[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR31.205-27]

[Page 602-603]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents
 
          Subpart 31.2--Contracts With Commercial Organizations
 
Sec. 31.205-27  Organization costs.

    (a) Except as provided in paragraph (b) of this section, 
expenditures in connection with (1) planning or executing the 
organization or reorganization of the corporate structure of a business, 
including mergers and acquisitions, (2) resisting or planning to resist 
the reorganization of the corporate structure of a business or a change 
in the controlling interest in the ownership of a business, and (3) 
raising capital (net worth plus long-term liabilities), are unallowable. 
Such expenditures include but are not limited to incorporation

[[Page 603]]

fees and costs of attorneys, accountants, brokers, promoters and 
organizers, management consultants and investment counselors, whether or 
not employees of the contractor. Unallowable reorganization costs 
include the cost of any change in the contractor's financial structure, 
excluding administrative costs of short-term borrowings for working 
capital, resulting in alterations in the rights and interests of 
security holders, whether or not additional capital is raised.
    (b) The cost of activities primarily intended to provide 
compensation will not be considered organizational costs subject to this 
subsection, but will be governed by 31.205-6. These activities include 
acquiring stock for (1) executive bonuses, (2) employee savings plans, 
and (3) employee stock ownership plans.

[48 FR 42301, Sept. 19, 1983, as amended at 53 FR 10830, Apr. 1, 1988]