization shall be based on a percentag that reflects the best available estimates of post-five-year period usefulness and additional incentives to the minimum amount deemed necessary to secure the needed expansion. 3. The determination of amortization percentages shall be closely related by the Defense Production Administration to the provision of other financial incentives by the Government to encourage the construction of facilities, such as direct Government loans, guarantees, and contractual arrangements. The objective shall be to use these incentives separately or in combination to secure the needed expansion at minimum cost to the Treasury. 4. For purposes of effective administration the Defense Production Administration may establish percentage certification patterns for individual industries. These shall provide a basis from which adjustments upward or downward shall be made on account of special factors such as size of enterprise, extent of integration, promotion of competition, new or improved technology, geographical location, and the relative expansion needed. A major objective of this procedure will be to insure that individual firms will not be unduly benefited or prejudiced, as they would be by the flat application of industry-wide percentages. 5. The Defense Production Administration shall assure that the need for the dispersal of facilities in accord with the new pattern established by the National Security Resources Board and approved by the President is adequately recognized when certificates are granted. 6. For purposes of cost computations in negotiated contract pricing, accelerated amortization shall be allowed only to the extent that the percentage certified is based on an estimate of post-five-year period usefulness. Percentages of amortization attributable to other incentives shall not be included as an element of cost in contract pricing. 7. The Defense Production Administration, in cooperation with the procurement agencies concerned, shall immediately undertake a review of those tax amortization actions which, under the policy statement above, will affect negotiated contract pricing with a view to determining the part of percentages that should be considered as costs with respect to certificates already granted. On the basis of this review, procedures shall be established for similar determinations with respect to certificates to be granted in the future. 8. This order shall take effect on August 14, 1951. OFFICE OF DEFENSE MOBILIZATION, EXHIBIT 50 DPA PRESS RELEASE OF OCTOBER 18, 1951-TAX AMORTIZATION MORATORIUM ENDS DEFENSE PRODUCTION ADMINISTRATION For immediate release Thursday, October 18, 1951 TAX AMORTIZATION MORATORIUM ENDS DPA-145 Termination of the 60-day moratorium on the issuance of tax amortization certificates and the establishment of new procedures and criteria for the filing and processing of applications were announced today by the Defense Production Administration. In an exchange of letters between Manly Fleischmann, DPA Administrator, and Charles E. Wilson, Director of the Office of Defense Mobilization, the following was agreed upon 1. Immediate termination of the moratorium which began August 18. 2. Issuance of certificates of necessity on construction commenced after November 1, 1951, only if DPA has, prior to the beginning of construction, made a determination as to shortage of the facilities and essentiality of the product. 3. Review of applications on file and canvass of applicants to determine whether construction has been commenced or is still contemplated, and whether an allocation of materials has been requested. 4. Adoption of a formal system of priorities for processing applications based on the essentiality of the product involved. 5. Treatment within priority groups to be based on the extent of the particular shortage involved and the degree to which already certified erpansion has reduced it. The accelerated tax amortization program is provided for in the Revenue Act of 1950. Its purpose is to encourage the expansion of private industry's productive capacity to meet mobilization goals. Prior to the passage of this act, the period permitted for depreciation of new facilities by the Bureau of Internal Revenue varied up to 25 years depending upon normal-life usefulness of the facility. Certification of a defense facility permits individuals, companies or corporations to write off for tax purposes an authorized amount of the cost of a new facility over a 5-year period. The moratorium was instituted August 18 by DPA at the request of Mr. Wilson in the light of the serious shortage of critical materials and to provide a period for review of administrative procedures and criteria for the granting of future certificates of necessity. Under its revised procedures DPA will publish a formal order of preference based on the degree of essentiality of the production involved which will determine the order in which all applications will be processed hereafter. In the initial stages, priority of treatment will be given applications involving production of the following facilities in the following sequence: 1. Machine tools, cutting tools, dies, gages, jigs, and fixtures. 2. Ores such as copper, lead, and zinc. 3. Pig iron. 4. Sulfur. 5. Military end items and supporting products urgently needed by the armed services. 6. Basic aluminum. 7. Nitrogen. 8. Aviation gasoline. 9. Steel scrap. 10. Special aluminum extrusions. DPA emphasized that the order of priority and the priorities themselves will be revised from time to time as conditions warrant. Relative to the certification of facilities commenced after November 1, 1951. Mr. Fleischmann's letter to Mr. Wilson cited the fact that the previous regulations permitted the filing of applications at any time within 6 months after the beginning of construction. "In regard to applications filed prior to the beginning of construction," Mr. Fleischmann said, "it appears that since essential expansion programs are making increasingly heavy demands on available scarce and critical materials and it does not appear that this situation will improve in the next several months, there should be a much greater control of expansions proposed for certification to keep them within established goals. "When an applicant files for a certificate after the beginning of construction, it is patently impossible for DPA to give full consideration to established policies such as those relating to dispersion and manpower and the further concentra tion of economic power." DPA said the existing administrative procedures and criteria will be amended to provide that in regard to all expansions commenced after November 1, 1951, a necessity certificate will not be issued unless, prior to the beginning of o struction, the Defense Production Administrator, as the certifying author's under section 124A of the Internal Revenue Code, makes a determination as to shortage of facilities and essentiality of the product within the meaning of the regulations. The determination will be evidenced by the issuance of either a necessity cettificate or, in the event that the volume of cases to be handled becomes heavy, a brief form letter stating that such determination has been made and giving the percentage of certification which will be allowed when the application for the necessity certificate is ultimately processed. Relative to all applications now on file, Mr. Fleischmann said: "I intend to request that all applicants inform DPA as to whether they have commenced construction, or propose to do so, and whether the necessary materials have bee requested. It is anticipated that many applicants may have abandoned proposed expansions. As to the balance, the replies will be of assistance in determining the order in which pending applications should be processed, depending both on whether or not the applicant has proceeded with construction, and the 15 of production involved." |