They first submitted it to the MPAA in January, 1981, it was tied down to a February 11th release date, and it came back from CARA with an "X" rating at least 3 times according to the filmmakers. Paramount wasn't going to push it to 1982 just so it could get the contractually-mandated rating and - much unlike Cannon with "X-Ray" - they were gung-ho on it being a Valentine's Day tie-in, so George Mihalka didn't have any more time to play give and take games with the Nazi who ran CARA at the time. They cut the shots out wholesale and got their "R" rating with no time to spare, and it went out to theaters on time. Had there been more time, had it been submitted earlier, they likely would have been able to get a lot more of it through.
Also, Paramount was not involved with the recuts at all. They didn't wish to be. The filmmakers had to do it all themselves. And they did a pretty crappy job of it, if you ask me. Columbia were the ones who recut "Happy Birthday to Me", without contacting the producers, when that returned from the MPAA with an "X" for the same nonsense, and they did a much better job of it. (Not that I'm happy that no one has bothered to release the trims to date.)
The DVD and Blu-Ray releases from Lionsgate are the ones that contain a loose approximation of the director's cut, by the way. The DVD releases from Paramount only contain the "R" rated theatrical cut. The theatrical cut is technically not on the Lionsgate releases, despite their claims to the contrary. One scene in it (the 1960s party flashback) somehow slipped past them uncut and appears in both the "theatrical" and extended cuts on the disc in its "X" rated state.
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