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B-146819, FEB. 8, 1965

B-146819 Feb 08, 1965
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TO THE SECRETARY OF COMMERCE: REFERENCE IS MADE TO LETTER DATED AUGUST 10. REQUESTING OUR OPINION ON CERTAIN QUESTIONS THAT HAVE ARISEN CONCERNING THE TREATMENT TO BE ACCORDED THE INVESTMENT TAX CREDIT GRANTED BY THE REVENUE ACT OF 1962 AS MODIFIED BY THE REVENUE ACT OF 1964 WITH RESPECT TO THE CONTRACTS AND PROGRAMS OF THE MARITIME ADMINISTRATION. THE QUESTIONS WHICH HAVE ARISEN ARE BASED ON THE VIEWS EXPRESSED IN OUR LETTERS OF AUGUST 15. WHEREIN IT WAS STATED THAT WE DO NOT FAVOR FOR DETERMINATION OF COST UNDER A GOVERNMENT CONTRACT A DEPRECIATION BASIS FOR ASSETS THAT DOES NOT REDUCE THE ACQUISITION COST OF THE ASSETS BY THE INVESTMENT TAX CREDIT TAKEN. THIS POSITION WAS BASED PRIMARILY ON THE VIEW THAT IT WOULD BE INEQUITABLE FOR THE GOVERNMENT TO PAY PART OF THE COST OF FACILITIES BY MEANS OF THE INVESTMENT TAX CREDIT AND THEN AGAIN TO PAY THE SAME COST AS AN ELEMENT OF CONTRACT PRICE.

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B-146819, FEB. 8, 1965

TO THE SECRETARY OF COMMERCE:

REFERENCE IS MADE TO LETTER DATED AUGUST 10, 1964, FROM YOUR PREDECESSOR, REQUESTING OUR OPINION ON CERTAIN QUESTIONS THAT HAVE ARISEN CONCERNING THE TREATMENT TO BE ACCORDED THE INVESTMENT TAX CREDIT GRANTED BY THE REVENUE ACT OF 1962 AS MODIFIED BY THE REVENUE ACT OF 1964 WITH RESPECT TO THE CONTRACTS AND PROGRAMS OF THE MARITIME ADMINISTRATION.

THE QUESTIONS WHICH HAVE ARISEN ARE BASED ON THE VIEWS EXPRESSED IN OUR LETTERS OF AUGUST 15, 1963, TO THE SECRETARY OF DEFENSE, AND JUNE 10, 1964, TO THE UNITED STATES ATOMIC ENERGY COMMISSION, WHEREIN IT WAS STATED THAT WE DO NOT FAVOR FOR DETERMINATION OF COST UNDER A GOVERNMENT CONTRACT A DEPRECIATION BASIS FOR ASSETS THAT DOES NOT REDUCE THE ACQUISITION COST OF THE ASSETS BY THE INVESTMENT TAX CREDIT TAKEN. THIS POSITION WAS BASED PRIMARILY ON THE VIEW THAT IT WOULD BE INEQUITABLE FOR THE GOVERNMENT TO PAY PART OF THE COST OF FACILITIES BY MEANS OF THE INVESTMENT TAX CREDIT AND THEN AGAIN TO PAY THE SAME COST AS AN ELEMENT OF CONTRACT PRICE.

OUR OPINION WITH RESPECT TO THE EQUITIES OF THE MATTER, INSOFAR AS THE ORDINARY PROCUREMENT OF GOODS AND SERVICES UNDER NEGOTIATED CONTRACTS IS CONCERNED, REMAINS UNCHANGED. HOWEVER, IN VIEW OF THE NATIONAL POLICY CONSIDERATIONS INVOLVED IN MANY OF THE PROGRAMS OF THE MARITIME ADMINISTRATION AND THE SOMEWHAT SIMILAR POLICY STATED IN SECTION 203/E) OF THE REVENUE ACT OF 1964 WHICH READS, IN PART: "IT WAS THE INTENT OF CONGRESS IN PROVIDING AN INVESTMENT CREDIT UNDER SECTION 38 OF THE INTERNAL REVENUE CODE OF 1954, AND IT IS THE INTENT OF CONGRESS IN REPEALING THE REDUCTION IN BASIS REQUIRED BY SECTION 48/G) OF SUCH CODE, TO PROVIDE AN INCENTIVE FOR MODERNIZATION AND GROWTH OF PRIVATE INDUSTRY (INCLUDING THAT PORTION THEREOF WHICH IS REGULATED). * * *.' WE WILL NOT OBJECT IF THE COSTS REQUIRED TO BE DETERMINED IN THE EXECUTION AND ADMINISTRATION OF THE CONTRACTS AND PROGRAMS OF THE MARITIME ADMINISTRATION ARE NOT REGARDED AS REDUCED BY THE AMOUNT OF THE INVESTMENT TAX CREDIT.

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