Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has finalized regulations that provide guidance to corporations that are component members of a controlled group of corporations regarding the apportionment of tax benefit items and the amount and type of information that they are required to submit with their returns. The final regulations also provide guidance to consolidated groups filing life-nonlife federal income tax returns. The regulations are effective on the date of publication in the Federal Register.

Code Sec. 1502 Regulations

  Under the final Code Sec. 1502 regulations, if a consolidated group is treated collectively as being one component member of a controlled group or if each member of a consolidated group is treated as being a separate member of a controlled group, then Code Sec. 1561 applies to determine the portion of the consolidated accumulated earnings credit to be allocated to the group or each member. The final regulations under Code Sec. 1502 also set forth certain filing requirements for consolidated income tax returns for a life-nonlife consolidated group by the common parent. These regulations generally apply to consolidated federal income tax returns due (without extensions) on or after December 21, 2009. However, a consolidated group may apply the regulations to any consolidated federal income tax return filed on or after December 21, 2009.

Code Sec. 1561 Regulations

  The final regulations under Code Sec. 1561 provide: (1) general rules regarding certain tax benefits available to the component members of a controlled group of corporations, (2) special rules for allocating reductions of certain Code Sec. 1561(a) tax benefit items, and (3) filing requirements related to the allocation of
Code Sec. 1561(a) tax items. These regulations generally apply to any tax year beginning on or after December 21, 2009. However, taxpayers may apply the regulations to any federal income tax return filed on or after December 21, 2009. For tax years beginning before December 21, 2009, the former temporary regulations apply.

  The general rules in the final regulations provide that the amount of tax items set forth in Code Sec. 1561(a) that are available to any of the component members of a controlled group shall be determined as if the component members were a single corporation. Certain other tax items, such as the Code Sec. 11(b)(1) additional tax and the Code Sec. 55(d)(3) phaseout of the alternative minimum tax (AMT) exemption amount will be determined by combining the positive taxable income or positive alternative minimum taxable income (AMTI) of the component members of such group and then allocating the amount of such items among the members.

  The special rules in the final regulations provide detailed guidance on the calculation of the Code Sec. 11(b)(1) additional tax and the apportionment of the additional tax under the proportionate method or the FIFO method. Detailed guidance is also provided on the calculation of the reduction set forth in Code Sec. 55(d)(3) to the amount exempted from the AMT. Any reduction to the exemption amount shall be apportioned to the component members of a controlled group in the same manner that the amount of the exemption provided in
Code Sec. 55(d)(2) to the AMT was allocated under Code Sec. 1561(a). Additional rules for short tax years and examples are also provided.

  The filing requirements in the Code Sec. 1561 final regulations generally provide that, for each tax year that a corporation is a component member of the same controlled group of corporation on December 31st (its testing date), such corporation and all other component members of such group each must file Schedule O or any successor form with the federal income tax return for that component member's tax year that includes a particular testing date. Each such corporation must file the form with its return whether or not there is an apportionment plan in effect or any change is made to the group's apportionment of its Code Sec. 1561(a) tax benefit items from the previous year. An exception applies if any of the component members of a controlled group are also members of a consolidated group. Additional rules provide guidance where no apportionment plan is in effect and guidance on how component members of a controlled group adopt an apportionment plan or an amendment of an apportionment plan.

T.D. 9476, 2010FED ¶47,006

Other References:

 
Code Sec. 924

  CCH Reference - 2009FED ¶28,144

 
Code Sec. 1502

  CCH Reference - 2009FED ¶33,190

  CCH Reference - 2009FED ¶33,193

 
Code Sec. 1561

  CCH Reference - 2009FED ¶33,341

  CCH Reference - 2009FED ¶33,342

  CCH Reference - 2009FED ¶33,344

  CCH Reference - 2009FED ¶33,345

  Tax Research Consultant

  CCH Reference - TRC CCORP: 42,050

  CCH Reference - TRC CCORP: 42,052.05

  CCH Reference - TRC CCORP: 42,052.10

  CCH Reference - TRC CCORP: 42,054.05

  CCH Reference - TRC CCORP: 42,054.10

  CCH Reference - TRC CCORP: 42,058

  CCH Reference - TRC CCORP: 42,204

  CCH Reference - TRC CCORP: 42,206

  CCH Reference - TRC CCORP: 45,054.10

  CCH Reference - TRC CCORP: 45,502

  CCH Reference - TRC CONSOL: 7,106