Taxpayers come up with all sorts of excuses for missing the income tax filing deadline, but a group of defense contractors who failed to file from 949 on time this year have one of the best explanations ever: the Internal Revenue Service never got around to printing the form.
As a result, the contractors will get a reprieve from complying with a tough profit-control law that could cost them millions of dollars.
After ordering all companies that sold ships, planes, or their parts to the Pentagon last year to file profit data on Form 949, by April 15, the IRS last week had to give the firms a six-month extension because it had not completed the form or the regulations governing it.
This will delay at least until October compliance with the law Form 949 is supposed to enforce-the Vinson Trammel Act, which sets strict limits on the profits manufacturers can earn on warship and warplane sales.
The extension gives the defense industry time to expand its lobbying effort on Capitol Hill to soften or repeal the statue. Congressional staff aides say the weapons makers have an excellent chance to succeed.
Vinson-Trammel, enacted in 1934, when the Navy was starting to expand its fleet to meet the Axis threat, decrees that firms cannot earn more than 10 percent profit on contracts for ships or ship parts, or 12 percent on airplane contracts. Any excess profit is to be paid to the Internal Revenue Service in addition to normal corporate taxes.
The law was suspended, but not repealed, a few years after its adoption when Congress created the Renegotiation Board, an independent agency, as the government's watchdog against defense profiteering.
Several years ago, however, contractor organizations mounted a nation-wide grass-roots lobbying campaign to kill the Renegotiation Board, and last summer Congress voted to do just that. The board was abolished effective March 31 of this year.
That action automatically brought the 1934 profit law back into effect, and the IRS began a major effort to update the regulations and the forms it used to enforce Vinson-Trammel. Last fall it ordered all firms covered by the law to start filing annual profit statements as of April 15 of this year.
But then the IRS failed to produce the forms and regulations.
The IRS did not give a reason for its delay, but various observes of the profit-control struggle have offered explanations of their own.
"The law is impossible to enforce," said Rep. Paul McCloskey (R-Calif.), who has been one of the industry's chief fighters against any profit-limiting legislation.
Amber Scholtz, McCloskey's adminstrative assistant, noted that when the IRS called on the Defense Department last year for help in drafting regulations to enforce Vinson-Trammel, the Pentagon responded with a letter calling the 1934 law "unwork able."
Mitchell Rofsky, of the lobby group Congress Watch, which has supported strict legislation controlling defense profits, believes the IRS may be deliberately dragging its feet in the hope that Congress will lift the burden of enforcing the law from its shoulders.
"They've been working on these regulations for more than tow years," Rofsky explained. "I can't understand how an agency could take that long, unless they thought the bill might be repealed if they waited enough."
McCloskey has introduced legislation to repeal Vinson-trammel. That would leave the government with no authority to control profits once a contract is completed. McCloskey says that the Pentagon's various mechanisms to control costs when contracts are negotiated and while they are being performed provide adequate safeguards.
Business lobbyists say they will work hard to pass the repeal legislation, and their success in terminating the Renegotiaion Board suggests that the McCloskey bill had a good chance for passage.