Of course,

We operated from 1942 through 1948-that is 7 years. they were not all war years. The war ended in 1945. The other 3 years were clean-up years because the partnership was liquidated at the end of the year. During that entire period, on all war work, this partnership did $3,753,000-plus worth of war construction work. After paying taxes, its book net balance, without any salaries to any partners save one for their services, was $36,330. That does not represent cash. That represents physical assets, without any salaries being taken out for the partners, save $250 a month to Raymond Rushlight prior to his being taken into the service.

In 1942, prior to the passage of the Renegotiation Act, March, to be exact, this company entered into a contract to perform the mechanical work on the Walla Walla Air Base which was badly needed by the United States Government. It was a rush job, and had to be done in 90 days. And it was done in 90 days.

That was prior to the Renegotiation Act, the Renegotiation Act having passed, I believe, in April 1942, a month later. There was no renegotiation provision in this contract, the result being that we had no renegotiation proceedings.

In 1943, after this company had filed the reports required by that renegotiation law, a unilateral determination was made that this company owed the Government eighty thousand-and-some-odd dollars for excess profits in the year 1942, which comprised mainly this Walla Walla Air Base job, which made a net recovery to the renegotiation agency of $42,013. That is after the tax adjustment, you understand. Senator BUTLER. That was taking 1943 and 1942 together?

Mr. RUSHLIGHT. No. That was just for the year 1942. All the other years were settled without any difficulty.

The renegotiation law was attacked as to the constitutionality of the retroactive provision, with the result that the administration made no effort to collect this unilateral determination made in 1943 on the 1942 excess profits, with the result that we proceeded to use that money that otherwise they might have been able to collect at that time in furtherance of the war effort, in other words, investing it in other contracts.

In the year 1944, this company on this same war work lost $25,730, and in 1945, for reasons which I could explain to the committee, which were beyond our control, this company lost $193,319.

Mind you, nobody associated with this company has ever taken one dime of salary or any moneys out of this company save $250 per month to Raymond Rushlight except to pay their taxes. And this company, I might say in passing, paid during this period $190,274 in income taxes, during that period of 4 years of war work.

Senator BUTLER. Were you incorporated then?
Mr. RUSHLIGHT. No, sir. This is a partnership.

Senator BUTLER. The partnership does not pay any taxes. The individuals do.

Mr. RUSHLIGHT. The individuals, I mean.

That is the amount

they paid, Senator. Thank you for correcting me.

The individuals comprising the partnership paid that amount of taxes from the proceeds of the operations of this partnership.

As a result, we find ourselves now, and have been for several years, in the hands of the Claims Department of the Justice Department.

They have had us in the Federal court in Portland on three different occasions to attempt to collect this amount which we are unable to pay, and the court, understanding the situation, has refused to try the case, instead recommending that I come back to Washington and attempt to settle it with the Justice Department.

I might say that the local attorney general out there in Portland, Oreg., has always concurred with our attorneys in that method of procedure, recognizing the unfairness of what the Government is trying to do under the law.

I also want to say in passing that in the strict interpretation of the law, we have not, as I understand it from our attorneys, a legal leg to stand on. So we find ourselves, as a contractor, in the position of actually having to pay the Government, if they can find where they can collect the money, $43,000 as a premium for the privilege of helping win World War II.

Now, the Justice Department advises me that they have no legal authority to settle such a matter with the taxpayer. We talked to Mr. Clapp, and finally to Mr. Wilhelm, and Mr. Wilhelm told me that the only basis the Justice Department could settle an inequitable matter of this kind with the taxpayer was by determining what the Government could realize if they put you through bankruptcy, and then after they determined that figure, they would agree to take that instead of going to the trouble of putting you through bankruptcy. I think that is a good example, our little case here, of how this Renegotiation Act can result in serious damage to little companies that try to help win a war.

I am frank to say to you gentlemen on this committee that if this situation exists as it is, I and many other small contractors would not dare to take a war contract, because when you take a building contract, it is just like playing poker. You are gambling. You do not know what your costs are going to be.

One of the reasons for this large loss that we had was that it was occasioned by a large project that we had for the Navy on Camp Farragut, Farragut, Idaho. At that time, the other agencies of the Government introduced this portal-to-portal pay business which we had not figured on in our contract at all. That meant that we lost approximately 3 hours a day on every man who worked on that project, which resulted in a tremendous loss to us, because we had not figured on that at all, and we had no opportunity to get any relief. But after entering into that contract, other agencies of the Government held that the man's pay started on the outside of the project, and then you had to pay him while you hauled him in to work and while he changed into his overalls and got ready for work, and then at night the same procedure over again, and you multiply several hundred men by a loss of 3 hours a day, and you can understand readily, with the wage rates they were getting, how quickly you can run into tremendous loss.

So I would like to recommend to this committee, if it is possible, that this Renegotiation Act be so amended as to prevent such injustices as this.

I am one of those that believe that if you can take a man over and put him in Korea or someplace else and shoot him for $50 or $60 a month, I have no right to stay home here and become wealthy over any war effort. On the other hand, I do not think that I should be

required to pay for the privilege of helping one's country win a war. And that is just the way this law operates under existing law, when you have a case of this kind. And I know of many of them.

You have 600 of them, Senator, on file down there in the Justice Department now. And I believe that a committee such as this could gain a great deal of information as to necessary corrections of pending legislation if they would take the time to see how the previous laws worked in actual administration.

I have no quarrel with the principle of the Renegotiation Act. I do not know of any good American citizen that has. When the country is in need of the services of business and industry, I do not believe -and many believe with me-that anyone has the right to get rich when the lives of our boys are being jeopardized as common privates in the service.

But I do believe that little companies should have the right to live, just as well as big ones. I believe that this is a good example of one of the inequalities of the law, and that is the reason I have asked permission to appear before your committee to present this problem. I have it all worked out here by our accountants in figures which have been furnished to the Justice Department. They have had the FBI check them, so that so far as we know, it is authentic, and they have concurred in it.

Senator BUTLER. Are you going to present that for the record? Mr. RUSHLIGHT. I will, sir. I had not planned on it. I intended to make a prepared statement, but I found out that I was going to have to testify here very shortly, and I could not get it typed. So I hope that I have been able to give you my views satisfactorily, orally. The CHAIRMAN. Yes. You may also file your statement as a part of this record if you wish to.

Senator BUTLER. I think, Mr. Chairman, if he wishes to summarize it and file a written statement tomorrow, that would be time enough. The CHAIRMAN. That would be quite all right.

Mr. RUSHLIGHT. Thank you. I think I could get it out by that time, Senator Butler.

The CHAIRMAN. That will be all right. You may furnish it to the secretary of the committee tomorrow, and it will go in as part of your statement.

(The statement referred to follows:)

STATEMENT OF W. A. RUSHLIGHT, W. A. RUSHLIGHT & Co., Portland, Oreg.

Gentlemen, my name is W. A. Rushlight. I am a partner of the W. A. Rushlight Co., a copartnership of 407 Southeast Morrison Street, Portland, Oreg. First, let me say that I am hardly in accord with the testimony given by Mr. Alvord of the United States Chamber of Commerce with respect to the renegotiation laws. I have asked to appear before your committee to give you a concrete example of the difficulty it is easily possible for any small-business concern to have in connection with the renegotiation of contracts.

W. A. Rushlight Co. was formed in 1942 for the purpose of engaging in war work. At that particular time the Government was having difficulty getting sufficient numbers of contractors to undertake the program that had to be undertaken on the coast. During the period 1942 to 1948, inclusive, W. A. Rushlight Co. performed construction work for the war effort in the gross amount of $3,753,479.01 which resulted in a net profit before taxes for the years 1942 to 1948 of $226,605.10. Personal-income taxes were withdrawn and paid by the partners amounting to $190,274.56, leaving a balance for the period after the withdrawal for taxes of $36,330.54. All renegotiation problems for the 7-year period have been terminated with the administrative agency of the Government having to do with such problems with the exception of the year 1942.

In the year 1942, W. A. Rushlight Co. undertook a contract prior to the passage of the Renegotiation Act for the mechanical work on the Walla Walla Air Base at Walla Walla, Wash. Subsequently the Renegotiation Act was passed which contained a retroactive provision which under its terms would bring this contract under the provisions of the Renegotiation Act.

However, the best legal minds of the country stated the retoractive features of the law were unconstitutional, resulting in considerable confusion in administration of this provision of the act. No renegotiation was had between our company and the renegotiation authorities for the year 1942 but reports were filed by us as required by law with the renegotiation authorities. In 1943 a unilateral determination was made that an excessive profit had been realized by W. A. Rushlight Co. of more than $80,000 for the year 1942, which after income-tax adjustments, resulted in an amount claimed of $42,013. No attempt, was made for the collection of this amount inasmuch as the question of constitutionality was taken to court by others and finally carried to the Supreme Court of the United States. The Supreme Court decided that the Congress had the constitutional right to change the terms of a contract without the parties' consent and upheld the retroactive feature of the 1942 act. However, W. A. Rushlight Co. proceeded with their operations doing war work and suffered losses of many thousands of dollars in the years 1944 and 1945 which, after payment of income taxes for the years 1942 and 1943, makes it impossible to pay the amount of $43,013 now demanded by the Government for excessive profits in the year 1942.

In other words, the effect of the operation of the Renegotiation Act has been to take profits away from business in fair years without any consideration at all for losses suffered in prior or subsequent years. This brings about a condition such as experienced by W. A. Rushlight Co., the effect of which would be to cause W. A. Rushlight Co. to actually pay the Government out of the pockets of the individuals comprising the partnership after these individuals have spent many years of hard work in executing more than $3,753,000 of war construction contracts. The claim against W. A. Rushlight Co. has been in the hands of the Justice Department for a number of years and we have made numerous attempts to get the Justice Department to consider the question of equity and fair play in settling this matter with the W. A. Rushlight Co.

The Justice Department has had us in the Federal court in Portland on three different occasions to attempt to collect this amount which we are unable to pay. The court, understanding the situation, has refused to try the case, postponing the case each time, recommending that I come back to Washington and attempt to settle it with the Justice Department.

The United States attorney, representing the Justice Department in Portland, Oreg., has, I have been told, concurred with our attorneys in continuing the case in order that I might come to Washington to make a further attempt to settle with the Justice Department.

Mr.

However, we have been advised by Mr. Clapp and Mr. Wilhelm of the Claims Division of the Justice Department that Congress has tied their hands so that they have no authorization and are unable to consider the question of equity or the question of fairness in settling a claim of this kind against the taxpayer. Wilhelm, handling such matters as these renegotiation claims, advises that at the present time he has still pending over 600 cases in his department and that the only basis upon which they can consider dealing with a situation of this nature under the law, is to make a determination of the amount the Government might realize in placing the taxpayer company through bankruptcy and then settling with the company for the amount that could be realized from bankruptcy proceedings if carried to final conclusion.

Assuming that the Justice Department is right in their contention the existing renegotiation laws give them no authority under past and present legislation to consider the question of equity in the settlement of renegotiation claims, we do not believe that any company or individual would dare to again engage in war work for fear of financial bankruptcy resulting from the fact that profits were taken from them without any regard for losses in prior or subsequent years. This is the situation the W. A. Rushlight Co. finds itself confronted with today. Mr. Wilhelm of the Claims Division of the Justice Department advised former Senator Holman, of Oregon, and myself that he belived that were he given the opportunity he could make many beneficial suggestions to Congress pertaining to the administration of the law, based on his many years of experience in the Claims Section. I would like to suggest that your committee avail itself of his testimony as I think it would be very helpful.

I would like to recommend to this committee that the Renegotiation Act be so amended as to prevent such injustices as we have suffered, and that the provisions should be made retroactive to the year 1942.

I am one of those that believe that if you can take a man over and put him in Korea or someplace else and shoot him for $50 or $60 a month, I have no right to stay home here and become wealthy over any war effort. On the other hand, I do not think that I should be required to pay for the privilege of helping one's country win a war. That is just the way this renegotiation law operates when you have a case of this kind. I know of many other companies in similar cir

cumstances.

In conclusion, I wish to urge upon this committee that the Renegotiation Act provide for the carry-forward and carry-back of losses suffered from war contracts similar to provisions in the Internal Revenue Act, and that such provisions be retroactive to the year 1942. The carry-back carry-forward provision would permit the Justice Department to make a fair and equitable settlement of my case and other similar cases now pending before the Justice Department. Such provisions will alleviate the fears of many small businesses now entering into new war contracts, and assure them that they will not be subjected to the inequities with which the W. A. Rushlight Co. is now faced.

The CHAIRMAN. We have been very glad, Mr. Rushlight, to have your statement in the record, as an illustration of how this renegotiation process can work.

Mr. RUSHLIGHT. Thank you, sir.

The CHAIRMAN. Are there any questions?

Senator MARTIN. No, sir.

The CHAIRMAN. Thank you very much for your appearance.

Mr. RUSHLIGHT. Thank you, gentlemen.

The CHAIRMAN. That is the last scheduled witness. I have several letters and statements that will be inserted in the record.

(The material referred to follows:)

STATEMENT OF AMERICAN MINING CONGRESS, JULIAN D. CONOVER, SECRETARY, WASHINGTON, D. C.

On behalf of the mining industry and in the interest of the national defense effort, the American Mining Congress urges that the mineral raw materials exemption which has stood for many years in the Renegotiation Acts remain unchanged, and that no action be taken to amend it as proposed in section 106 of H. R. 1724, now pending before your committee.

The existing law gives a definite, workable, well-established and satisfactorily administrable test as to the cut-off point which determines whether contracts or subcontracts relating to mineral raw materials are subject to renegotiation. The pending bill would substitute a test as to the cut-off point which is not an appropriate standard for renegotiation, which is much more difficult of interpretation and administration with respect to the production of metals, and which is impractical in that it does not conform with any standard in industry and trade.

Because the proposed test is uncertain it will bring confusion to the mineral industry, and because it will involve greater administrative problems and difficulties including a substantially augmented staff-it will be an unjustifiable burden both to metal producers and to the Government.

For these and other reasons, the new test may deter production of basic materials urgently needed in the emergency for defense purposes and essential civilian needs.

I. PERTINENT EXEMPTION PROVISIONS OF THE EXISTING LAW AND PENDING BILL

A. The provisions with respect to the minerals exemption in the statute now in effect (U. S. C. A. 50, 517-17), which continues similar provisions of the acts of 1942, 1943, and 1944, read, insofar as material, as follows:

"(i) Contracts exempted; Board's interpretations and application of exemp

tions

"(1) The provisions of this section shall not apply to

1 Some minerals, such as coal and various nonmetallics, may not be much affected by the proposed change in the exemption test, but the metals generally-such, for example, as copper, lead, zinc, iron, etc., will be seriously affected.