§ 17053.37-7. JSF Contract Bidding.

(c) JSF Property Credit Reflected Within the Bid. For purposes of this regulation, the term “reflected within the bid” shall mean:

(1) the bid that forms the basis of the contact or subcontract is reduced by the amount of the JSF Property Credit allowable, and

(2) the amount of the JSF Property Credit allowable is included on the face of the bid or an attachment to the bid that forms the basis of the contract or subcontract. The JSF Property Credit allowable shall be a lump sum number reflected on the contract or subcontract and the aggregate credit allowable over the term of the contract or subcontract is not required to be calculated on the basis of the year in which the credit amount is expected to be claimed.

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.

(3) With respect to a contract to construct all or a portion of the Joint Strike Fighter that is executed on a “cost plus” basis, the term “reflected within the bid” shall mean that (1) California income or franchise taxes are treated as an item of cost to be reimbursed under the terms of the contract, (2) the cost plus contract, or an attachment to the contract, contains a calculation showing the amount of the JSF Property Credit allowable, and (3) the California income or franchise taxes reimbursed under the contract reflect the reduction for the amount of the JSF Property Credit allowable.