Code of Federal Regulations: Containing a Codification of Documents of ...

(stock) interest meets the test of control." Cost of Living Council Ruling 1972-51.

One of the "other things" upon which a finding of "control" will be based is ownership of a sufficient interest in a corporation or other entity to dictate the pricing policies of that entity. On the basis of these facts, ownership of 45 percent of the stock of S Corporation, while the remaining 55 percent of the stock is dispersed has enabled P Corporation to have so many of its nominees elected to the Board of Directors of S that they constitute a majority. Moreover, the reality of their control has been recognized by the Securities and Exchange Commission in its evaluation of S Corporation's proxy materials.

Therefore, for purposes of determining its reporting obligations under the Economic Stabilization Program, Corporation P must include the annual sales and revenues of S Corporation in its own annual sales and revenues.

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16025, Aug. 9, 1972]

[Cost of Living Council Ruling 1972-98] ATTRIBUTION OF INDIRECT INTERESTS IN RENTAL UNITS

Facts. A owns four single-family dwelling units which he leases as residences to others. A's wife, B, is the sole beneficiary of a testamentary trust which owns four other single-family dwelling units which it also leases as residences.

Issue. Which of the above units are exempt from the Economic Stabilization Regulations?

Ruling. The four units owned by A are not exempt; the four units owned by the testamentary trust of which B is the sole beneficiary are exempt.

The Economic Stabilization Regulations exempt single-family dwelling units and rental units in multifamily dwellings, provided the owner of such units and members of his family (as defined in section 318 of the Internal Revenue Code of 1954, as amended) do not own or have an interest, directly or indirectly, in more than an aggregate of four such rental units; 6 CFR 101.33 (a) (2) (iv) (1972).

As sole beneficiary of a trust which owns four rental units, B has an indirect interest in those four rental units. A directly owns four rental units. Since

B is a member of A's family (as defined in section 318 of the Internal Revenue Code of 1954, as amended), the units in which she has an indirect interest must be added to the units which A owns directly in order to determine whether A's units are exempt. Since the number of units which A owns directly, plus the number of those in which A's wife has an indirect interest, exceeds four, the units owned by A are not exempt.

Since the trust does not own or have an interest, directly or indirectly, in more than an aggregate of four such rental units, and since no persons can be related to a legal person, such as a trust or an estate, so as to be a "member of the family" of the trust or estate (as defined in section 318 of the Internal Revenue Code of 1954, as amended), those rental units owned by the trust are exempt.

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16025, Aug. 9, 1972]

[Cost of Living Council Ruling 1972-99] ANNUAL SALES AND REVENUESFOREIGN SUBSIDIARY

Facts. P is a manufacturing corporation. P also controls two foreign subsidaries A and B. P, A, and B are classified in the same two-digit classification of the Standard Industrial Classification Code. Each corporation maintains separate balance sheets and prepares separate financial statements. Thirty percent (30 percent) of the gross receipts of A are derived from transactions with foreign firms. Seventy percent (70 percent) of the gross receipts of B are derived from transactions with foreign firms.

Issue. Whether the gross receipts of A or B are included in the annual sales or revenues of P for purposes of determining P's price category?

Ruling. The annual revenues of P should include the gross receipts of A but not the gross receipts of B.

Section 101.2 defines "annual sales or revenues" as the total gross receipts of a firm during its most recent fiscal year from whatever source derived, except that it does not include gross receipts of or from a wholly or partially owned foreign entity such as a subsidiary, if the gross receipts of such foreign entity are derived primarily from transactions with other foreign firms. Economic Sta

bilization Regulations, § 101.2, 37 F.R. 14753 (1972). Since annual revenues include the total gross receipts of the firm whatever source derived, the gross receipts of any subsidiary are included in the total unless expressly excluded by the definition. The only gross receipts excluded are gross receipts from foreign subsidiaries which derive their revenue primarily from transactions with foreign firms. For the purposes of the Economic Stabilization Regulations "primarily" means more than half of the gross receipts of the foreign subsidiary. Thus, in the present case, the gross receipts of subsidiary A are not excluded from the annual revenues of P, whereas the gross receipts of subsidiary B are excluded from the annual revenues of P.

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16025, Aug. 9, 1972]

[Cost of Living Council Ruling 1972-100]

SMALL BUSINESS EXEMPTION Facts. Prior to the publication of the small business exemption regulations (Economic Stabilization Regulations, 6 CFR 101.51 (1972)), an employer had at least 50 percent of his employees under a master contract covering more than 60 employees. At the present time, this employer has no employees covered by a master contract or similar employment contract covering more than 60 employees.

Issue. Can this employer qualify for the small business exemption?

Ruling. No. The provisions of § 101.51 (c) state that the small business exemption operates prospectively only from the effective date of the regulation. However, in determining the applicability of the exemption, § 101.51 (a) (2) (iv) clearly specifies that the exemption is not applicable if the firm's pay adjustments immediately preceding the effective date

of the regulation which applied to or affected 50 percent or more of its employees, were set by a master or similar employment contract covering more than 60 employees.

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16114, Aug. 10, 1972]

[Cost of Living Council Ruling 1972-101] COST OF LIVING COUNCIL RULINGS UPDATE AS OF JUNE 30, 1972

The purpose of this ruling is to provide guidance as to the current applicability of all Cost of Living Council rulings which were published in the FEDERAL REGISTER on or before June 30, 1972. The effect of the republication of the rent regulations, 37 F.R. 13226 (1972) has been considered.

The ruling indicates the earliest date the result of a particular ruling would be the same (even if prior to the effective date of that ruling and even though different logic would be required in order to reach the same result) and whether a particular ruling can be relied upon for current transactions or, if it cannot, the last date it can be relied upon. A ruling which is only "partly" applicable to current transactions is so indicated. No limiting date is provided if the ruling is still currently applicable in some respects. No attempt has been made to specify in exactly what ways a particular ruling may not be currently applicable. In all cases the "Comments" portion of the ruling should be consulted to ascertain whether subsequent rulings or regulations have affected the ruling.

The number in the citation column of this ruling refers to the page on which a particular ruling was originally published in the FEDERAL REGISTER (Volume 36 for 1971 rulings or, Volume 37 for all other rulings).

an average of 60 or fewer employees are exempt from the coverage of the economic stabilization regulations, subject to certain exceptions; economic stabilization regulations § 101.51, 37 F.R. 8940 (1972).

Subparagraph (a)(2)(iv) of § 101.51 excepts firms whose pay adjustments immediately preceding the effective date of that section (May 2, 1972), applicable to or affecting 50 percent or more of its employees, were set by a master employment or other employment contract which was negotiated on a joint or association basis or on an industry, area, group, or other similar basis, and which covered more than 60 employees.

Since, on these facts, A is selfemployed and has no other barbers working for him, and since he is a party to the master contract as an owner, and not as employee, he has no "employees" as that term is used in § 101.51. Therefore, A's sole proprietorship has less than 60 employees, and is not excepted by subparagraph (a) (2) (iv) from the exemption of § 101.51.

Moreover, since the exception provided by subparagraph (a) (2) (iv) is limited to firms whose pay adjustments "as of the effective date of this regulation," applying to 50 percent or more of its employees, were set by a master employment contract. A's price adjustments will remain exempt if A later hires one or more union barbers as employees. The wages of such employees will not be exempt, however, if the master contract still covers more than 60 employees at the time they are hired by A; § 101.51 (a) (2) (v), 37 F.R. 8940 (1972).

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16986, Aug. 23, 1972]

[Cost of Living Council Ruling 1972-105]
SMALL BUSINESS EXEMPTION-
LANDLORDS

Facts. L owns a complex of apartments which he rents as residences. L has never employed more than 23 employees. The pay adjustments of the employees of L have never been set by a master employment or other employment contract of the type described in economic stabilization regulations 6 CFR 101.51(a) (2) (iv) (1972).

Issue. Whether the rent charged or the wages paid by L are exempt from the economic stabilization regulations?

Ruling. The rent charged by L is not exempt but the wages paid by L are exempt from the economic stabilization regulations.

Economic stabilization regulations 6 CFR 101.51(a) (1) (1972) provides in part that the price and pay adjustments (but not rent increases or adjustments) of any firm existing on or before December 31, 1971, with an average of 60 or fewer employees are exempt from the economic stabilization regulations. The parenthetical exception to the exemption in § 101.51 (a) (1) clearly indicates that rent increases and adjustment are not included in the coverage of the section. Thus, the rent charged by L for residences in the apartment complex is not exempt.

Section 101.2 defines firm as any person, corporation, association, estate, trust, partnership, joint venture, or sole proprietorship or any other entity however organized. Economic stabilization regulations 6 CFR 101.2 (1972). Thus, the word firm as used in § 101.51(a) (1) would include L. Consequently, the exemption provided for price and pay adjustments applies to L except to the extent that it is expressly inapplicable (i.e., the parenthetical exception of rent increases and adjustments). Thus, assuming that the other requirements of § 101.51 are fulfilled, the pay adjustments of the employees of L are exempt.

This ruling has been approved by the General Counsel of the Cost of Living Council.

[37 F.R. 16986, Aug. 23, 1972]

[Cost of Living Council Ruling 1972-106]

RENTAL OF BOAT SLIPS

Facts. A landlord in California leases 1,000 residential units and also owns a marina from which he rents boat slips to his tenants, under separate leases. A tenant is not required to lease a boat slip but, most housing tenants pay two rents monthly, one for an apartment and one for a boat slip. Other persons who are not tenants also rent a few of the boat slips. A small number of the persons renting boat slips make their home on a boat moored in the slip.

Issue. How are charges for these boat slips regulated under the Economic Stabilization Program?

Ruling. At all times during Phase II of the Economic Stabilization Program, the amount paid by a nonresidential user of a boat slip who is a licensee rather than a lessee of that slip is controlled by the rule governing service organizations. On the other hand, the amount charged a person for the license or lease of a boat slip which the person uses as nontransient moorage for a boat he uses as a residence, would be subject to the rent regulations since the boat slip would then become part of a "residence" as that term is defined in § 301.2, 37 F.R. 23226 (1972) or § 301.2, 36 F.R. 25387 (1971). If the terms of an agreement for the use of a boat slip for nonresidential purposes creates a leasehold, the amounts paid under such an agreement would be rent for nonresidential property and exempt under 6 CFR 101.33 (2) (i).

Boats slips used in conjunction with other residential real property are treated differently under the rent regulations in effect before and after July 4, 1972. When a separate lease is entered into with the same lessor for a boat slip and an apartment, the boat slip would be used "in connection with" the residence and thus, prior to July 4, would be controlled by the rent regulations. See § 301.3 (a), 36 F.R. 25387 (1972). After July 4, if a boat slip rental is not "required" by the lessor in order to lease an apartment it would not be controlled by the rent regulations, but would still be subject to the rule for service organizations if applicable. See definition of "rent" and "residence" in § 301.2, 37 F.R. 13226 (1972).

This ruling has been approved by the General Counsels of the Cost of Living Council and the Price Commission. [37 F.R. 17431, Aug. 26, 1972]

[Cost of Living Council Ruling 1972-107] EFFECT WHEN SMALL BUSINESS EXEMPTION IS LOST

Facts. A Company is exempt under Economic Stabilization Regulation § 101.51, 6 CFR 101.51 (1972). B Company is a nonexempt firm. A Company raises its price beyond that which would be allowable under the Price Commission Regulations, 6 CFR 300.1 et seq. (1972) had it been nonexempt. A then merges into B (or is consolidated with

B).

Issue. Must the price increase be rescinded?

Ruling. Yes. The surviving firm resulting from the merger (or consolidation) is not exempt under Economic Stabilization Regulation § 101.51, 6 CFR 101.51 (1972) because it will not meet the average number of employees test under paragraph (b) (3). Therefore, the firm cannot charge a price not authorized under the regulations. The price increase must be rolled back to an amount that is allowable under the regulations. The firm cannot continue to charge the increased price.

This ruling has been approved by the General Counsels of the Cost of Living Council and Price Commission.

[37 F.R. 17430, Aug. 26, 1972]

[Cost of Living Council Ruling 1972–108]
DEFINITION-PRICE INCREASE

Facts. X corporation is a retail supermarket that has offered its customers during the freeze base period such services as trading stamps and personal check cashing. X now no longer desires to offer such services or conveniences to its customers.

Issue. Is the discontinuance of such services a price increase?

Ruling. The discontinuance of the trading stamps is a price increase, but the discontinuance of check cashing is not a price increase. By definition a price adjustment is "an increase in the unit price of property or services or a decrease in the quality of substantially the same property or services." Economic Stabilization Regulations, 6 CFR 101.2 (1972). Furthermore, Economic Stabilization Regulations, 6 CFR 300.5 (1971) defines a price increase as an increase in the unit price of property or service or a decrease in the quality of substantially the same property or services. For purposes of the regulations, a reduction or discontinuance of a service that is of direct economic benefit to the individual customer is considered to be a decrease in the quality of substantially the same property or services offered by retailer X. Thus, a decrease in the quality of a service which is of direct economic benefit to the customer constitutes a price increase. Trading stamps are a direct economic benefit to the consumer since they can be redeemed for valuable merchandise. The discontinuance of trading