charge the subsidized vessels for such services or facilities on the basis of rates not in excess of the rates charged all other vessels using them, the corresponding expense of maintaining such facilities shall be determined, where necessary, and allocated between subsidized and unsubsidized operations on the following bases:

(i) With respect to related companies (other than wholly-owned subsidiaries), the expense of maintaining such facilities shall be allocated between subsidized and unsubsidized operations on the basis of the relation that the income so derived from the vessels engaged in each such operation bears to the total income derived from the furnishing of such facilities.

(ii) With respect to wholly-owned subsidiaries, income and expenses shall be allocated in the same manner as are the revenues, interdepartmental credits and expenses with respect to services and facilities when furnished by the operator as prescribed in paragraph (c) (6) of this section.

§ 286.5 Preliminary compliance with reserve and recapture requirements.

(a) Tentative deposits in statutory reserve funds and recording of excess profits: Not later than six months, or within such additional time as the Maritime Administrator may grant, after the end of each accounting year the operator shall deposit in the Capital Reserve Fund and in the Special Reserve Fund the amounts required to be deposited therein with respect to such accounting year, pursuant to the provisions of the Operating-Differential Subsidy Agreement, based on the requirements of section 607 of the act: Provided, however, That, in the event of any dividend being paid out of earnings of the current year, all deposits of accrued depreciation and excess profits to the end of the month preceding the date of the declaration of the dividend, and if paid out of earnings of prior years such deposits accrued through the period of such earnings shall be made into the Capital Reserve Fund and Special Reserve Fund, either concurrently with the payment of such dividend or prior thereto. The amounts of such deposits shall be calculated in accordance with the rules and regulations for determining capital employed, as prescribed in § 286.3 and net earnings as prescribed in § 286.4. Where audited financial and operating statements are unavailable,

tentative calculations should be prepared for this purpose. If the operator establishes, to the satisfaction of the Maritime Administrator, that its available Working Capital would be seriously impaired or depleted by making any such deposit, the Maritime Administrator in his discretion may postpone, under such conditions as he may prescribe, the making of part or all of such deposit, provided that the amount so postponed shall not exceed the amount of the unpaid operating-differential subsidy for the period to which the deposit applies.

(b) The provision for Federal income tax deducted in the determination of net earnings from subsidized operations shall not exceed the total of such tax reported in the income tax return or assessed upon the total taxable income of the operator for the year or other accounting period involved and shall be subject to adjustment upon final determination, by the Internal Revenue Service, of the amount of such tax assessable upon the net earnings of the operator for the year or other accounting period involved: Provided, That any tax adjustments resulting from adjustments of taxable income or expense which may be related to a prior year or accounting period, and to the extent allocable to subsidized operations, shall be treated in the same manner as other adjustments of subsidized income or expense as authorized in this chapter.

(1)

(c) Preliminary, supplemental and final accountings by operators: Every holder of an Operating-Differential Subsidy Agreement executed with the Federal Maritime Board shall submit a separate Preliminary Accounting of its operations in the form and manner prescribed herein, for each accounting period beginning after December 31, 1957 and ending prior to January 1, 1960 within six months after publication of this part in the FEDERAL REGISTER and for each accounting period thereafter within six months after the termination thereof: Provided, however, That the Maritime Administrator may extend, for such further period as in his judgment is warranted by the circumstances in any instance, the time limit prescribed in this section for the submission of such accountings.

(2) Supplemental Accounting (s) separately for each accounting period for which a Preliminary Accounting has been filed (under subparagraph (1) of this paragraph) but for which a Final

Accounting has not been filed (under subparagraph (3) of this paragraph) shall be submitted by the operator on or before June 30, 1961 and thereafter on or before June 30 of each succeeding year, covering each accounting period beginning after December 31, 1957.

(3) A Final Accounting for each accounting period shall be submitted by the operator within six months after the close of the calendar year in which the later of the following occurs: (i) All final subsidy rates for the accounting period concerned have been incorporated in the Subsidy Agreement and (ii) the Maritime Administration has completed its audit of the Preliminary and Supplemental Accountings. All subsequent adjustments (recorded in a complete calendar year) not reflected in a Supplemental Accounting shall be reflected in the Final Accounting. Each of these, i.e., the Preliminary, Supplemental and the Final Accountings, shall be submitted in quadruplicate to the appropriate District Comptroller of the Maritime Administration.

(d) Statements required by the Maritime Administration: The accountings required shall include the following statements: (Illustrative examples of such statements, based on hypothetical figures, will be supplied by the Comptroller.) The operator may change or vary the design of any of these statements: Provided, That the statements substituted will produce the same results and include all the information required: And provided further, That no substantial change or variation in the design of such statements shall be made without the prior concurrence of the appropriate District Comptroller. These examples have been based on the Uniform System of Accounts prescribed by the Maritime Administrator in Part 282 of this chapter:

Exhibit A-I Capital Necessarily Employed, II Recapturable Profits. III Required Deposits of Excess Profits for the Year Ended December 31. This statement, consisting of three parts: (1) summarizes amounts arrived at on Exhibit B to determine Capital Necessarily Employed: (11) determines allowable return and excess profits and recapture, if any; and (ii) computes the required deposit of excess profits into the operator's Special Reserve Fund This Exhibit will be required with the Preliminary, Supplemental and Final Accountings

Exhibit B-Trial Balance as of December 31, (at end of preceding accounting period) and Determination of Capital Necessarily Employed for the Calendar Year This statement shall reflect the appropriate allocation of each account composing the post-closing trial balance of the general ledger of the operator to one or more of the following categories: (1) Statutory Reserve Funds and Vessel Equities, (11) Adjusted Working Capital, (111) Other Items Allocated to Subsidized Operation, (iv) Capital Held in Reserve, (v) Unsubsidized Operations, and (vi) Subject to Formula. With respect to each item of the trial balance, reference shall be made either to the section of the order governing its allocation or the supporting schedule on which the allocation is made. This statement shall be subtotaled at the end of the trial balance, and, following the subtotal, all appropriate adjustments. Interim Adjustments, and applications of the formula and all limitations shall be reflected and referenced to the appropriate section or schedule, and the statement totaled. These totals, as appropriate, are carried to Exhibit A, and also are carried forward from the preceding accounting (Preliminary or Supplemental) to constitute the beginning figures in the Final Accounting. Adjustments applicable to preceding years shall be included or excluded in accordance with paragraph (e) of this section.

Exhibit C-Trial Balance and Allocated Statement of Profit and Loss, Year Ended December 31, This statement shall reflect the appropriate allocation of each income and expense account for the accounting period, between Subsidized and Unsubsidized Operations. This statement shall be subtotaled at the end of the trial balance. and all appropriate adjustments shall follow the subtotals. Each account and adjustment shall be referenced to the section of the part governing its allocation or the supporting schedule on which the allocation is made. The net result of Subsidized Operations is carried forward to Exhibit A and all totals are carried forward from the preceding accounting (Preliminary or Supplemental) to constitute the beginning figures in the Final Accounting.

Exhibit D-Analysis of Surplus Accounts. Year Ended December 81. This statement shall reflect all changes in the various surplus accounts for the accounting period and shall be submitted only with the Preliminary Accounting.

Exhibit E-Statutory Reserve Fund Requirements and Deposits with Respect Thereto for the Period from Beginning of Subsidized Operations to December 31, ----. under Operating-Differential Subsidy Agreement (as of close of month preceding the filing of this accounting). This statement shall be filed only with the Preliminary Accounting and shall reflect the current status of all deposit requirements, by accounting periods. with respect to each of the statutory reserve funds.

----)

Schedule B-1-Capital Reserve Fund and Related Accounts, December 31, Adjusted. This statement shall reflect the balances in the subject accounts as at the beginning of the accounting period, and all appropriate Interim Adjustments, as well as the determination of Limitation (1) as defined in § 286.3(a)(2) of this chapter. Any Capital Held in Reserve as the result of the application of this limitation shall be set forth. This statement shall be filed with the Preliminary Accounting, and shall be filed with the Supplemental or Final Accounting only if adjustments with respect thereto have occurred.

---

Schedule B-2-Special Reserve Fund and Related Accounts, December 31, Adjusted. This statement shall reflect the balances in the subject accounts as at the beginning of the accounting period, and all appropriate Interim Adjustments, as well as the determination of Limitation (2) as defined in § 286.3(a)(2) of this chapter. Any Capital Held in Reserve as the result of the application of this limitation shall be set forth. This statement shall be filled with the Preliminary Accounting, and shall be filled with the Supplemental or Final Accounting only if adjustments with respect thereto have occurred.

Schedule B-3-Adjusted Working Capital December 31, This statement shall reflect the allocation of the adjusted working capital of the operator and of any consolidated wholly-owned subsidiaries, in accordance with the provisions of § 286.3, as well as the determination of Limitation (3) or (4) as defined in § 286.3(a) (2) of this chapter, whichever is applicable. Details of the composition of Adjusted Working Capital need not be shown hereon. Any Capital Held in Reserve as a result of the application of Limitation (4) shall be set forth. This statement shall be filled with the Preliminary Accounting, and shall be filled with the Supplemental or Final Accounting only if adjustments with respect thereto have occurred.

Schedule B-3(a)-Determination of Average Voyage expenses, Year Ended December 31, This statement shall set forth the determination of Average Voyage Expenses as defined in § 286.3 (a) (2), Limitation (4) of this chapter and need be filed only with the Preliminary Accounting in accordance with that section.

Schedule B-4-Vessel Equities-December 31, ---- Adjusted. This statement shall set forth the capitalized cost, accumulated depreciation, and mortgage debt, if any, with respect to each vessel owned by the operator at the beginning of the accounting period, segregated as to those assigned and those not assigned under Operating-Differential Subsidy Agreement at that date, with the net equity allocated appropriately to Subsidized and Unsubsidized Operations. Any adjustments to these figures and Interim Adjustments shall be reflected also. This statement shall be filed with the Prelimi

nary Accounting, and shall be filed with the Supplemental or Final Accounting only if adjustments with respect thereto have occurred.

Schedule B-5-Allocation of Other Balance Sheet Accounts, December 31, Any balance sheet accounts, other than those comprehended by the preceding schedules, and for which the bases for the allocation are not adequately explained on Exhibit B, shall be included in this statement. All details necessary to accomplish the appropriate allocation thereof shall be set forth separately and reference shall be made to the section of the order governing their allocation. The details of each account shall be summarized so as to agree with the balance shown on Exhibit B. The complete statement shall be filed with the Preliminary Accounting, and any changes affecting the Supplemental or Final Accounting with respect to these accounts shall be supported by schedules in the Supplemental and Final Accountings; otherwise, the individual account distribution need not be repeated.

Schedule C-1-Trial Balance and Allocated Statement of Profit and Loss of Wholly-Owned Subsidiary Companies, Year Ended December 31, This statement shall reflect the appropriate allocation of each income and expense account for the accounting period between Subsidized and Unsubsidized Operations. This statement shall be filled with the Preliminary Accounting and need not be repeated unless there be a change in the allocations in the Supplemental or Final Accounting.

---

Schedule C-2-Allocation of Income and Expense Accounts, Year Ended December 31, Any profit and loss accounts for which the bases for the allocation are not adequately explained on Exhibit C shall be included in this statement. All details necessary to accomplish the appropriate allocation thereof shall be set forth separately, and reference shall be made to the section of the part governing their allocation. The details of each account shall be summarized so as to agree with the balance shown on Exhibit C. The complete statement shall be filled with the Preliminary Accounting, and any changes affecting the Supplemental or Final Accounting with respect to these accounts shall be supported by schedules in the Supplemental and Final Accountings; otherwise, the individual account distribution need not be repeated.

(e) Adjustments applicable to preceding years: (1) All Account 090 entries (recorded in a complete calendar year) reflecting adjustments to prior years shall be reflected in Preliminary, Supplemental and Final Accountings as set forth in this section.

(2) Until a Final Accounting with respect to an accounting period has been filed, all 090 entries recorded in subsequent accounting periods shall be carried back for capital necessarily employed purposes through the accountings for intervening years and reflected in the earnings section of the Supplemental or Final Accountings of the year to which they apply. After a Final Accounting for an accounting period has been filed all 090 entries recorded in the year in which such accounting is filed and in subsequent years shall be reflected in the year in which recorded and absorbed in the operations for that year.

(3) In carrying back such 090 entries through the accountings for intervening years appropriate adjustments shall be made in the determination of capital necessarily employed for those intervening years and such adjustments shall be reflected in the Preliminary, Supplemental or Final Accountings, as appropriate, of those years. Such recordings shall have no effect on the earnings sections of those intervening years, however.

(f) All calculations required herein shall be carried to at least five places beyond the decimal point, e.g., 97.53821 percent.

(g) The accountings (Preliminary, Supplemental and Final) required under this part shall be accompanied by an affidavit of the corporate officer responsible for the accuracy and maintenance of the books of account and financial records of the operator to the effect that:

(1) The books and accounts have been maintained in accordance with Part 282 of this chapter;

(2) The exhibits and schedules composing the accounting have been prepared in accordance with this part;

(3) The operator has fully complied with all the terms and conditions of its Operating-Differential Subsidy Agreement, dated. -----, with the Federal

Maritime Board; and

(4) The accounting, including all exhibits and schedules, reflects true and complete statements in accordance with all applicable orders, rules, regulations,

and instructions issued or adopted by the Maritime Administrator appertaining thereto.

(h) Only the Preliminary accountings submitted must be accompanied, in addition to the affidavit required of the operator, by a signed opinion of an independent certified public accountant to the effect that:

(1) The exhibits and schedules composing the annual accounting have been either examined or prepared by the accountant;

(2) The exhibits and schedules have been prepared in accordance with the terms and conditions of the OperatingDifferential Subsidy Agreement, this part, and all other applicable orders, rules, regulations, and instructions issued or adopted by the Maritime Administrator:

(3) An examination was made of the books and records of the operator in support of the accounting in accordance with generally accepted auditing standards and including all procedures which were considered necessary in the circumstances; and

(4) The annual accounting correctly sets forth the required financial data. § 286.6 Statement of purposes and res

ervations.

(a) The purpose of the procedure in this part is to establish the means for uniform application to expedite and facilitate the rendition by operators to the Administration of annual accountings under an Operating-Differential Subsidy Agreement. The receipt and consideration of such accountings by the Administration shall be subject to the following reservations:

(1) That all working papers (irrespective of by whom prepared) in support of the various statements comprising such accountings, shall be available for examination by the Administration's auditors upon request and that the Administration's auditors shall be permitted to make copies of such papers to the extent they deem necessary;

(2) That the Administration reserves the right to conduct such audits, examinations, or checks of the operators' accounts as it may deem necessary before approving the accounting involved; and

(3) That the examples to be supplied by the Comptroller of the statements required by the Administration are for illustrative purposes only and are based on

hypothetical figures; that no implications should be drawn from the relative magnitude of the figures used in these examples; and that if, in any instance, an example should conflict with the text of the procedure in this part, the latter shall govern.

(b) Where, in the preceding sections hereof, reference is made to a particular part, such reference is to such part as amended, supplemented, or revised at the time of the transaction involved.

(c) The term "subsidized vessels" shall include the vessels listed in the Operating-Differential Subsidy Agreement and any other vessel for any period with respect to which its operating results are required, by the applicable provisions of the said agreement or Part 281 of this chapter, to be taken into account under the reserve fund and recapture provisions thereof.

(d) The preliminary or tentative deposits in the statutory reserve funds and calculations of excess profits subject to recapture by the Maritime Administration provided for in § 286.5 are subject to adjustment upon the approval by the Maritime Administrator of final accounting for each year or other accounting period involved.

(e) The establishment of the rules and regulations prescribed in §§ 286.1 to 286.5 is without prejudice to the right of the Maritime Administrator to determine or the operator to submit for consideration of the Maritime Administrator the employment of other bases for allocation and calculation in any instance where, upon the completion of any annual or final accounting, the results produced by the application of such rules and regulations create unreasonable results, in the judgment of the Maritime Administrator.

(f) If the rules and regulations prescribed in §§286.1 to 286.5 should conflict with the provisions of any applicable statute or of the Operating-Differential Subsidy Agreement, such provisions shall govern.

(g) Nothing in this part contained shall be construed as a waiver of any requirement that the consent of the Maritime Administrator be obtained with respect to any transaction, nor as a waiver of any other right reserved to the Maritime Administrator by the Act or under the Operating-Differential Subsidy Agreement.

PART 287-ESTABLISHMENT OF CONSTRUCTION RESERVE FUNDS

Sec.

287.1

287.2

287.3

287.4

287.5

287.6 287.7

287.8 287.9

287.10

287.11

287.12

287.13

287.14 287.15 287.16

287.17

287.18

287.19

287.20

287.21

287.22

287.23

287.24 287.25

287.26 287.27 287.28

Reports by taxpayers.

Controlled corporation.

Administrative jurisdiction.

AUTHORITY: The provisions of this Part 287 issued under secs. 204, 511, 49 Stat. 1987, as amended, 54 Stat. 1106, as amended; 46 U.S.C. 1114, 1161.

SOURCE: The provisions of this Part 287 contained in General Order 38, 2d Rev., 30 F.R. 7215, May 29, 1965; 30 F.R. 8162, June 25, 1965, unless otherwise noted.

NOTE: The regulations contained in this Part were codified by the Internal Revenue Service in Treasury Decision 6820, 30 F.R. 6820, Apr. 29, 1965. For text see also 26 CFR Part 2.