97-25243. Federal Acquisition Regulation; Taxes Associated With Divested Segments

[Federal Register Volume 62, Number 184 (Tuesday, September 23, 1997)]
[Proposed Rules]
[Pages 49903-49904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25243]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31

[FAR Case 97-010]
RIN 9000-AH71


Federal Acquisition Regulation; Taxes Associated With Divested 
Segments

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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[[Page 49904]]

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council are proposing to amend the Federal 
Acquisition Regulation (FAR) to add increased taxes resulting from a 
contractors sale of a segment to the list of unallowable costs in the 
cost principle. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Comments should be submitted on or before November 24, 1997 to 
be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVRS), 1800 F Street, 
NW, Room 4035, Washington, DC 20405.
    E-mail comments submitted over Internet should be addressed to: 
[e-mail].
    Please cite FAR case 97-010 in all correspondence related to this 
case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405 [phone] for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Linda Nelson at [phone]. Please cite FAR 
case 97-010.

SUPPLEMENTARY INFORMATION:

A. Background

    When a contractor discontinues operations through the sale or other 
transfer of ownership of a segment, the contractor may be assessed 
state and local taxes on the gain resulting from that sale or transfer. 
Since the Government does not share in the gain resulting from the 
segment sale or transfer, the Government should not share in any tax 
increases resulting from the segment sale or transfer. This proposed 
rule adds increased taxes resulting from a contractor's sale or other 
transfer of ownership of a segment to the list of unallowable costs at 
FAR 31.205-41(b).

B. Regulatory Flexibility Act

    This proposed rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most 
contracts awarded to small entities use simplified acquisition 
procedures or are awarded on a competitive, fixed-price basis, and do 
not require application of the cost principle contained in this rule. 
An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. Comments from small entities concerning the affected FAR 
part will be considered in accordance with 5 U.S.C. 610 of the Act. 
Such comments must be submitted separately and should cite 5 U.S.C. 
601, et seq. (FAR case 97-010), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose recordkeeping or information 
collection requirements, or collections of information from offerors, 
contractors, or members of the public which require the approval of the 
Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: September 17, 1997.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, it is proposed that 48 CFR Part 31 be amended as set 
forth below:

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    1. The authority citation for 48 CFR Part 31 continues to read as 
follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Section 31.205-41 is amended by adding paragraph (b)(8) to read 
as follows:


31.205-41   Taxes.

* * * * *
    (b) * * *
    (8) Net increase in taxes incurred by a seller or transferor 
resulting from a sale or other transfer of ownership of a segment 
(e.g., taxes on the gain on disposition of a segment). For purposes of 
this subpart, ``net'' is defined as the difference between the actual 
taxes paid and the taxes that would have been paid had the sales or 
other transfer of ownership not occurred. When the amount of taxes that 
would have been paid had the sale or other transfer of ownership not 
occurred is less than zero, the amount that would have been paid shall 
be deemed to be zero.
* * * * *
[FR Doc. 97-25243 Filed 9-22-97; 8:45 am]
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