Cal. Code Regs. Tit. 18, §§ 17053.37-7
JSF Contract Bidding -- (See Regulation 17053.37-0 for Table of Contents.)
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 Revenue and Taxation Code section 17053.37 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 Section 17053.37 of the Revenue and Taxation code and this regulation are met.
EXAMPLE: Y, a qualified taxpayer, submits a bid to the prime contractor to manufacture the cockpit canopy for the Joint Strike Fighter. 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). X is the successful bidder on the cockpit canopy and thereafter is awarded the contract to produce this part for the Joint Strike Fighter. X and the prime contractor execute a contract in the amount of $90. Thereafter, Y's costs to produce the cockpit canopy increase by 10% and Y determines that its actual qualified costs would result in a JSF Property Credit in the amount of $11. In this circumstance, even though Y's qualified costs have increased, Y is only able to claim a JSF Property Credit in the amount of $10 since that is the amount of the credit allowable that was reflected within Y's bid.
EXAMPLE: Z, a qualified taxpayer, submits a bid to the prime contractor to manufacture a portion of the hydraulic system for the Joint Strike Fighter. Z calculates the total allowable JSF Property Credit to be $75. Z has a valid S corporation election in effect for California tax purposes. Under Revenue and Taxation Code section 23803, subsection (a)(1)(A), Z's JSF Property Credit is limited to one-third of the amount of the credit otherwise allowable ($25). However, the amount of the JSF Property Credit that is expected to be passed through to Z's shareholders is $75 and Z must reflect the $75 reduced credit amount on the bid submitted to the prime contractor as provided in this regulation.
Cal. Code Regs. Tit. 18, §§ 17053.37-7
Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 17053.37, Revenue and Taxation Code.