-CITE-
26 USC CHAPTER 6 - CONSOLIDATED RETURNS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
-HEAD-
CHAPTER 6 - CONSOLIDATED RETURNS
-MISC1-
Subchapter Sec.(!1)
A. Returns and Payment of Tax 1501
B. Related Rules 1551
-SECREF-
CHAPTER REFERRED TO IN OTHER SECTIONS
This chapter is referred to in sections 953, 6012, 6103, 7851 of
this title.
-FOOTNOTE-
(!1) Section numbers editorially supplied.
-End-
-CITE-
26 USC Subchapter A - Returns and Payment of Tax 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
SUBCHAPTER A - RETURNS AND PAYMENT OF TAX
-MISC1-
Sec.
1501. Privilege to file consolidated returns.
1502. Regulations.
1503. Computation and payment of tax.
1504. Definitions.
1505. Cross references.
-End-
-CITE-
26 USC Sec. 1501 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
Sec. 1501. Privilege to file consolidated returns
-STATUTE-
An affiliated group of corporations shall, subject to the
provisions of this chapter, have the privilege of making a
consolidated return with respect to the income tax imposed by
chapter 1 for the taxable year in lieu of separate returns. The
making of a consolidated return shall be upon the condition that
all corporations which at any time during the taxable year have
been members of the affiliated group consent to all the
consolidated return regulations prescribed under section 1502 prior
to the last day prescribed by law for the filing of such return.
The making of a consolidated return shall be considered as such
consent. In the case of a corporation which is a member of the
affiliated group for a fractional part of the year, the
consolidated return shall include the income of such corporation
for such part of the year as it is a member of the affiliated
group.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 367.)
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 172, 542, 818, 832, 963,
1092, 7701 of this title.
-End-
-CITE-
26 USC Sec. 1502 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
Sec. 1502. Regulations
-STATUTE-
The Secretary shall prescribe such regulations as he may deem
necessary in order that the tax liability of any affiliated group
of corporations making a consolidated return and of each
corporation in the group, both during and after the period of
affiliation, may be returned, determined, computed, assessed,
collected, and adjusted, in such manner as clearly to reflect the
income-tax liability and the various factors necessary for the
determination of such liability, and in order to prevent avoidance
of such tax liability.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 367; Pub. L. 94-455, title XIX,
Sec. 1906(b) (13)(A), Oct. 4, 1976, 90 Stat. 1834.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455 struck out "or his delegate" after
"Secretary".
DUAL RESIDENT COMPANIES
Pub. L. 100-647, title VI, Sec. 6126, Nov. 10, 1988, 102 Stat.
3713, provided that:
"(a) General Rule. - In the case of a transaction which -
"(1) involves the transfer after the date of the enactment of
this Act [Nov. 10, 1988] by a domestic corporation, with respect
to which there is a qualified excess loss account, of its assets
and liabilities to a foreign corporation in exchange for all of
the stock of such foreign corporation, followed by the complete
liquidation of the domestic corporation into the common parent,
and
"(2) qualifies, pursuant to Revenue Ruling 87-27, as a
reorganization which is described in section 368(a)(1)(F) of the
1986 Code,
then, solely for purposes of applying Treasury Regulation section
1.1502-19 to such qualified excess loss account, such foreign
corporation shall be treated as a domestic corporation in
determining whether such foreign corporation is a member of the
affiliated group of the common parent.
"(b) Treatment of Income of New Foreign Corporation. -
"(1) In general. - In any case to which subsection (a) applies,
for purposes of the 1986 Code -
"(A) the source and character of any item of income of the
foreign corporation referred to in subsection (a) shall be
determined as if such foreign corporation were a domestic
corporation,
"(B) the net amount of any such income shall be treated as
subpart F income (without regard to section 952(c) of the 1986
Code), and
"(C) the amount in the qualified excess loss account referred
to in subsection (a) shall -
"(i) be reduced by the net amount of any such income, and
"(ii) be increased by the amount of any such income
distributed directly or indirectly to the common parent
described in subsection (a).
"(2) Limitation. - Paragraph (1) shall apply to any item of
income only to the extent that the net amount of such income does
not exceed the amount in the qualified excess loss account after
being reduced under paragraph (1)(C) for prior income.
"(3) Basis adjustments not applicable. - To the extent
paragraph (1) applies to any item of income, there shall be no
increase in basis under section 961(a) of such Code on account of
such income (and there shall be no reduction in basis under
section 961(b) of such Code on account of an exclusion
attributable to the inclusion of such income).
"(4) Recognition of gain. - For purposes of paragraph (1), if
the foreign corporation referred to in subsection (a) transfers
any property acquired by such foreign corporation in the
transaction referred to in subsection (a) (or transfers any other
property the basis of which is determined in whole or in part by
reference to the basis of property so acquired) and (but for this
paragraph) there is not full recognition of gain on such
transfer, the excess (if any) of -
"(A) the fair market value of the property transferred, over
"(B) its adjusted basis,
shall be treated as gain from the sale or exchange of such
property and shall be recognized notwithstanding any other
provision of law. Proper adjustment shall be made to the basis of
any such property for gain recognized under the preceding
sentence.
"(c) Definitions. - For purposes of this section -
"(1) Common parent. - The term 'common parent' means the common
parent of the affiliated group which included the domestic
corporation referred to in subsection (a)(1).
"(2) Qualified excess loss account. - The term 'qualified
excess loss account' means any excess loss account (within the
meaning of the consolidated return regulations) to the extent
such account is attributable -
"(A) to taxable years beginning before January 1, 1988, and
"(B) to periods during which the domestic corporation was
subject to an income tax of a foreign country on its income on
a residence basis or without regard to whether such income is
from sources in or outside of such foreign country.
The amount of such account shall be determined as of immediately
after the transaction referred to in subsection (a) and without,
except as provided in subsection (b), diminution for any future
adjustment.
"(3) Net amount. - The net amount of any item of income is the
amount of such income reduced by allocable deductions as
determined under the rules of section 954(b)(5) of the 1986 Code.
"(4) Second same country corporation may be treated as domestic
corporation in certain cases. - If -
"(A) another foreign corporation acquires from the common
parent stock of the foreign corporation referred to in
subsection (a) after the transaction referred to in subsection
(a),
"(B) both of such foreign corporations are subject to the
income tax of the same foreign country on a residence basis,
and
"(C) such common parent complies with such reporting
requirements as the Secretary of the Treasury or his delegate
may prescribe for purposes of this paragraph,
such other foreign corporation shall be treated as a domestic
corporation in determining whether the foreign corporation
referred to in subsection (a) is a member of the affiliated group
referred to in subsection (a) (and the rules of subsection (b)
shall apply (i) to any gain of such other foreign corporation on
any disposition of such stock, and (ii) to any other income of
such other foreign corporation except to the extent it
establishes to the satisfaction of the Secretary of the Treasury
or his delegate that such income is not attributable to property
acquired from the foreign corporation referred to in subsection
(a))."
SPECIAL RULE FOR DISPOSITION OF STOCK OF SUBSIDIARY
Pub. L. 99-514, title VI, Sec. 647, Oct. 22, 1986, 100 Stat.
2294, provided that: "If for a taxable year of an affiliated group
filing a consolidated return ending on or before December 31, 1987,
there is a disposition of stock of a subsidiary (within the meaning
of Treasury Regulation section 1.1502-19), the amount required to
be included in income with respect to such disposition under
Treasury Regulation section 1.1502-19(a) shall, notwithstanding
such section, be included in income ratably over the 15-year period
beginning with the taxable year in which the disposition occurs.
The preceding sentence shall apply only if such subsidiary was
incorporated on December 24, 1969, and is a participant in a
mineral joint venture with a corporation organized under the laws
of the foreign country in which the joint venture mineral project
is located."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1501, 1503 of this title.
-End-
-CITE-
26 USC Sec. 1503 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
Sec. 1503. Computation and payment of tax
-STATUTE-
(a) [General rule] (!1)
In any case in which a consolidated return is made or is required
to be made, the tax shall be determined, computed, assessed,
collected, and adjusted in accordance with the regulations under
section 1502 prescribed before the last day prescribed by law for
the filing of such return.
[(b) Repealed. Pub. L. 94-455, title X, Sec. 1052(c)(5), Oct. 4,
1976, 90 Stat. 1648]
(c) Special rule for application of certain losses against income
of insurance companies taxed under section 801
(1) In general
If an election under section 1504(c)(2) is in effect for the
taxable year and the consolidated taxable income of the members
of the group not taxed under section 801 results in a
consolidated net operating loss for such taxable year, then under
regulations prescribed by the Secretary, the amount of such loss
which cannot be absorbed in the applicable carry-back periods
against the taxable income of such members not taxed under
section 801 shall be taken into account in determining the
consolidated taxable income of the affiliated group for such
taxable year to the extent of 35 percent of such loss or 35
percent of the taxable income of the members taxed under section
801, whichever is less. The unused portion of such loss shall be
available as a carryover, subject to the same limitations
(applicable to the sum of the loss for the carryover year and the
loss (or losses) carried over to such year), in applicable
carryover years.
(2) Losses of recent nonlife affiliates
Notwithstanding the provisions of paragraph (1), a net
operating loss for a taxable year of a member of the group not
taxed under section 801 shall not be taken into account in
determining the taxable income of a member taxed under section
801 (either for the taxable year or as a carryover or carryback)
if such taxable year precedes the sixth taxable year such members
have been members of the same affiliated group (determined
without regard to section 1504(b)(2)).
(d) Dual consolidated loss
(1) In general
The dual consolidated loss for any taxable year of any
corporation shall not be allowed to reduce the taxable income of
any other member of the affiliated group for the taxable year or
any other taxable year.
(2) Dual consolidated loss
For purposes of this section -
(A) In general
Except as provided in subparagraph (B), the term "dual
consolidated loss" means any net operating loss of a domestic
corporation which is subject to an income tax of a foreign
country on its income without regard to whether such income is
from sources in or outside of such foreign country, or is
subject to such a tax on a residence basis.
(B) Special rule where loss not used under foreign law
To the extent provided in regulations, the term "dual
consolidated loss" shall not include any loss which, under the
foreign income tax law, does not offset the income of any
foreign corporation.
(3) Treatment of losses of separate business units
To the extent provided in regulations, any loss of a separate
unit of a domestic corporation shall be subject to the
limitations of this subsection in the same manner as if such unit
were a wholly owned subsidiary of such corporation.
(4) Income on assets acquired after the loss
The Secretary shall prescribe such regulations as may be
necessary or appropriate to prevent the avoidance of the purposes
of this subsection by contributing assets to the corporation with
the dual consolidated loss after such loss was sustained.
(e) Special rule for determining adjustments to basis
(1) In general
Solely for purposes of determining gain or loss on the
disposition of intragroup stock and the amount of any inclusion
by reason of an excess loss account, in determining the
adjustments to the basis of such intragroup stock on account of
the earnings and profits of any member of an affiliated group for
any consolidated year (and in determining the amount in such
account) -
(A) such earnings and profits shall be determined as if
section 312 were applied for such taxable year (and all
preceding consolidated years of the member with respect to such
group) without regard to subsections (k) and (n) thereof, and
(B) earnings and profits shall not include any amount
excluded from gross income under section 108 to the extent the
amount so excluded was not applied to reduce tax attributes
(other than basis in property).
(2) Definitions
For purposes of this subsection -
(A) Intragroup stock
The term "intragroup stock" means any stock which -
(i) is in a corporation which is or was a member of an
affiliated group of corporations, and
(ii) is held by another corporation which is or was a
member of such group.
Such term includes any other property the basis of which is
determined (in whole or in part) by reference to the basis of
stock described in the preceding sentence.
(B) Consolidated year
The term "consolidated year" means any taxable year for which
the affiliated group makes a consolidated return.
(C) Application of section 312(n)(7) not affected
The reference in paragraph (1) to subsection (n) of section
312 shall be treated as not including a reference to paragraph
(7) of such subsection.
(3) Adjustments
Under regulations prescribed by the Secretary, proper
adjustments shall be made in the application of paragraph (1) -
(A) in the case of any property acquired by the corporation
before consolidation, for the difference between the adjusted
basis of such property for purposes of computing taxable income
and its adjusted basis for purposes of computing earnings and
profits, and
(B) in the case of any property, for any basis adjustment
under section 50(c).
(4) Elimination of election to reduce basis of indebtedness
Nothing in the regulations prescribed under section 1502 shall
permit any reduction in the amount otherwise included in gross
income by reason of an excess loss account if such reduction is
on account of a reduction in the basis of indebtedness.
(f) Limitation on use of group losses to offset income of
subsidiary paying preferred dividends
(1) In general
In the case of any subsidiary distributing during any taxable
year dividends on any applicable preferred stock -
(A) no group loss item shall be allowed to reduce the
disqualified separately computed income of such subsidiary for
such taxable year, and
(B) no group credit item shall be allowed against the tax
imposed by this chapter on such disqualified separately
computed income.
(2) Group items
For purposes of this subsection -
(A) Group loss item
The term "group loss item" means any of the following items
of any other member of the affiliated group which includes the
subsidiary:
(i) Any net operating loss and any net operating loss
carryover or carryback under section 172.
(ii) Any loss from the sale or exchange of any capital
asset and any capital loss carryover or carryback under
section 1212.
(B) Group credit item
The term "group credit item" means any credit allowable under
part IV of subchapter A of chapter 1 (other than section 34) to
any other member of the affiliated group which includes the
subsidiary and any carryover or carryback of any such credit.
(3) Other definitions
For purposes of this subsection -
(A) Disqualified separately computed income
The term "disqualified separately computed income" means the
portion of the separately computed taxable income of the
subsidiary which does not exceed the dividends distributed by
the subsidiary during the taxable year on applicable preferred
stock.
(B) Separately computed taxable income
The term "separately computed taxable income" means the
separate taxable income of the subsidiary for the taxable year
determined -
(i) by taking into account gains and losses from the sale
or exchange of a capital asset and section 1231 gains and
losses,
(ii) without regard to any net operating loss or capital
loss carryover or carryback, and
(iii) with such adjustments as the Secretary may prescribe.
(C) Subsidiary
The term "subsidiary" means any corporation which is a member
of an affiliated group filing a consolidated return other than
the common parent.
(D) Applicable preferred stock
The term "applicable preferred stock" means stock described
in section 1504(a)(4) in the subsidiary which is -
(i) issued after November 17, 1989, and
(ii) held by a person other than a member of the same
affiliated group as the subsidiary.
(4) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the provisions of this
subsection, including regulations -
(A) to prevent the avoidance of this subsection through the
transfer of built-in losses to the subsidiary,
(B) to provide rules for cases in which the subsidiary owns
(directly or indirectly) stock in another member of the
affiliated group, and
(C) to provide for the application of this subsection where
dividends are not paid currently, where the redemption and
liquidation rights of the applicable preferred stock exceed the
issue price for such stock, or where the stock is otherwise
structured to avoid the purposes of this subsection.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 367; Pub. L. 86-780, Sec. 2,
Sept. 14, 1960, 74 Stat. 1011; Pub. L. 88-272, title II, Sec.
234(a), (b)(1), (2), Feb. 26, 1964, 78 Stat. 113; Pub. L. 94-455,
title X, Secs. 1031(b)(4), 1052(c)(5), title XV, Sec. 1507(b)(3),
title XIX, Sec. 1901(b)(1)(Y), Oct. 4, 1976, 90 Stat. 1623, 1648,
1740, 1792; Pub. L. 98-369, div. A, title II, Sec. 211(b)(19), July
18, 1984, 98 Stat. 756; Pub. L. 99-514, title XII, Sec. 1249(a),
Oct. 22, 1986, 100 Stat. 2584; Pub. L. 100-203, title X, Sec.
10222(a)(1), Dec. 22, 1987, 101 Stat. 1330-410; Pub. L. 100-647,
title I, Sec. 1012(u), title II, Sec. 2004(j)(1)(A), (2), (3)(A),
Nov. 10, 1988, 102 Stat. 3528, 3604, 3605; Pub. L. 101-239, title
VII, Secs. 7201(a), 7207(a), 7821(c), Dec. 19, 1989, 103 Stat.
2328, 2337, 2424; Pub. L. 101-508, title XI, Secs. 11802(f)(4),
11813(b)(25), Nov. 5, 1990, 104 Stat. 1388-530, 1388-555.)
-MISC1-
AMENDMENTS
1990 - Subsec. (c)(1). Pub. L. 101-508, Sec. 11802(f)(4), struck
out at end "For taxable years ending with or within calendar year
1981, '25 percent' shall be substituted for '35 percent' each place
it appears in the first sentence of this subsection. For taxable
years ending with or within calendar year 1982, '30 percent' shall
be substituted for '35 percent' each place it appears in that
sentence."
Subsec. (e)(3)(B). Pub. L. 101-508, Sec. 11813(b)(25),
substituted "section 50(c)" for "section 48(q)".
1989 - Subsec. (e)(2)(A)(ii). Pub. L. 101-239, Sec. 7821(c),
substituted "another corporation which is or was a member" for
"another member".
Subsec. (e)(4). Pub. L. 101-239, Sec. 7207(a), added par. (4).
Subsec. (f). Pub. L. 101-239, Sec. 7201(a), added subsec. (f).
1988 - Subsec. (d)(3), (4). Pub. L. 100-647, Sec. 1012(u), added
pars. (3) and (4).
Subsec. (e)(1). Pub. L. 100-647, Sec. 2004(j)(1)(A), amended
introductory provisions generally. Prior to amendment, introductory
provisions read as follows: "Solely for purposes of determining
gain or loss on the disposition of intragroup stock, in determining
the adjustments to the basis of such intragroup stock on account of
the earnings and profits of any member of an affiliated group for
any consolidated year - ".
Subsec. (e)(2)(C). Pub. L. 100-647, Sec. 2004(j)(3)(A), added
subpar. (C).
Subsec. (e)(3). Pub. L. 100-647, Sec. 2004(j)(2), added par. (3).
1987 - Subsec. (e). Pub. L. 100-203 added subsec. (e).
1986 - Subsec. (d). Pub. L. 99-514 added subsec. (d).
1984 - Subsec. (c). Pub. L. 98-369, Sec. 211(b)(19)(A), (C),
substituted "section 801" for "section 802" in heading, and
wherever appearing in text.
Subsec. (c)(1). Pub. L. 98-369, Sec. 211(b)(19)(B), struck out
provision that for purposes of this subsection, in determining the
taxable income of each insurance company subject to tax under
section 802, section 802(b)(3) would not be taken into account.
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1052(c)(5), struck out
subsec. (a) designation.
Subsec. (b). Pub. L. 94-455, Sec. 1052(c)(5), struck out subsec.
(b) which provided for a special rule for application of foreign
tax credit when overall limitation applies.
Subsec. (b)(1). Pub. L. 94-455, Sec. 1031(b)(4), struck out "and
if for the taxable year an election under section 904(b)(1)
(relating to election of overall limitation on foreign tax credit)
is in effect" after "section 921)".
Subsec. (b)(3)(C). Pub. L. 94-455, Sec. 1901(b)(1)(Y), struck out
subpar. (C) which defined "consolidated taxable income".
Subsec. (c). Pub. L. 94-455, Sec. 1507(b)(3), added subsec. (c).
1964 - Subsec. (a). Pub. L. 88-272, Sec. 234(a), struck out
provisions which increased the tax imposed under section 11(c), or
section 831, by 2% of the consolidated taxable income of the
affiliated group of includible corporations, and defined
"consolidated taxable income".
Subsec. (b). Pub. L. 88-272, Sec. 234(b)(1), (2), redesignated
subsec. (d) as (b), and substituted references to section 7701 for
references to former subsection (c) of this section, in subpar.
(A), and definition of "consolidated taxable income" for provisions
relating to the computation of tax, for purposes of par. (1)(A), on
the portion of consolidated taxable income attributable to any
corporation, without regard to the increase of 2% as in subsec.
(a), in subpar. (C). Former subsec. (b), which limited the 2%
increase in subsec. (a) in cases where the affiliated group
included one or more Western Hemisphere trade corporations or one
or more regulated public utilities, to the amount by which the
consolidated taxable income of the affiliated group exceed the
income attributable to such corporations and utilities, was struck
out.
Subsec. (c). Pub. L. 88-272, Sec. 234(b)(1), struck out subsec.
(c) which defined regulated public utility. See section 7701(a)(33)
of this title.
Subsec. (d). Pub. L. 88-272, Sec. 234(b)(1), redesignated subsec.
(d) as (b).
1960 - Subsec. (d). Pub. L. 86-780 added subsec. (d).
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11813(b)(25) of Pub. L. 101-508 applicable
to property placed in service after Dec. 31, 1990, but not
applicable to any transition property (as defined in section 49(e)
of this title), any property with respect to which qualified
progress expenditures were previously taken into account under
section 46(d) of this title, and any property described in section
46(b)(2)(C) of this title, as such sections were in effect on Nov.
4, 1990, see section 11813(c) of Pub. L. 101-508, set out as a note
under section 29 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7201(b) of Pub. L. 101-239 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to taxable years ending after November
17, 1989.
"(2) Binding contract exception. - For purposes of section
1503(f)(3)(D) of the Internal Revenue Code of 1986, stock issued
after November 17, 1989, pursuant to a written binding contract in
effect on November 17, 1989, and at all times thereafter before
such issuance, shall be treated as issued on November 17, 1989.
"(3) Special rule when subsidiary leaves group. - If, by reason
of a transaction after November 17, 1989, a corporation ceases to
be, or becomes, a member of an affiliated group, the stock of such
corporation shall be treated, for purposes of section 1503(f)(3)(D)
of such Code, as issued on the date of such cessation or
commencement, unless such transaction is of a kind which would not
result in the recognition of any deferred intercompany gain under
the consolidated return regulations by reason of the acquisition of
the entire group.
"(4) Retired stock. -
"(A) Except as provided in subparagraph (B), if stock issued
before November 18, 1989, (or described in paragraph (2)), is
retired or acquired after November 17, 1989, by the corporation
or another member of the same affiliated group, such stock shall
be treated, for purposes of section 1503(f)(3)(D) of such Code,
as issued on the date of such retirement or acquisition.
"(B) Subparagraph (A) shall not apply to any retirement or
acquisition pursuant to an obligation to reissue under a binding
written contract in effect on November 17, 1989, and at all times
thereafter before such retirement or acquisition.
"(5) Auction rate preferred. - For purposes of section
1503(f)(3)(D) of such Code, auction rate preferred stock shall be
treated as issued when the contract requiring the auction became
binding.
"(6) Special rule for certain auction rate preferred. - For
purposes of section 1503(f)(3)(D) of the Internal Revenue Code of
1986, any auction rate preferred stock shall be treated as issued
before November 18, 1989, if -
"(A) a subsidiary was incorporated before July 10, 1989 for the
special purpose of issuing such stock,
"(B) a rating agency was retained before July 10, 1989, and
"(C) such stock is issued before the date 30 days after the
date of the enactment of this Act [Dec. 19, 1989]."
Section 7207(b) of Pub. L. 101-239 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by subsection (a) [amending this section] shall
apply to dispositions after July 10, 1989, in taxable years ending
after such date.
"(2) Binding contract. - The amendment made by subsection (a)
shall not apply to any disposition pursuant to a written binding
contract in effect on July 10, 1989, and at all times thereafter
before such disposition."
Amendment by section 7821 of Pub. L. 101-239 effective as if
included in the provision of the Revenue Act of 1987, Pub. L.
100-203, title X, to which such amendment relates, see section 7823
of Pub. L. 101-239, set out as a note under section 26 of this
title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1012(u) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Amendment by section 2004(j)(1)(A), (2), (3)(A) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provisions of the Revenue Act of 1987, Pub. L. 100-203, title
X, to which such amendment relates, see section 2004(u) of Pub. L.
100-647, set out as a note under section 56 of this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10222(a)(2) of Pub. L. 100-203, as amended by Pub. L.
100-647, title II, Sec. 2004(j)(1)(B), Nov. 10, 1988, 102 Stat.
3604, provided that:
"(A) In general. - Except as provided in subparagraph (B), the
amendment made by paragraph (1) [amending this section] shall apply
to any intragroup stock disposed of after December 15, 1987. For
purposes of determining the adjustments to the basis of such stock,
such amendment shall be deemed to have been in effect for all
periods whether before, on, or after December 15, 1987.
"(B) Exception. - The amendment made by paragraph (1) shall not
apply to any intragroup stock disposed of after December 15, 1987,
and before January 1, 1989, if such disposition is pursuant to a
written binding contract, governmental order, letter of intent or
preliminary agreement, or stock acquisition agreement, in effect on
or before December 15, 1987.
"(C) Treatment of certain excess loss accounts. -
"(i) In general. - If -
"(I) any disposition on or before December 15, 1987, of stock
resulted in an inclusion of an excess loss account (or would
have so resulted if the amendments made by paragraph (1) had
applied to such disposition), and
"(II) there is an unrecaptured amount with respect to such
disposition,
the portion of such unrecaptured amount allocable to stock
disposed of in a disposition to which the amendment made by
paragraph (1) applies shall be taken into account as negative
basis. To the extent permitted by the Secretary of the Treasury
or his delegate, the preceding sentence shall not apply to the
extent the taxpayer elects to reduce its basis in indebtedness of
the corporation with respect to which there would have been an
excess loss account.
"(ii) Special rules. - For purposes of this subparagraph -
"(I) Unrecaptured amount. - The term 'unrecaptured amount'
means the amount by which the inclusion referred to in clause
(i)(I) would have been increased if the amendment made by
paragraph (1) and [had] applied to the disposition.
"(II) Coordination with binding contract exception. - A
disposition shall be treated as occurring on or before December
15, 1987, if the amendment made by paragraph (1) does not apply
to such disposition by reason of subparagraph (B)."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1249(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to net
operating losses for taxable years beginning after December 31,
1986."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, see section 215 of Pub. L. 98-369, set out as
an Effective Date note under section 801 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1031(b)(4) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1975, see section 1031(c) of
Pub. L. 94-455, set out as a note under section 904 of this title.
Amendment by section 1052(c)(5) of Pub. L. 94-455 effective with
respect to taxable years beginning after Dec. 31, 1979, see section
1052(d) of Pub. L. 94-455, set out as a note under section 170 of
this title.
Amendment by section 1507(b)(3) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1980, see section 1507(c) of
Pub. L. 94-455, set out as a note under section 1504 of this title.
Amendment by section 1901(b)(1)(Y) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 234(c) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) and (b) [amending this section and sections
12, 172, 904, 1341, 1552, and 7701 of this title] shall apply with
respect to taxable years beginning after December 31, 1963."
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-780 applicable to taxable years beginning
after Dec. 31, 1960, see section 4 of Pub. L. 86-780, set out as a
note under section 904 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 178, 337, 584, 806, 847,
953 of this title.
-FOOTNOTE-
(!1) Subsec. (a) heading editorially supplied.
-End-
-CITE-
26 USC Sec. 1504 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
Sec. 1504. Definitions
-STATUTE-
(a) Affiliated group defined
For purposes of this subtitle -
(1) In general
The term "affiliated group" means -
(A) 1 or more chains of includible corporations connected
through stock ownership with a common parent corporation which
is an includible corporation, but only if -
(B)(i) the common parent owns directly stock meeting the
requirements of paragraph (2) in at least 1 of the other
includible corporations, and
(ii) stock meeting the requirements of paragraph (2) in each
of the includible corporations (except the common parent) is
owned directly by 1 or more of the other includible
corporations.
(2) 80-percent voting and value test
The ownership of stock of any corporation meets the
requirements of this paragraph if it -
(A) possesses at least 80 percent of the total voting power
of the stock of such corporation, and
(B) has a value equal to at least 80 percent of the total
value of the stock of such corporation.
(3) 5 years must elapse before reconsolidation
(A) In general
If -
(i) a corporation is included (or required to be included)
in a consolidated return filed by an affiliated group for a
taxable year which includes any period after December 31,
1984, and
(ii) such corporation ceases to be a member of such group
in a taxable year beginning after December 31, 1984,
with respect to periods after such cessation, such corporation
(and any successor of such corporation) may not be included in
any consolidated return filed by the affiliated group (or by
another affiliated group with the same common parent or a
successor of such common parent) before the 61st month
beginning after its first taxable year in which it ceased to be
a member of such affiliated group.
(B) Secretary may waive application of subparagraph (A)
The Secretary may waive the application of subparagraph (A)
to any corporation for any period subject to such conditions as
the Secretary may prescribe.
(4) Stock not to include certain preferred stock
For purposes of this subsection, the term "stock" does not
include any stock which -
(A) is not entitled to vote,
(B) is limited and preferred as to dividends and does not
participate in corporate growth to any significant extent,
(C) has redemption and liquidation rights which do not exceed
the issue price of such stock (except for a reasonable
redemption or liquidation premium), and
(D) is not convertible into another class of stock.
(5) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection, including (but not limited to) regulations -
(A) which treat warrants, obligations convertible into stock,
and other similar interests as stock, and stock as not stock,
(B) which treat options to acquire or sell stock as having
been exercised,
(C) which provide that the requirements of paragraph (2)(B)
shall be treated as met if the affiliated group, in reliance on
a good faith determination of value, treated such requirements
as met,
(D) which disregard an inadvertent ceasing to meet the
requirements of paragraph (2)(B) by reason of changes in
relative values of different classes of stock,
(E) which provide that transfers of stock within the group
shall not be taken into account in determining whether a
corporation ceases to be a member of an affiliated group, and
(F) which disregard changes in voting power to the extent
such changes are disproportionate to related changes in value.
(b) Definition of "includible corporation"
As used in this chapter, the term "includible corporation" means
any corporation except -
(1) Corporations exempt from taxation under section 501.
(2) Insurance companies subject to taxation under section 801.
(3) Foreign corporations.
(4) Corporations with respect to which an election under
section 936 (relating to possession tax credit) is in effect for
the taxable year.
[(5) Repealed. Pub. L. 94-455, title X, Sec. 1053(d)(2), Oct.
4, 1976, 90 Stat. 1649.]
(6) Regulated investment companies and real estate investment
trusts subject to tax under subchapter M of chapter 1.
(7) A DISC (as defined in section 992(a)(1)).
(8) An S corporation.
(c) Includible insurance companies
Notwithstanding the provisions of paragraph (2) of subsection (b)
-
(1) Two or more domestic insurance companies each of which is
subject to tax under section 801 shall be treated as includible
corporations for purposes of applying subsection (a) to such
insurance companies alone.
(2)(A) If an affiliated group (determined without regard to
subsection (b)(2)) includes one or more domestic insurance
companies taxed under section 801, the common parent of such
group may elect (pursuant to regulations prescribed by the
Secretary) to treat all such companies as includible corporations
for purposes of applying subsection (a) except that no such
company shall be so treated until it has been a member of the
affiliated group for the 5 taxable years immediately preceding
the taxable year for which the consolidated return is filed.
(B) If an election under this paragraph is in effect for a
taxable year -
(i) section 243(b)(3) and the exception provided under
section 243(b)(2) with respect to subsections (b)(2) and (c) of
this section,
(ii) section 542(b)(5), and
(iii) subsection (a)(4) and (b)(2)(D) of section 1563, and
the reference to section 1563(b)(2)(D) contained in section
1563(b)(3)(C),
shall not be effective for such taxable year.
(d) Subsidiary formed to comply with foreign law
In the case of a domestic corporation owning or controlling,
directly or indirectly, 100 percent of the capital stock (exclusive
of directors' qualifying shares) of a corporation organized under
the laws of a contiguous foreign country and maintained solely for
the purpose of complying with the laws of such country as to title
and operation of property, such foreign corporation may, at the
option of the domestic corporation, be treated for the purpose of
this subtitle as a domestic corporation.
(e) Includible tax-exempt organizations
Despite the provisions of paragraph (1) of subsection (b), two or
more organizations exempt from taxation under section 501, one or
more of which is described in section 501(c)(2) and the others of
which derive income from such 501(c)(2) organizations, shall be
considered as includible corporations for the purpose of the
application of subsection (a) to such organizations alone.
(f) Special rule for certain amounts derived from a corporation
previously treated as a DISC
In determining the consolidated taxable income of an affiliated
group for any taxable year beginning after December 31, 1984, a
corporation which had been a DISC and which would otherwise be a
member of such group shall not be treated as such a member with
respect to -
(1) any distribution (or deemed distribution) of accumulated
DISC income which was not treated as previously taxed income
under section 805(b)(2)(A) of the Tax Reform Act of 1984, and
(2) any amount treated as received under section 805(b)(3) of
such Act.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 369; Mar. 13, 1956, ch. 83, Sec.
5(8), 70 Stat. 49; Pub. L. 85-866, title I, Sec. 64(d)(3), Sept. 2,
1958, 72 Stat. 1657; Pub. L. 86-69, Sec. 3(f)(1), June 25, 1959, 73
Stat. 140; Pub. L. 86-376, Sec. 2(c), Sept. 23, 1959, 73 Stat. 699;
Pub. L. 86-779, Sec. 10(j), Sept. 14, 1960, 74 Stat. 1009; Pub. L.
89-389, Sec. 4(b)(3), Apr. 14, 1966, 80 Stat. 116; Pub. L. 91-172,
title I, Sec. 121(a)(4), Dec. 30, 1969, 83 Stat. 537; Pub. L.
92-178, title V, Sec. 502(e), Dec. 10, 1971, 85 Stat. 550; Pub. L.
94-455, title VIII, Sec. 803(b)(3), title X, Secs. 1051(g),
1053(d)(2), title XV, Sec. 1507(a), Oct. 4, 1976, 90 Stat. 1584,
1646, 1649, 1739; Pub. L. 95-600, title I, Sec. 141(f)(4), Nov. 6,
1978, 92 Stat. 2795; Pub. L. 96-222, title I, Sec.
101(a)(7)(L)(i)(VIII), (iv)(II), Apr. 1, 1980, 94 Stat. 199, 200;
Pub. L. 98-369, div. A, title I, Sec. 60(a), title II, Sec.
211(b)(20), July 18, 1984, 98 Stat. 577, 756; Pub. L. 99-514, title
X, Sec. 1024(c)(15), (16), title XVIII, Secs. 1804(e)(1), (10),
1899A(35), Oct. 22, 1986, 100 Stat. 2408, 2800, 2804, 2960; Pub. L.
100-647, title I, Sec. 1018(d)(10), Nov. 10, 1988, 102 Stat. 3581;
Pub. L. 101-508, title XI, Sec. 11814(b), Nov. 5, 1990, 104 Stat.
1388-557; Pub. L. 104-188, title I, Secs. 1308(d)(2), 1702(h)(6),
Aug. 20, 1996, 110 Stat. 1783, 1874.)
-REFTEXT-
REFERENCES IN TEXT
Section 805(b)(2)(A) and (3) of the Tax Reform Act of 1984,
referred to in subsec. (f)(1), (2), is section 805(b)(2)(A) and (3)
of Pub. L. 98-369, which is set out as a note under section 991 of
this title.
-MISC1-
AMENDMENTS
1996 - Subsec. (b)(8). Pub. L. 104-188, Sec. 1308(d)(2), added
par. (8).
Subsec. (c)(2)(B)(i). Pub. L. 104-188, Sec. 1702(h)(6), inserted
"section" before "243(b)(2)".
1990 - Subsec. (c)(2)(B)(i). Pub. L. 101-508, Sec. 11814(b),
substituted "section 243(b)(3)" for "section 243(b)(6)" and
"243(b)(2)" for "section 243(b)(5)".
1988 - Subsec. (b)(7). Pub. L. 100-647, Sec. 1018(d)(10)(A),
amended par. (7) generally, striking out ", or any other
corporation which has accumulated DISC income which is derived
after December 31, 1984" after "in section 992(a)(1))".
Subsec. (f). Pub. L. 100-647, Sec. 1018(d)(10)(B), added subsec.
(f).
1986 - Subsec. (a)(4)(C). Pub. L. 99-514, Sec. 1804(e)(1),
amended subpar. (C) generally. Prior to amendment, subpar. (C) read
as follows: "has redemption and liquidation rights which do not
exceed the paid-in capital or par value represented by such stock
(except for a reasonable redemption premium in excess of such
paid-in capital or par value), and".
Subsec. (b)(2). Pub. L. 99-514, Sec. 1024(c)(15), struck out "or
821" after "section 802".
Subsec. (b)(7). Pub. L. 99-514, Sec. 1804(e)(10), amended par.
(7) generally. Prior to amendment, par. (7) read as follows: "A
DISC or former DISC (as defined in section 992(a))."
Subsec. (c)(2)(A). Pub. L. 99-514, Sec. 1899A(35), struck out "or
821" after "section 801".
Pub. L. 99-514, Sec. 1024(c)(16), substituted "subsection (b)(2))
includes" for "subsection (b)(2) includes".
1984 - Subsec. (a). Pub. L. 98-369, Sec. 60(a), in amending
subsec. (a), generally, revised existing provisions of subsec. (a)
into pars. (1), (2), and (4), added pars. (3) and (5), revised
definition of "affiliated group", and expanded the enumeration of
securities not included under term "stock".
Subsecs. (b)(2), (c)(1), (2)(A). Pub. L. 98-369, Sec. 211(b)(20),
substituted "section 801" for "section 802".
1980 - Subsec. (a). Pub. L. 96-222 substituted "a tax credit
employee stock ownership plan" for "an ESOP" and "employee" for
"leveraged employee".
1978 - Subsec. (a). Pub. L. 95-600 substituted "(within the
meaning for section 409A(l)) while such securities are held under
an ESOP, or qualifying employer securities (within the meaning of
section 4975(e)(8)) while such securities are held under a
leveraged employee stock ownership plan which meets the
requirements of section 4975(e)(7)" for "within the meaning of
section 301(d)(9)(A) of the Tax Reduction Act of 1975, or
qualifying employer securities within the meaning of section
4975(e)(8) while such securities are held under an employee stock
ownership plan which meets the requirements of section 301(d) of
such Act or section 4975(e)(7), respectively".
1976 - Subsec. (a). Pub. L. 94-455, Sec. 803(b)(3), substituted
"dividends, employer securities within the meaning of section
301(d)(9)(A) of the Tax Reduction Act of 1976, or qualifying
employer securities within the meaning of section 4975(e)(8) while
such securities are held under an employee stock ownership plan
which meets the requirements of section 301(d) of such Act or
section 4975(e)(7), respectively" for "dividends" after "preferred
as to".
Subsec. (b)(4). Pub. L. 94-455, Sec. 1051(g), substituted
"Corporations with respect to which an election under section 936
(relating to possession tax credit) is in effect for the taxable
year" for "Corporations entitled to the benefits of section 931, by
reason of receiving a large percentage of their income from sources
within possessions of the United States" in par. (4).
Subsec. (b)(5). Pub. L. 94-455, Sec. 1053(d)(2), struck out par.
(5) which included corporations organized under the China Trade
Act, 1922, within term "includible corporation".
Subsec. (c). Pub. L. 94-455, Sec. 1507(a), designated existing
provisions as provision preceding par. (1) and par. (1), in
provision preceding par. (1) as so designated, substituted
"Notwithstanding the provisions" for "Despite the provisions", in
par. (1) as so designated, substituted "tax under section 802 shall
be treated" for "taxation under the same section of this subtitle
shall be considered" and added par. (2).
1971 - Subsec. (b)(7). Pub. L. 92-178 added par. (7).
1969 - Subsec. (e). Pub. L. 91-172 added subsec. (e).
1966 - Subsec. (b)(7). Pub. L. 89-389 struck out par. (7)
exception to definition of "includible corporation" of
unincorporated business enterprises subject to tax as corporations
under section 1361 of this title.
1960 - Subsec. (b)(6). Pub. L. 86-779 inserted "and real estate
investment trusts" after "Regulated investment companies".
1959 - Subsec. (b)(2). Pub. L. 86-69 struck out reference to
section 811.
Subsec. (b)(8). Pub. L. 86-376 struck out par. (8) which excepted
an electing small business corporation from term "includible
corporation".
1958 - Subsec. (b)(8). Pub. L. 85-866 added par. (8).
1956 - Subsec. (b)(2), Act Mar. 13, 1956, inserted reference to
section 811.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1308(d)(2) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1317(a) of
Pub. L. 104-188, set out as a note under section 641 of this title.
Amendment by section 1702(h)(6) of Pub. L. 104-188 effective,
except as otherwise expressly provided, as if included in the
provision of the Revenue Reconciliation Act of 1990, Pub. L.
101-508, title XI, to which such amendment relates, see section
1702(i) of Pub. L. 104-188, set out as a note under section 38 of
this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to taxable years
beginning after Dec. 31, 1990, and for purposes of section
243(b)(3) of this title, references to elections under such section
to include references to an election under section 243(b) of this
title as in effect on Nov. 4, 1990, see section 11814(c) of Pub. L.
101-508, set out as a note under section 243 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1024(c)(15), (16) of Pub. L. 99-514
applicable to taxable years beginning after Dec. 31, 1986, see
section 1024(e) of Pub. L. 99-514, set out as a note under section
831 of this title.
Amendment by section 1804(e)(1), (10) of Pub. L. 99-514
effective, except as otherwise provided, as if included in the
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,
to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 60(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1804(e)(2)-(5), Oct. 22, 1986, 100 Stat.
2095, 2800, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendment made by subsection (a) [amending this
section] shall apply to taxable years beginning after December 31,
1984.
"(2) Special rule for corporations affiliated on june 22, 1984. -
In the case of a corporation which on June 22, 1984, is a member of
an affiliated group which files a consolidated return for such
corporation's taxable year which includes June 22, 1984, for
purposes of determining whether such corporation continues to be a
member of such group for taxable years beginning before January 1,
1988, the amendment made by subsection (a) [amending this section]
shall not apply. The preceding sentence shall cease to apply as of
the first day after June 22, 1984, on which such corporation does
not qualify as a member of such group under section 1504(a) of the
Internal Revenue Code of 1954 [now 1986] (as in effect on the day
before the date of the enactment of this Act [July 18, 1984]).
"(3) Special rule not to apply to certain sell-downs after june
22, 1984. - If -
"(A) the requirements of paragraph (2) are satisfied with
respect to a corporation,
"(B) more than a de minimis amount of the stock of such
corporation -
"(i) is sold or exchanged (including in a redemption), or
"(ii) is issued,
after June 22, 1984 (other than in the ordinary course of
business), and
"(C) the requirements of the amendment made by subsection (a)
are not satisfied after such sale, exchange, or issuance,
then the amendment made by subsection (a) [amending this section]
shall apply for purposes of determining whether such corporation
continues to be a member of the group. The preceding sentence shall
not apply to any transaction if such transaction does not reduce
the percentage of the fair market value of the stock of the
corporation referred to in the preceding sentence held by members
of the group determined without regard to this paragraph.
"(4) Exception for certain sell-downs. - Subsection (b)(2) (and
not subsection (b)(3)) will apply to a corporation if such
corporation issues or sells stock after June 22, 1984, pursuant to
a registration statement filed with the Securities and Exchange
Commission on or before June 22, 1984, but only if the requirements
of the amendment made by subsection (a) [amending this section]
(substituting 'more than 50 percent' for 'at least 80 percent' in
paragraph (2)(B) of section 1504(a) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954]) are satisfied immediately after such
issuance or sale and at all times thereafter until the first day of
the first taxable year beginning after December 31, 1987. For
purposes of the preceding sentence, if there is a letter of intent
between a corporation and a securities underwriter entered into on
or before June 22, 1984, and the subsequent issuance or sale is
effected pursuant to a registration statement filed with the
Securities and Exchange Commission, such stock shall be treated as
issued or sold pursuant to a registration statement filed with the
Securities and Exchange Commission on or before June 22, 1984.
"(5) Native corporations. -
"(A) In the case of a Native Corporation established under the
Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), or
a corporation all of whose stock is owned directly by such a
corporation, during any taxable year (beginning after the
effective date of these amendments and before 1992), or any part
thereof, in which the Native Corporation is subject to the
provisions of section 7(h)(1) of such Act (43 U.S.C. 1606(h)(1))
-
"(i) the amendment made by subsection (a) [amending this
section] shall not apply, and
"(ii) the requirements for affiliation under section 1504(a)
of the Internal Revenue Code of 1986 before the amendment made
by subsection (a) shall be applied solely according to the
provisions expressly contained therein, without regard to
escrow arrangements, redemption rights, or similar provisions.
"(B) Except as provided in subparagraph (C), during the period
described in subparagraph (A), no provision of the Internal
Revenue Code of 1986 (including sections 269 and 482) or
principle of law shall apply to deny the benefit or use of losses
incurred or credits earned by a corporation described in
subparagraph (A) to the affiliated group of which the Native
Corporation is the common parent.
"(C) Losses incurred or credits earned by a corporation
described in subparagraph (A) shall be subject to the general
consolidated return regulations, including the provisions
relating to separate return limitation years, and to sections 382
and 383 of the Internal Revenue Code of 1986.
"(D) Losses incurred and credits earned by a corporation which
is affiliated with a corporation described in subparagraph (A)
shall be treated as having been incurred or earned in a separate
return limitation year, unless the corporation incurring the
losses or earning the credits satisfies the affiliation
requirements of section 1504(a) without application of
subparagraph (A).
"(6) Treatment of certain corporations affiliated on June 22,
1984. - In the case of an affiliated group which -
"(A) has as its common parent a Minnesota corporation
incorporated on April 23, 1940, and
"(B) has a member which is a New York corporation incorporated
on November 13, 1969,
for purposes of determining whether such New York corporation
continues to be a member of such group, paragraph (2) shall be
applied by substituting for 'January 1, 1988,' the earlier of
January 1, 1994, or the date on which the voting power of the
preferred stock in such New York corporation terminates.
"(7) Election to have amendments apply for years beginning after
1983. - If the common parent of any group makes an election under
this paragraph, notwithstanding any other provision of this
subsection, the amendments made by subsection (a) [amending this
section] shall apply to such group for taxable years beginning
after December 31, 1983. Any such election, once made, shall be
irrevocable.
"(8) Treatment of certain affiliated groups. - If -
"(A) a corporation (hereinafter in this paragraph referred to
as the 'parent') was incorporated in 1968 and filed consolidated
returns as the parent of an affiliated group for each of its
taxable years ending after 1969 and before 1985,
"(B) another corporation (hereinafter in this paragraph
referred to as the 'subsidiary') became a member of the parent's
affiliated group in 1978 by reason of a recapitalization pursuant
to which the parent increased its voting interest in the
subsidiary from not less than 56 percent to not less than 85
percent, and
"(C) such subsidiary is engaged (or was on September 27, 1985,
engaged) in manufacturing and distributing a broad line of
business systems and related supplies for binding, laminating,
shredding, graphics, and providing secure identification,
then, for purposes of determining whether such subsidiary
corporation is a member of the parent's affiliated group under
section 1504(a) of the Internal Revenue Code of 1954 [now 1986] (as
amended by subsection (a)), paragraph (2)(B) of such section
1504(a) shall be applied by substituting '55 percent' for '80
percent'.
"(9) Treatment of certain corporations affiliated during 1971. -
In the case of a group of corporations which filed a consolidated
Federal income tax return for the taxable year beginning during
1971 and which -
"(A) included as a common parent on December 31, 1971, a
Delaware corporation incorporated on August 26, 1969, and
"(B) included as a member thereof a Delaware corporation
incorporated on November 8, 1971,
for taxable years beginning after December 31, 1970, and ending
before January 1, 1988, the requirements for affiliation for each
member of such group under section 1504(a) of the Internal Revenue
Code of 1954 [now 1986] (before the amendment made by subsection
(a) [amending this section]) shall be limited solely to the
provisions expressly contained therein and by reference to stock
issued under State law as common or preferred stock. During the
period described in the preceding sentence, no provision of the
Internal Revenue Code of 1986 (including sections 269 and 482) or
principle of law, except the general consolidated return
regulations (including the provisions relating to separate return
limitation years) and sections 382 and 383 of such Code, shall
apply to deny the benefit or use of losses incurred or credits
earned by members of such group."
Amendment by section 211(b)(20) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 effective with respect to qualified
investment for taxable years beginning after Dec. 31, 1978, see
section 141(g)(1) of Pub. L. 95-600, set out as a Effective Date
note under section 409 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 803(b)(3) of Pub. L. 94-455 applicable for
taxable years beginning after Dec. 31, 1974, see section 803(j) of
Pub. L. 94-455, set out as a note under section 46 of this title.
Amendment by section 1051(g) of Pub. L. 94-455 applicable to
taxable years beginning after Dec. 31, 1975, see section 1051(i) of
Pub. L. 94-455, set out as a note under section 27 of this title.
Section 1053(e) of Pub. L. 94-455 provided that: "The amendments
made by subsections (a) and (b) [amending section 941 and 943 of
this title] shall apply with respect to taxable years beginning
after December 31, 1975. The amendments made by subsections (c) and
(d) [amending this section and sections 116, 6072, and 6091 of this
title and repealing sections 941-943 of this title] shall apply
with respect to taxable years beginning after December 31, 1977."
Section 1507(c)(1) of Pub. L. 94-455 provided that: "The
amendments made by subsections (a) and (b) [amending this section
and sections 821, 843, and 1503 of this title] shall apply to
taxable years beginning after December 31, 1980."
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable with respect to taxable
years ending after Dec. 31, 1971, except that a corporation may not
be a DISC for any taxable year beginning before Jan. 1, 1972, see
section 507 of Pub. L. 92-178, set out as an Effective Date note
under section 991 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out
as a note under section 511 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Section 4(b) of Pub. L. 89-389 provided that the amendment made
by that section is effective on Jan. 1, 1969.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-779 applicable with respect to taxable
years of real estate investment trusts beginning after Dec. 31,
1960, see section 10(k) of Pub. L. 86-779, set out as an Effective
Date note under section 856 of this title.
EFFECTIVE DATE OF 1959 AMENDMENTS
Section 2(d) of Pub. L. 86-376 provided that: "The amendment made
by subsection (a) [amending section 1371 of this title] shall apply
to taxable years beginning after December 31, 1959. The amendments
made by subsections (b) and (c) [amending this section and section
1374 of this title] shall take effect on the day after the date of
the enactment of this Act [Sept. 23, 1959]."
Amendment by Pub. L. 86-69 applicable only with respect to
taxable years beginning after Dec. 31, 1957, see section 4 of Pub.
L. 86-69, set out as an Effective Date note under section 381 of
this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable only with respect to
taxable years beginning after Dec. 31, 1958, see section 64(e) of
Pub. L. 85-866, set out as a note under section 172 of this title.
EFFECTIVE DATE OF 1956 AMENDMENT
Amendment by act Mar. 13, 1956, applicable only to taxable years
beginning after Dec. 31, 1954, see section 6 of act Mar. 13, 1956,
set out as a note set out under section 316 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
REPEAL OF RULES PERMITTING LOSS TRANSFERS BY ALASKA NATIVE
CORPORATIONS
Section 5021 of Pub. L. 100-647, as amended by Pub. L. 101-239,
title VII, Sec. 7815(b), Dec. 19, 1989, 103 Stat. 2414, provided
that:
"(a) General Rule. - Nothing in section 60(b)(5) of the Tax
Reform Act of 1984 (as amended by section 1804(e)(4) of the Tax
Reform Act of 1986) [section 60(b)(5) of Pub. L. 98-369, set out as
an Effective Date of 1984 Amendment note above] -
"(1) shall allow any loss (or credit) of any corporation which
arises after April 26, 1988, to be used to offset the income (or
tax) of another corporation if such use would not be allowable
without regard to such section 60(b)(5) as so amended, or
"(2) shall allow any loss (or credit) of any corporation which
arises on or before such date to be used to offset disqualified
income (or tax attributable to such income) of another
corporation if such use would not be allowable without regard to
such section 60(b)(5) as so amended.
"(b) Exception for Existing Contracts. -
"(1) In general. - Subsection (a) shall not apply to any loss
(or credit) of any corporation if -
"(A) such corporation was in existence on April 26, 1988, and
"(B) such loss (or credit) is used to offset income assigned
(or attributable to property contributed) pursuant to a binding
contract entered into before July 26, 1988.
"(2) $40,000,000 limitation. - The aggregate amount of losses
(and the deduction equivalent of credits as determined in the
same manner as under section 469(j)(5) of the 1986 Code) to which
paragraph (1) applies with respect to any corporation shall not
exceed $40,000,000. For purposes of this paragraph, a Native
Corporation and all other corporations all of the stock of which
is owned directly by such corporation shall be treated as 1
corporation.
"(3) Special rule for corporations under title 11. - In the
case of a corporation which on April 26, 1988, was under the
jurisdiction of a Federal district court under title 11 of the
United States Code -
"(A) paragraph (1)(B) shall be applied by substituting the
date 1 year after the date of the enactment of this Act [Nov.
10, 1988] for 'July 26, 1988',
"(B) paragraph (1) shall not apply to any loss or credit
which arises on or after the date 1 year after the date of the
enactment of this Act, and
"(C) paragraph (2) shall be applied by substituting
'$99,000,000' for '$40,000,000'.
"(c) Special Administrative Rules. -
"(1) Notice to native corporations of proposed tax adjustments.
- Notwithstanding section 6103 of the 1986 Code, the Secretary of
the Treasury or his delegate shall notify a Native Corporation or
its designated representative of any proposed adjustment -
"(A) of the tax liability of a taxpayer which has contracted
with the Native Corporation (or other corporation all of the
stock of which is owned directly by the Native Corporation) for
the use of losses of such Native Corporation (or such other
corporation), and
"(B) which is attributable to an asserted overstatement of
losses by, or misassignment of income (or income attributable
to property contributed) to, an affiliated group of which the
Native Corporation (or such other corporation) is a member.
Such notice shall only include information with respect to the
transaction between the taxpayer and the Native Corporation.
"(2) Rights of native corporation. -
"(A) In general. - If a Native Corporation receives a notice
under paragraph (1), the Native Corporation shall have the
right to -
"(i) submit to the Secretary of the Treasury or his
delegate a written statement regarding the proposed
adjustment, and
"(ii) meet with the Secretary of the Treasury or his
delegate with respect to such proposed adjustment.
The Secretary of the Treasury or his delegate may discuss such
proposed adjustment with the Native Corporation or its designated
representative.
"(B) Extension of statute of limitations. - Subparagraph (A)
shall not apply if the Secretary of the Treasury or his
delegate determines that an extension of the statute of
limitation[s] is necessary to permit the participation
described in subparagraph (A) and the taxpayer and the
Secretary or his delegate have not agreed to such extension.
"(3) Judicial proceedings. - In the case of any proceeding in a
Federal court or the United States Tax Court involving a proposed
adjustment under paragraph (1), the Native Corporation, subject
to the rules of such court, may file an amicus brief concerning
such adjustment.
"(4) Failures. - For purposes of the 1986 Code, any failure by
the Secretary of the Treasury or his delegate to comply with the
provisions of this subsection shall not affect the validity of
the determination of the Internal Revenue Service of any
adjustment of tax liability of any taxpayer described in
paragraph (1).
"(d) Disqualified Income Defined. - For purposes of subsection
(a), the term 'disqualified income' means any income assigned (or
attributable to property contributed) after April 26, 1988, by a
person who is not a Native Corporation or a corporation all the
stock of which is owned directly by a Native Corporation.
"(e) Basis Determination. - For purposes of determining basis for
Federal tax purposes, no provision in any law enacted after the
date of the enactment of this Act [Nov. 10, 1988] shall affect the
date on which the transfer to the Native Corporation is made. The
preceding sentence shall apply to all taxable years whether
beginning before, on, or after such date of enactment."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TRANSACTION RULES
Section 1507(c)(2) of Pub. L. 94-455, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(A) Limitations on carryovers or carrybacks for groups electing
under section 1504(c)(2). - If an affiliated group elects to file a
consolidated return pursuant to section 1501(c)(2) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] a carryover of a loss
or credit from a taxable year ending before January 1, 1981, and
losses or credits which may be carried back to taxable years ending
before such date, shall be taken into account as if this section
had not been enacted.
"(B) Nontermination of affiliated group. - The mere election to
file a consolidated return pursuant to such section 1504(c)(2)
shall not cause the termination of an affiliated group filing
consolidated returns."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 132, 149, 163, 165, 168,
172, 243, 246A, 279, 280G, 281, 304, 312, 332, 336, 338, 355, 358,
367, 382, 384, 404, 448, 465, 472, 542, 543, 584, 593, 732, 805,
818, 832, 861, 864, 865, 904, 936, 952, 954, 1042, 1092, 1313,
1362, 1503, 4216, 4282, 4612, 6166, 7701 of this title; title 6
section 395.
-End-
-CITE-
26 USC Sec. 1505 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter A - Returns and Payment of Tax
-HEAD-
Sec. 1505. Cross references
-STATUTE-
(1) For suspension of running of statute of limitations when
notice in respect of a deficiency is mailed to one corporation,
see section 6503(a)(1).
(2) For allocation of income and deductions of related trades
or businesses, see section 482.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 370.)
-End-
-CITE-
26 USC Subchapter B - Related Rules 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
-HEAD-
SUBCHAPTER B - RELATED RULES
-MISC1-
Part Sec.(!1)
I. In general 1551
II. Certain controlled corporations 1561
-FOOTNOTE-
(!1) Section numbers editorially supplied.
-End-
-CITE-
26 USC PART I - IN GENERAL 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART I - IN GENERAL
-HEAD-
PART I - IN GENERAL
-MISC1-
Sec.
1551. Disallowance of the benefits of the graduated
corporate rates and accumulated earnings credit.
1552. Earnings and profits.
AMENDMENTS
1978 - Pub. L. 95-600, title III, Sec. 301(b)(18)(C), Nov. 6,
1978, 92 Stat. 2823, in item 1551 substituted "the benefits of the
graduated corporate rates" for "surtax exemption".
1964 - Pub. L. 88-272, title II, Sec. 235(c)(4), Feb. 26, 1964,
78 Stat. 127, inserted table of parts, and heading for part I.
-End-
-CITE-
26 USC Sec. 1551 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART I - IN GENERAL
-HEAD-
Sec. 1551. Disallowance of the benefits of the graduated corporate
rates and accumulated earnings credit
-STATUTE-
(a) In general
If -
(1) any corporation transfers, on or after January 1, 1951, and
on or before June 12, 1963, all or part of its property (other
than money) to a transferee corporation,
(2) any corporation transfers, directly or indirectly, after
June 12, 1963, all or part of its property (other than money) to
a transferee corporation, or
(3) five or fewer individuals who are in control of a
corporation transfer, directly or indirectly, after June 12,
1963, property (other than money) to a transferee corporation,
and the transferee corporation was created for the purpose of
acquiring such property or was not actively engaged in business at
the time of such acquisition, and if after such transfer the
transferor or transferors are in control of such transferee
corporation during any part of the taxable year of such transferee
corporation, then for such taxable year of such transferee
corporation the Secretary may (except as may be otherwise
determined under subsection (c)) disallow the benefits of the rates
contained in section 11(b) which are lower than the highest rate
specified in such section, or the accumulated earnings credit
provided in paragraph (2) or (3) of section 535(c), unless such
transferee corporation shall establish by the clear preponderance
of the evidence that the securing of such benefits or credit was
not a major purpose of such transfer.
(b) Control
For purposes of subsection (a), the term "control" means -
(1) With respect to a transferee corporation described in
subsection (a)(1) or (2), the ownership by the transferor
corporation, its shareholders, or both, of stock possessing at
least 80 percent of the total combined voting power of all
classes of stock entitled to vote or at least 80 percent of the
total value of shares of all classes of the stock; or
(2) With respect to each corporation described in subsection
(a)(3), the ownership by the five or fewer individuals described
in such subsection of stock possessing -
(A) at least 80 percent of the total combined voting power of
all classes of stock entitled to vote or at least 80 percent of
the total value of shares of all classes of the stock of each
corporation, and
(B) more than 50 percent of the total combined voting power
of all classes of stock entitled to vote or more than 50
percent of the total value of shares of all classes of stock of
each corporation, taking into account the stock ownership of
each such individual only to the extent such stock ownership is
identical with respect to each such corporation.
For purposes of this subsection, section 1563(e) shall apply in
determining the ownership of stock.
(c) Authority of the Secretary under this section
The provisions of section 269(c) and the authority of the
Secretary under such section, shall, to the extent not inconsistent
with the provisions of this section, be applicable to this section.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 371; Pub. L. 85-866, title II,
Sec. 205(a), Sept. 2, 1958, 72 Stat. 1680; Pub. L. 88-272, title
II, Sec. 235(b), Feb. 26, 1964, 78 Stat. 125; Pub. L. 94-12, title
III, Sec. 304(b), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94-455, title
XIX, Secs. 1901(a)(158), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1790, 1834; Pub. L. 95-600, title III, Sec. 301(b)(18)(A), (B),
Nov. 6, 1978, 92 Stat. 2823; Pub. L. 97-34, title II, Sec.
232(b)(2), Aug. 13, 1981, 95 Stat. 250; Pub. L. 99-514, title
XVIII, Sec. 1899A(36), Oct. 22, 1986, 100 Stat. 2960.)
-MISC1-
AMENDMENTS
1986 - Subsec. (c). Pub. L. 99-514 substituted "section 269(c)"
for "section 269(b)".
1981 - Subsec. (a). Pub. L. 97-34 struck out "$150,000" before
"accumulated earnings credit".
1978 - Pub. L. 95-600, Sec. 301(b)(18)(B), substituted "the
benefits of the graduated corporate rates" for "surtax exemption"
in section catchline.
Subsec. (a). Pub. L. 95-600, Sec. 301(b)(18)(A), in provisions
following par. (3) substituted "disallow the benefits of the rates
contained in section 11(b) which are lower than the highest rate
specified in such section" for "disallow the surtax exemption (as
defined in section 11(d))" and "such benefits or" for "such
exemption or".
1976 - Subsec. (a). Pub. L. 94-455 Secs. 1901(a)(158),
1906(b)(13)(A), substituted "subsection (c)" for "subsection (d)"
after "determined under" and struck out "or his delegate" after
"Secretary".
1975 - Subsec. (a). Pub. L. 94-12 substituted "$150,000" for
"$100,000".
1964 - Pub. L. 88-272 amended section generally, and among other
changes, designated provisions as subsecs. (a) to (c), included
among corporations who are disallowed surtax exemption and
accumulated earnings credit, corporations, and five or fewer
individuals in charge of a corporation who, directly or indirectly,
transfer property in contravention of subsec. (a) after June 12,
1963, substituted provisions permitting the Secretary or his
delegate to disallow the exemption or the earnings credit, for
provisions which disallowed the exemption and the credit except as
otherwise determined by the Secretary of his delegate, provisions
that for purposes of determining ownership of stock, section
1563(e) shall apply, for provisions which determined ownership in
accordance with section 544, and defined control, with respect to
corporations described in subsec. (a)(3), to include the additional
test as stated in subsec. (b)(2)(B).
1958 - Pub. L. 85-866 substituted "$100,000" for "$60,000".
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see section 232(c) of Pub. L. 97-34, set out
as a note under section 535 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 applicable to taxable years beginning
after Dec. 31, 1978, see section 301(c) of Pub. L. 95-600, set out
as a note under section 11 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(158) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1975 AMENDMENT
Amendment by Pub. L. 94-12 applicable to taxable years beginning
after Dec. 31, 1974, see section 305(c) of Pub. L. 94-12, set out
as a note under section 535 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 235(d) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) and (c) [enacting sections 1561 to 1563 of
this title and amending sections 269, 441, and 802 of this title]
shall apply with respect to taxable years ending after December 31,
1963. The amendment made by subsection (b) [amending this section]
shall apply with respect to transfers made after June 12, 1963."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable with respect to taxable
years beginning after Dec. 31, 1957, see section 205(b) of Pub. L.
85-866, set out as a note under section 535 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 12, 535 of this title.
-End-
-CITE-
26 USC Sec. 1552 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART I - IN GENERAL
-HEAD-
Sec. 1552. Earnings and profits
-STATUTE-
(a) General rule
Pursuant to regulations prescribed by the Secretary the earnings
and profits of each member of an affiliated group required to be
included in a consolidated return for such group filed for a
taxable year shall be determined by allocating the tax liability of
the group for such year among the members of the group in accord
with whichever of the following methods the group shall elect in
its first consolidated return filed for such a taxable year:
(1) The tax liability shall be apportioned among the members of
the group in accordance with the ratio which that portion of the
consolidated taxable income attributable to each member of the
group having taxable income bears to the consolidated taxable
income.
(2) The tax liability of the group shall be allocated to the
several members of the group on the basis of the percentage of
the total tax which the tax of such member if computed on a
separate return would bear to the total amount of the taxes for
all members of the group so computed.
(3) The tax liability of the group (excluding the tax increases
arising from the consolidation) shall be allocated on the basis
of the contribution of each member of the group to the
consolidated taxable income of the group. Any tax increases
arising from the consolidation shall be distributed to the
several members in direct proportion to the reduction in tax
liability resulting to such members from the filing of the
consolidated return as measured by the difference between their
tax liabilities determined on a separate return basis and their
tax liabilities based on their contributions to the consolidated
taxable income.
(4) The tax liability of the group shall be allocated in accord
with any other method selected by the group with the approval of
the Secretary.
(b) Failure to elect
If no election is made in such first return, the tax liability
shall be allocated among the several members of the group pursuant
to the method prescribed in subsection (a)(1).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 371; Pub. L. 88-272, title II,
Sec. 234(b)(8), Feb. 26, 1964, 78 Stat. 116; Pub. L. 94-455, title
XIX, Secs. 1901(a)(159), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1790, 1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (a). Pub. L. 94-455, Secs. 1901(a)(159),
1906(b)(13)(A), struck out "beginning after December 31, 1953, and
ending after the date of enactment of this title" after "group
filed for a taxable year", and "or his delegate" after "Secretary"
in two places.
1964 - Subsec. (a)(3). Pub. L. 88-272 struck out "(determined
without regard to the 2 percent increase provided by section
1503(a))", before "based on their contributions".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(159) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to taxable years beginning
after Dec. 31, 1963, see section 234(c) of Pub. L. 88-272, set out
as a note under section 1503 of this title.
-End-
-CITE-
26 USC PART II - CERTAIN CONTROLLED CORPORATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART II - CERTAIN CONTROLLED CORPORATIONS
-HEAD-
PART II - CERTAIN CONTROLLED CORPORATIONS
-MISC1-
Sec.
1561. Limitations on certain multiple tax benefits in the
case of certain controlled corporations.
[1562. Repealed.]
1563. Definitions and special rules.
[1564. Repealed.]
AMENDMENTS
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(12), Nov. 5,
1990, 104 Stat. 1388-522, struck out item 1564 "Transitional rules
in the case of certain controlled corporations".
1969 - Pub. L. 91-172, title IV, Sec. 401(a)(3), (b)(2)(E), Dec.
30, 1969, 83 Stat. 600, 602, substituted "Sec. 1561. Limitations on
certain multiple tax benefits in the case of certain controlled
corporations." for "Sec. 1561. Surtax exemptions in case of certain
controlled corporations.", and struck out item 1562, effective with
respect to taxable years beginning after Dec. 31, 1974, and added
item 1564.
1964 - Pub. L. 88-272, title II, Sec. 235(a), Feb. 26, 1964, 78
Stat. 116, added designation of part II, and items 1561 to 1563.
-End-
-CITE-
26 USC Sec. 1561 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART II - CERTAIN CONTROLLED CORPORATIONS
-HEAD-
Sec. 1561. Limitations on certain multiple tax benefits in the case
of certain controlled corporations
-STATUTE-
(a) General rule
The component members of a controlled group of corporations on a
December 31 shall, for their taxable years which include such
December 31, be limited for purposes of this subtitle to -
(1) amounts in each taxable income bracket in the tax table in
section 11(b)(1) which do not aggregate more than the maximum
amount in such bracket to which a corporation which is not a
component member of a controlled group is entitled,
(2) one $250,000 ($150,000 if any component member is a
corporation described in section 535(c)(2)(B)) amount for
purposes of computing the accumulated earnings credit under
section 535(c)(2) and (3),
(3) one $40,000 exemption amount for purposes of computing the
amount of the minimum tax, and
(4) one $2,000,000 amount for purposes of computing the tax
imposed by section 59A.
The amounts specified in paragraph (1), the amount specified in
paragraph (3), and the amount specified in paragraph (4) shall be
divided equally among the component members of such group on such
December 31 unless all of such component members consent (at such
time and in such manner as the Secretary shall by regulations
prescribe) to an apportionment plan providing for an unequal
allocation of such amounts. The amounts specified in paragraph (2)
shall be divided equally among the component members of such group
on such December 31 unless the Secretary prescribes regulations
permitting an unequal allocation of such amounts. Notwithstanding
paragraph (1), in applying the last 2 sentences of section 11(b)(1)
to such component members, the taxable income of all such component
members shall be taken into account and any increase in tax under
such last 2 sentences shall be divided among such component members
in the same manner as amounts under paragraph (1). In applying
section 55(d)(3), the alternative minimum taxable income of all
component members shall be taken into account and any decrease in
the exemption amount shall be allocated to the component members in
the same manner as under paragraph (3).
(b) Certain short taxable years
If a corporation has a short taxable year which does not include
a December 31 and is a component member of a controlled group of
corporations with respect to such taxable year, then for purposes
of this subtitle -
(1) the amount in each taxable income bracket in the tax table
in section 11(b), and
(2) the amount to be used in computing the accumulated earnings
credit under section 535(c)(2) and (3),
of such corporation for such taxable year shall be the amount
specified in subsection (a)(1) or (2), as the case may be, divided
by the number of corporations which are component members of such
group on the last day of such taxable year. For purposes of the
preceding sentence, section 1563(b) shall be applied as if such
last day were substituted for December 31.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 235(a), Feb. 26, 1964, 78
Stat. 116; amended Pub. L. 91-172, title IV, Sec. 401(a)(1), Dec.
30, 1969, 83 Stat. 599; Pub. L. 94-12, title III, Secs. 303(c)(1),
304(b), Mar. 29, 1975, 89 Stat. 44, 45; Pub. L. 94-164, Sec.
4(d)(1), Dec. 23, 1975, 89 Stat. 974; Pub. L. 94-455, title IX,
Sec. 901(c)(1), title XIX, Secs. 1901(b)(1)(J)(v), 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1607, 1791, 1834; Pub. L. 95-600, title III,
Sec. 301(b)(19), title VII, Sec. 703(j)(7), Nov. 6, 1978, 92 Stat.
2823, 2941; Pub. L. 97-34, title II, Sec. 232(b)(3), Aug. 13, 1981,
95 Stat. 250; Pub. L. 97-248, title II, Sec. 259(b), (c), Sept. 3,
1982, 96 Stat. 539; Pub. L. 98-369, div. A, title I, Sec. 66(b),
title II, Sec. 211(b)(21), July 18, 1984, 98 Stat. 585, 756; Pub.
L. 99-499, title V, Sec. 516(b)(3), Oct. 17, 1986, 100 Stat. 1771;
Pub. L. 99-514, title VII, Sec. 701(e)(2), Oct. 22, 1986, 100 Stat.
2342; Pub. L. 100-647, title II, Sec. 2004(l), Nov. 10, 1988, 102
Stat. 3606; Pub. L. 104-188, title I, Sec. 1703(f), Aug. 20, 1996,
110 Stat. 1876.)
-MISC1-
AMENDMENTS
1996 - Subsec. (a). Pub. L. 104-188 in closing provisions
substituted "last 2 sentences" for "last sentence" in two places.
1988 - Subsec. (a). Pub. L. 100-647 substituted "section
11(b)(1)" for "section 11(b)" in par. (1) and in penultimate
sentence.
1986 - Subsec. (a). Pub. L. 99-514 added par. (3), and in
concluding provisions, substituted "amounts specified in paragraph
(1) (and the amount specified in paragraph (3))" for "amounts
specified in paragraph (1)" and inserted "In applying section
55(d)(3), the alternative minimum taxable income of all component
members shall be taken into account and any decrease in the
exemption amount shall be allocated to the component members in the
same manner as under paragraph (3)."
Pub. L. 99-499, in subsec. (a) as amended by Pub. L. 99-514
above, added par. (4), and in concluding provisions substituted ",
the amount specified in paragraph (3), and the amount specified in
paragraph (4)" for "(and the amount specified in paragraph (3))".
1984 - Subsec. (a). Pub. L. 98-369, Sec. 211(b)(21)(A), inserted
"and" at end of par. (1), substituted a period for the comma at end
of par. (2), struck out par. (3) which read as follows: "one
$25,000 amount for purposes of computing the limitation on the
small business deduction of life insurance companies under sections
804(a)(3) and 809(d)(10), and", struck out par. (4) which read as
follows: "one $1,000,000 amount (adjusted as provided in section
809(f)(3) for purposes of computing the limitation under paragraph
(1) or (2) of section 809(f).", and substituted "paragraph (2)" for
"paragraphs (2), (3), and (4)" in concluding provisions.
Pub. L. 98-369, Sec. 66(b), inserted provision that
notwithstanding paragraph (1), in applying last sentence of section
11(b) to such component members, the taxable income of all such
component members shall be taken into account and any increase in
tax under the last sentence shall be divided among such component
members in the same manner as amounts under paragraph (1).
Subsec. (b). Pub. L. 98-369, Sec. 211(b)(21)(B), inserted "and"
at end of par. (1), struck out par. (3) which read as follows: "the
amount to be used in computing the limitation on the small business
deduction of life insurance companies under sections 804(a)(3) and
809(d)(10), and", struck out par. (4) which read as follows: "the
amount (adjusted as provided in section 809(f)(3)) to be used in
computing the limitation under paragraph (1) or (2) of section
809(f),", and substituted "or (2)" for ", (2), (3), or (4)" in
concluding provisions.
1982 - Subsec. (a). Pub. L. 97-248, Sec. 259(b), added par. (4)
and inserted reference to par. (4) in text following par. (4).
Subsec. (b). Pub. L. 97-248, Sec. 259(c), added par. (4) and
inserted reference to subsec. (a)(4) in text following par. (4).
1981 - Subsec. (a)(2). Pub. L. 97-34 substituted "$250,000
($150,000 if any component member is a corporation described in
section 535(c)(2)(B))" for "$150,000".
1978 - Subsec. (a). Pub. L. 95-600, Sec. 301(b)(19)(A), in par.
(1) substituted "amounts in each taxable income bracket in the tax
table in section 11(b) which do not aggregate more than the maximum
amount in such bracket to which a corporation is not a component
member of a controlled group is entitled" for "the surtax exemption
under section 11(d)" and in provisions following par. (3)
substituted "amounts" for "amount" in two places and struck out
provision that in applying section 11(b)(2), the first $25,000 of
taxable income and the second $25,000 of taxable income each be
allocated among the component members of a controlled group of
corporations in the same manner as the surtax exemption is
allocated.
Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(19)(B), substituted
"the amount in each taxable income bracket in the tax table in
section 11(b)" for "the surtax exemption under section 11(d)".
Subsec. (b)(3). Pub. L. 95-600, Sec. 703(j)(7), substituted
"804(a)(3)" for "804(a)(4)".
1976 - Subsec. (a). Pub. L. 94-455, Secs. 901(c)(1),
1906(b)(13)(A), inserted "In applying section 11(b)(2), the first
$25,000 of taxable income and the second $25,000 of taxable income
shall each be allocated among the component members of a controlled
group of corporations in the same manner as the surtax exemption is
allocated" after "unequal allocation of such amounts" and struck
out "or his delegate" after "Secretary" in two places.
Subsec. (a)(3). Pub. L. 94-455, Sec. 1901(b)(1)(J)(v),
substituted "804(a)(3)" for "804(a)(4)" after "under sections".
1975 - Subsec. (a)(1). Pub. L. 94-164 struck out "$25,000" in
par. (1) as par. (1) is in effect for taxable years ending after
Dec. 31, 1975.
Pub. L. 94-12, Sec. 303(c)(1), substituted "$50,000" for
"$25,000".
Subsec. (a)(2). Pub. L. 94-12, Sec. 304(b), substituted
"$150,000" for "$100,000".
1969 - Pub. L. 91-172 provided, with respect to taxable years
beginning after Dec. 31, 1974, that a controlled group of
corporations is limited to one $25,000 surtax exemption under
section 11(d), one $100,000 amount for purposes of computing the
accumulated earnings credit under section 535(c)(2) and (3), and
one $25,000 amount for purposes of computing the limitation on the
small business deduction of life insurance companies under sections
804(a)(4) and 809(d)(10).
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provisions of the Revenue Act of
1987, Pub. L. 100-203, title X, to which such amendment relates,
see section 2004(u) of Pub. L. 100-647, set out as a note under
section 56 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, with certain exceptions and qualifications,
see section 701(f) of Pub. L. 99-514, set out as an Effective Date
note under section 55 of this title.
Amendment by Pub. L. 99-499 applicable to taxable years beginning
after Dec. 31, 1986, see section 516(c) of Pub. L. 99-499, set out
as a note under section 26 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 66(b) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 66(c) of
Pub. L. 98-369, set out as a note under section 11 of this title.
Amendment by section 211(b)(21) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
EFFECTIVE AND TERMINATION DATE OF 1982 AMENDMENT
Section 263(a)(1) of Pub. L. 97-248 provided that the amendment
made by section 259(b), (c) of Pub. L. 97-248 is applicable to
taxable years beginning after Dec. 31, 1981, and before Jan. 1,
1984.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see section 232(c) of Pub. L. 97-34, set out
as a note under section 535 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(19) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
Amendment by section 703(j)(7) of Pub. L. 95-600 effective on
Oct. 4, 1976, see section 703(r) of Pub. L. 95-600, set out as a
note under section 46 of this title.
EFFECTIVE DATES OF 1976 AMENDMENT
Amendment by section 901(c)(1) of Pub. L. 94-455 applicable to
taxable years ending after Dec. 31, 1975, see section 901(d) of
Pub. L. 94-455, set out as a note under section 11 of this title.
Amendment by section 1901(b)(1)(J)(v) of Pub. L. 94-455 effective
for taxable years beginning after Dec. 31, 1976, see section
1901(d) of Pub. L. 94-455, set out as a note under section 2 of
this title.
EFFECTIVE AND TERMINATION DATES OF 1975 AMENDMENTS
Amendment by Pub. L. 94-164 applicable to taxable years beginning
after Dec. 31, 1975, see section 4(e) of Pub. L. 94-164, set out as
a note under section 11 of this title.
Amendment by section 303(c)(1) of Pub. L. 94-12 applicable to
taxable years ending after Dec. 31, 1974, but to cease to apply for
taxable years ending after Dec. 31, 1975, see section 305(b)(1) of
Pub. L. 94-12, set out as a note under section 11 of this title.
Amendment by section 304(b) of Pub. L. 94-12 applicable to
taxable years beginning after Dec. 31, 1974, see section 305(c) of
Pub. L. 94-12, set out as an Effective Date of 1975 Amendment note
under section 535 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 401(h) of Pub. L. 91-172 provided that:
"(1) The amendments made by subsection (a) [amending this section
and repealing section 1562 of this title] shall apply with respect
to taxable years beginning after December 31, 1974.
"(2) The amendments made by subsection (b) [enacting section 1564
and amending sections 11, 535, 804, and 1562] shall apply with
respect to taxable years beginning after December 31, 1969.
"(3) The amendments made by subsections (c), (d), (e), and (f)
[amending sections 46, 48, 179, and 1563] shall apply with respect
to taxable years ending on or after December 31, 1970."
EFFECTIVE DATE
Section applicable with respect to taxable years ending after
Dec. 31, 1963, see section 235(d) of Pub. L. 88-272, set out as an
Effective Date of 1964 Amendment note under section 1551 of this
title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION
TO TREATY OBLIGATIONS OF UNITED STATES
For applicability of amendment by section 701(e)(2) of Pub. L.
99-514 notwithstanding any treaty obligation of the United States
in effect on Oct. 22, 1986, see section 1012(aa)(2) of Pub. L.
100-647, set out as a note under section 861 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 535, 4980B, 4980D, 4980F,
6655 of this title.
-End-
-CITE-
26 USC Sec. 1562 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART II - CERTAIN CONTROLLED CORPORATIONS
-HEAD-
[Sec. 1562. Repealed. Pub. L. 91-172, title IV, Sec. 401(a)(2),
Dec. 30, 1969, 83 Stat. 600]
-MISC1-
Section, added Pub. L. 88-272, title II, Sec. 235(a), Feb. 26,
1964, 78 Stat. 117, amended Pub. L. 91-172, title IV, Sec.
401(b)(2)(A), Dec. 30, 1969, 83 Stat. 602, set limits on the
privilege of groups to elect multiple surtax exemptions.
EFFECTIVE DATE OF REPEAL
Repeal applicable with respect to taxable years beginning after
Dec. 31, 1974, see section 401(h)(1) of Pub. L. 91-172, set out as
an Effective Date of 1969 Amendment note under section 1561 of this
title.
RETROACTIVE TERMINATION OF ELECTIONS
Section 401(g) of Pub. L. 91-172 authorized an affiliated group
of corporations making a consolidated return for the taxable year
which included Dec. 31, 1970, to terminate the election under
section 1562 of this title with respect to any prior Dec. 31 which
was included in a taxable year of any such corporations from which
there was a net operating loss carryover to the 1970 consolidated
return year and provided that the termination of such election was
to be valid only if in accord with subsecs. (c)(1) and (e) of
section 1562 of this title other than the requirement of making the
termination prior to the expiration of the 3 year period specified
in subsec. (e) of section 1562 of this title.
-End-
-CITE-
26 USC Sec. 1563 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART II - CERTAIN CONTROLLED CORPORATIONS
-HEAD-
Sec. 1563. Definitions and special rules
-STATUTE-
(a) Controlled group of corporations
For purposes of this part, the term "controlled group of
corporations" means any group of -
(1) Parent-subsidiary controlled group
One or more chains of corporations connected through stock
ownership with a common parent corporation if -
(A) stock possessing at least 80 percent of the total
combined voting power of all classes of stock entitled to vote
or at least 80 percent of the total value of shares of all
classes of stock of each of the corporations, except the common
parent corporation, is owned (within the meaning of subsection
(d)(1)) by one or more of the other corporations; and
(B) the common parent corporation owns (within the meaning of
subsection (d)(1)) stock possessing at least 80 percent of the
total combined voting power of all classes of stock entitled to
vote or at least 80 percent of the total value of shares of all
classes of stock of at least one of the other corporations,
excluding, in computing such voting power or value, stock owned
directly by such other corporations.
(2) Brother-sister controlled group
Two or more corporations if 5 or fewer persons who are
individuals, estates, or trusts own (within the meaning of
subsection (d)(2)) stock possessing -
(A) at least 80 percent of the total combined voting power of
all classes of stock entitled to vote or at least 80 percent of
the total value of shares of all classes of the stock of each
corporation, and
(B) more than 50 percent of the total combined voting power
of all classes of stock entitled to vote or more than 50
percent of the total value of shares of all classes of stock of
each corporation, taking into account the stock ownership of
each such person only to the extent such stock ownership is
identical with respect to each such corporation.
(3) Combined group
Three or more corporations each of which is a member of a group
of corporations described in paragraph (1) or (2), and one of
which -
(A) is a common parent corporation included in a group of
corporations described in paragraph (1), and also
(B) is included in a group of corporations described in
paragraph (2).
(4) Certain insurance companies
Two or more insurance companies subject to taxation under
section 801 which are members of a controlled group of
corporations described in paragraph (1), (2), or (3). Such
insurance companies shall be treated as a controlled group of
corporations separate from any other corporations which are
members of the controlled group of corporations described in
paragraph (1), (2), or (3).
(b) Component member
(1) General rule
For purposes of this part, a corporation is a component member
of a controlled group of corporations on a December 31 of any
taxable year (and with respect to the taxable year which includes
such December 31) if such corporation -
(A) is a member of such controlled group of corporations on
the December 31 included in such year and is not treated as an
excluded member under paragraph (2), or
(B) is not a member of such controlled group of corporations
on the December 31 included in such year but is treated as an
additional member under paragraph (3).
(2) Excluded members
A corporation which is a member of a controlled group of
corporations on December 31 of any taxable year shall be treated
as an excluded member of such group for the taxable year
including such December 31 if such corporation -
(A) is a member of such group for less than one-half the
number of days in such taxable year which precede such December
31,
(B) is exempt from taxation under section 501(a) (except a
corporation which is subject to tax on its unrelated business
taxable income under section 511) for such taxable year,
(C) is a foreign corporation subject to tax under section 881
for such taxable year,
(D) is an insurance company subject to taxation under section
801 (other than an insurance company which is a member of a
controlled group described in subsection (a)(4)), or
(E) is a franchised corporation, as defined in subsection
(f)(4).
(3) Additional members
A corporation which -
(A) was a member of a controlled group of corporations at any
time during a calendar year,
(B) is not a member of such group on December 31 of such
calendar year, and
(C) is not described, with respect to such group, in
subparagraph (B), (C), (D), or (E) of paragraph (2),
shall be treated as an additional member of such group on
December 31 for its taxable year including such December 31 if it
was a member of such group for one-half (or more) of the number
of days in such taxable year which precede such December 31.
(4) Overlapping groups
If a corporation is a component member of more than one
controlled group of corporations with respect to any taxable
year, such corporation shall be treated as a component member of
only one controlled group. The determination as to the group of
which such corporation is a component member shall be made under
regulations prescribed by the Secretary which are consistent with
the purposes of this part.
(c) Certain stock excluded
(1) General rule
For purposes of this part, the term "stock" does not include -
(A) nonvoting stock which is limited and preferred as to
dividends,
(B) treasury stock, and
(C) stock which is treated as "excluded stock" under
paragraph (2).
(2) Stock treated as "excluded stock"
(A) Parent-subsidiary controlled group
For purposes of subsection (a)(1), if a corporation (referred
to in this paragraph as "parent corporation") owns (within the
meaning of subsections (d)(1) and (e)(4)), 50 percent or more
of the total combined voting power of all classes of stock
entitled to vote or 50 percent or more of the total value of
shares of all classes of stock in another corporation (referred
to in this paragraph as "subsidiary corporation"), the
following stock of the subsidiary corporation shall be treated
as excluded stock -
(i) stock in the subsidiary corporation held by a trust
which is part of a plan of deferred compensation for the
benefit of the employees of the parent corporation or the
subsidiary corporation,
(ii) stock in the subsidiary corporation owned by an
individual (within the meaning of subsection (d)(2)) who is a
principal stockholder or officer of the parent corporation.
For purposes of this clause, the term "principal stockholder"
of a corporation means an individual who owns (within the
meaning of subsection (d)(2)) 5 percent or more of the total
combined voting power of all classes of stock entitled to
vote or 5 percent or more of the total value of shares of all
classes of stock in such corporation,
(iii) stock in the subsidiary corporation owned (within the
meaning of subsection (d)(2)) by an employee of the
subsidiary corporation if such stock is subject to conditions
which run in favor of such parent (or subsidiary) corporation
and which substantially restrict or limit the employee's
right (or if the employee constructively owns such stock, the
direct owner's right) to dispose of such stock, or
(iv) stock in the subsidiary corporation owned (within the
meaning of subsection (d)(2)) by an organization (other than
the parent corporation) to which section 501 (relating to
certain educational and charitable organizations which are
exempt from tax) applies and which is controlled directly or
indirectly by the parent corporation or subsidiary
corporation, by an individual, estate, or trust that is a
principal stockholder (within the meaning of clause (ii)) of
the parent corporation, by an officer of the parent
corporation, or by any combination thereof.
(B) Brother-sister controlled group
For purposes of subsection (a)(2), if 5 or fewer persons who
are individuals, estates, or trusts (referred to in this
subparagraph as "common owners") own (within the meaning of
subsection (d)(2)), 50 percent or more of the total combined
voting power of all classes of stock entitled to vote or 50
percent or more of the total value of shares of all classes of
stock in a corporation, the following stock of such corporation
shall be treated as excluded stock -
(i) stock in such corporation held by an employees' trust
described in section 401(a) which is exempt from tax under
section 501(a), if such trust is for the benefit of the
employees of such corporation,
(ii) stock in such corporation owned (within the meaning of
subsection (d)(2)) by an employee of the corporation if such
stock is subject to conditions which run in favor of any of
such common owners (or such corporation) and which
substantially restrict or limit the employee's right (or if
the employee constructively owns such stock, the direct
owner's right) to dispose of such stock. If a condition which
limits or restricts the employee's right (or the direct
owner's right) to dispose of such stock also applies to the
stock held by any of the common owners pursuant to a bona
fide reciprocal stock purchase arrangement, such condition
shall not be treated as one which restricts or limits the
employee's right to dispose of such stock, or
(iii) stock in such corporation owned (within the meaning
of subsection (d)(2)) by an organization to which section 501
(relating to certain educational and charitable organizations
which are exempt from tax) applies and which is controlled
directly or indirectly by such corporation, by an individual,
estate, or trust that is a principal stockholder (within the
meaning of subparagraph (A)(ii)) of such corporation, by an
officer of such corporation, or by any combination thereof.
(d) Rules for determining stock ownership
(1) Parent-subsidiary controlled group
For purposes of determining whether a corporation is a member
of a parent-subsidiary controlled group of corporations (within
the meaning of subsection (a)(1)), stock owned by a corporation
means -
(A) stock owned directly by such corporation, and
(B) stock owned with the application of paragraphs (1), (2),
and (3) of subsection (e).
(2) Brother-sister controlled group
For purposes of determining whether a corporation is a member
of a brother-sister controlled group of corporations (within the
meaning of subsection (a)(2)), stock owned by a person who is an
individual, estate, or trust means -
(A) stock owned directly by such person, and
(B) stock owned with the application of subsection (e).
(e) Constructive ownership
(1) Options
If any person has an option to acquire stock, such stock shall
be considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option, and each one of a
series of such options, shall be considered as an option to
acquire such stock.
(2) Attribution from partnerships
Stock owned, directly or indirectly, by or for a partnership
shall be considered as owned by any partner having an interest of
5 percent or more in either the capital or profits of the
partnership in proportion to his interest in capital or profits,
whichever such proportion is the greater.
(3) Attribution from estates or trusts
(A) Stock owned, directly or indirectly, by or for an estate or
trust shall be considered as owned by any beneficiary who has an
actuarial interest of 5 percent or more in such stock, to the
extent of such actuarial interest. For purposes of this
subparagraph, the actuarial interest of each beneficiary shall be
determined by assuming the maximum exercise of discretion by the
fiduciary in favor of such beneficiary and the maximum use of
such stock to satisfy his rights as a beneficiary.
(B) Stock owned, directly or indirectly, by or for any portion
of a trust of which a person is considered the owner under
subpart E of part I of subchapter J (relating to grantors and
others treated as substantial owners) shall be considered as
owned by such person.
(C) This paragraph shall not apply to stock owned by any
employees' trust described in section 401(a) which is exempt from
tax under section 501(a).
(4) Attribution from corporations
Stock owned, directly or indirectly, by or for a corporation
shall be considered as owned by any person who owns (within the
meaning of subsection (d)) 5 percent or more in value of its
stock in that proportion which the value of the stock which such
person so owns bears to the value of all the stock in such
corporation.
(5) Spouse
An individual shall be considered as owning stock in a
corporation owned, directly or indirectly, by or for his spouse
(other than a spouse who is legally separated from the individual
under a decree of divorce whether interlocutory or final, or a
decree of separate maintenance), except in the case of a
corporation with respect to which each of the following
conditions is satisfied for its taxable year -
(A) The individual does not, at any time during such taxable
year, own directly any stock in such corporation;
(B) The individual is not a director or employee and does not
participate in the management of such corporation at any time
during such taxable year;
(C) Not more than 50 percent of such corporation's gross
income for such taxable year was derived from royalties, rents,
dividends, interest, and annuities; and
(D) Such stock in such corporation is not, at any time during
such taxable year, subject to conditions which substantially
restrict or limit the spouse's right to dispose of such stock
and which run in favor of the individual or his children who
have not attained the age of 21 years.
(6) Children, grandchildren, parents, and grandparents
(A) Minor children
An individual shall be considered as owning stock owned,
directly or indirectly, by or for his children who have not
attained the age of 21 years, and, if the individual has not
attained the age of 21 years, the stock owned, directly or
indirectly, by or for his parents.
(B) Adult children and grandchildren
An individual who owns (within the meaning of subsection
(d)(2), but without regard to this subparagraph) more than 50
percent of the total combined voting power of all classes of
stock entitled to vote or more than 50 percent of the total
value of shares of all classes of stock in a corporation shall
be considered as owning the stock in such corporation owned,
directly or indirectly, by or for his parents, grandparents,
grandchildren, and children who have attained the age of 21
years.
(C) Adopted child
For purposes of this section, a legally adopted child of an
individual shall be treated as a child of such individual by
blood.
(f) Other definitions and rules
(1) Employee defined
For purposes of this section the term "employee" has the same
meaning such term is given by paragraphs (1) and (2) of section
3121(d).
(2) Operating rules
(A) In general
Except as provided in subparagraph (B), stock constructively
owned by a person by reason of the application of paragraph
(1), (2), (3), (4), (5), or (6) of subsection (e) shall, for
purposes of applying such paragraphs, be treated as actually
owned by such person.
(B) Members of family
Stock constructively owned by an individual by reason of the
application of paragraph (5) or (6) of subsection (e) shall not
be treated as owned by him for purposes of again applying such
paragraphs in order to make another the constructive owner of
such stock.
(3) Special rules
For purposes of this section -
(A) If stock may be considered as owned by a person under
subsection (e)(1) and under any other paragraph of subsection
(e), it shall be considered as owned by him under subsection
(e)(1).
(B) If stock is owned (within the meaning of subsection (d))
by two or more persons, such stock shall be considered as owned
by the person whose ownership of such stock results in the
corporation being a component member of a controlled group. If
by reason of the preceding sentence, a corporation would (but
for this sentence) become a component member of two controlled
groups, it shall be treated as a component member of one
controlled group. The determination as to the group of which
such corporation is a component member shall be made under
regulations prescribed by the Secretary which are consistent
with the purposes of this part.
(C) If stock is owned by a person within the meaning of
subsection (d) and such ownership results in the corporation
being a component member of a controlled group, such stock
shall not be treated as excluded stock under subsection (c)(2),
if by reason of treating such stock as excluded stock the
result is that such corporation is not a component member of a
controlled group of corporations.
(4) Franchised corporation
If -
(A) a parent corporation (as defined in subsection
(c)(2)(A)), or a common owner (as defined in subsection
(c)(2)(B)), of a corporation which is a member of a controlled
group of corporations is under a duty (arising out of a written
agreement) to sell stock of such corporation (referred to in
this paragraph as "franchised corporation") which is franchised
to sell the products of another member, or the common owner, of
such controlled group;
(B) such stock is to be sold to an employee (or employees) of
such franchised corporation pursuant to a bona fide plan
designed to eliminate the stock ownership of the parent
corporation or of the common owner in the franchised
corporation;
(C) such plan -
(i) provides a reasonable selling price for such stock, and
(ii) requires that a portion of the employee's share of the
profits of such corporation (whether received as compensation
or as a dividend) be applied to the purchase of such stock
(or the purchase of notes, bonds, debentures or other similar
evidence of indebtedness of such franchised corporation held
by such parent corporation or common owner);
(D) such employee (or employees) owns directly more than 20
percent of the total value of shares of all classes of stock in
such franchised corporation;
(E) more than 50 percent of the inventory of such franchised
corporation is acquired from members of the controlled group,
the common owner, or both; and
(F) all of the conditions contained in subparagraphs (A),
(B), (C), (D), and (E) have been met for one-half (or more) of
the number of days preceding the December 31 included within
the taxable year (or if the taxable year does not include
December 31, the last day of such year) of the franchised
corporation,
then such franchised corporation shall be treated as an excluded
member of such group, under subsection (b)(2), for such taxable
year.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 235(a), Feb. 26, 1964, 78
Stat. 120; amended Pub. L. 91-172, title IV, Sec. 401(c), (d), Dec.
30, 1969, 83 Stat. 602; Pub. L. 91-373, title I, Sec. 102(b), Aug.
10, 1970, 84 Stat. 696; Pub. L. 94-455, title XIX, Sec.
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369, div.
A, title II, Sec. 211(b)(22), July 18, 1984, 98 Stat. 757; Pub. L.
99-514, title X, Sec. 1024(c)(17), Oct. 22, 1986, 100 Stat. 2408;
Pub. L. 100-647, title I, Sec. 1018(s)(3)(A), Nov. 10, 1988, 102
Stat. 3587.)
-MISC1-
AMENDMENTS
1988 - Subsec. (d)(1)(B). Pub. L. 100-647 substituted "paragraphs
(1), (2), and (3) of subsection (e)" for "subsection (e)(1)".
1986 - Subsec. (b)(2)(D). Pub. L. 99-514 struck out "or section
821" after "section 801".
1984 - Subsecs. (a)(4), (b)(2)(D). Pub. L. 98-369 substituted
"section 801" for "section 802".
1976 - Subsecs. (b)(4), (f)(3)(B). Pub. L. 94-455 struck out "or
his delegate" after "Secretary".
1970 - Subsec. (f)(1). Pub. L. 91-373 substituted "by paragraphs
(1) and (2) of section 2131(d)" for "in section 3306(i)".
1969 - Subsec. (a)(2). Pub. L. 91-172, Sec. 401(c), redesignated
existing provisions with minor changes as par. (A) and added par.
(B).
Subsec. (c)(2)(A)(iv). Pub. L. 91-172, Sec. 401(d)(1), added cl.
(iv).
Subsec. (c)(2)(B). Pub. L. 91-172, Sec. 401(d)(2), substituted "5
or fewer persons who are individuals, estates, or trusts (referred
to in this subparagraph as 'common owners') own" for "a person who
is an individual, estate, or trust (referred to in this paragraph
as 'common owner') owns" and in cl. (ii), substituted "any of such
common owners", "any of the common owners" for "such common owner"
and "the common owner", respectively and added cl. (iii).
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1018(s)(3)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to taxable years beginning after the date of the enactment of
this Act [Nov. 10, 1988]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 1024(e) of Pub. L. 99-514, set out
as a note under section 831 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, see section 215 of Pub. L. 98-369, set out as
an Effective Date note under section 801 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to taxable
years ending on or after Dec. 31, 1970, see section 401(h)(3) of
Pub. L. 91-172, set out as a note under section 1561 of this title.
EFFECTIVE DATE
Section applicable with respect to taxable years ending after
Dec. 31, 1963, see section 235(d) of Pub. L. 88-272, set out as an
Effective Date of 1964 Amendment note under section 1551 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 38, 41, 52, 120, 127,
129, 144, 147, 179, 194, 243, 263A, 267, 269B, 368, 382, 384, 404,
409, 414, 447, 460, 465, 585, 593, 613A, 806, 831, 848, 861, 904,
936, 943, 993, 1042, 1202, 1504, 1551, 1561, 5061 of this title;
title 2 section 691e; title 29 sections 1060, 1107, 1322; title 42
section 1395w-25.
-End-
-CITE-
26 USC Sec. 1564 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 6 - CONSOLIDATED RETURNS
Subchapter B - Related Rules
PART II - CERTAIN CONTROLLED CORPORATIONS
-HEAD-
[Sec. 1564. Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(38),
Nov. 5, 1990, 104 Stat. 1388-521]
-MISC1-
Section, added Pub. L. 91-172, title IV, Sec. 401(b)(1), Dec. 30,
1969, 83 Stat. 600; amended Pub. L. 94-455, title XIX, Secs.
1901(b)(1)(J)(vi), (21)(A)(ii), 1906(b)(13)(A), Oct. 4, 1976, 90
Stat. 1791, 1797, 1834, related to transitional rules in the case
of certain controlled corporations.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC Subtitle B - Estate and Gift Taxes 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle B - Estate and Gift Taxes
-HEAD-
Subtitle B - Estate and Gift Taxes
-MISC1-
Chapter Sec.(!1)
11. Estate tax 2001
12. Gift tax 2501
13. Tax on generation-skipping transfers 2601
14. Special valuation rules 2701
AMENDMENTS
1990 - Pub. L. 101-508, title XI, Sec. 11602(c), Nov. 5, 1990,
104 Stat. 1388-500, added item for chapter 14.
1986 - Pub. L. 99-514, title XIV, Sec. 1431(b), Oct. 22, 1986,
100 Stat. 2729, struck out "certain" after "Tax on" in item for
chapter 13.
1976 - Pub. L. 94-455, title XX, Sec. 2006(b)(1), Oct. 4, 1976,
90 Stat. 1888, added item for chapter 13.
-SECREF-
SUBTITLE REFERRED TO IN OTHER SECTIONS
This subtitle is referred to in sections 404, 877, 6019, 6211,
6212, 6213, 6214, 6404, 6501, 6662, 6871, 6901, 7491, 7701, 7702 of
this title.
-FOOTNOTE-
(!1) Section numbers editorially supplied.
-End-
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