RTX Corporation

September 16, 2026Judge D'Alessandris

Sustained / Appellant PrevailedCost Allowability / Allocability (FAR 31)Indirect Rates / Incurred CostContract InterpretationDCAA InvolvedDCMA InvolvedCommercial Item

RTX Corporation appealed contracting officer decisions disallowing portions of state income tax costs included in its fiscal-year 2020 and 2021 incurred-cost submissions. On cross-motions for summary judgment, the Board held that income taxes incurred from recognizing capital gains triggered by a business reorganization are not unallowable taxes in connection with the reorganization, granted summary judgment for RTX, and sustained the appeals.

Material Facts

RTX Corporation and its predecessors and subsidiaries held government contracts in effect during 2020 and 2021.
Some of those contracts contained the Allowable Cost and Payment clause.
RTX's intermediate home offices submitted incurred-cost submissions for fiscal years 2020 and 2021.
Portions of RTX's state income tax costs were allocated through its intermediate home offices to segments performing government contracts.
RTX and its predecessors completed a merger and several divestitures during the relevant period.
The asset sales generated capital gains that RTX recognized and reported as income for state tax purposes.
RTX voluntarily excluded certain state income tax attributable to commercial participation from the costs claimed through its intermediate home offices.
DCAA questioned portions of the state income tax costs as costs associated with reorganizations, mergers, and acquisitions.
DCMA issued separate contracting officer final decisions challenging portions of the state income tax costs claimed for fiscal years 2020 and 2021.
The parties stipulated that there were no material facts in dispute.

Parties

Appellant: RTX Corporation
Respondent Agency: Defense Contract Management Agency
Contracting Agency: Defense Contract Management Agency
Contract Number: FA8735-20-C-0003

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