Statutory Notes and Related Subsidiaries
Amendments
2018—Subsec. (b)(4) to (8). Pub. L. 115–141 redesignated pars. (6) to (8) as (4) to (6), respectively, and struck out former par. (4) which read as follows: “Corporations with respect to which an election under section 936 (relating to possession tax credit) is in effect for the taxable year.”
2014—Subsec. (a)(3)(A). Pub. L. 113–295 struck out “for a taxable year which includes any period after December 31, 1984” after “affiliated group” in cl. (i) and struck out “in a taxable year beginning after December 31, 1984” after “such group” in cl. (ii).
1996—Subsec. (b)(8). Pub. L. 104–188, § 1308(d)(2), added par. (8).
Subsec. (c)(2)(B)(i). Pub. L. 104–188, § 1702(h)(6), inserted “section” before “243(b)(2)”.
1990—Subsec. (c)(2)(B)(i). Pub. L. 101–508, § 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, § 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, § 1018(d)(10)(B), added subsec. (f).
1986—Subsec. (a)(4)(C). Pub. L. 99–514, § 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, § 1024(c)(15), struck out “or 821” after “section 802”.
Subsec. (b)(7). Pub. L. 99–514, § 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, § 1899A(35), struck out “or 821” after “section 801”.
Pub. L. 99–514, § 1024(c)(16), substituted “subsection (b)(2)) includes” for “subsection (b)(2) includes”.
1984—Subsec. (a). Pub. L. 98–369, § 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, § 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, § 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, § 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, § 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, § 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.
Statutory Notes and Related Subsidiaries
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 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
Pub. L. 98–369, div. A, title I, § 60(b), July 18, 1984, 98 Stat. 579, as amended by Pub. L. 99–514, § 2, title XVIII, § 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
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 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.
Pub. L. 94–455, title X, § 1053(e), Oct. 4, 1976, 90 Stat. 1649, 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.”
Pub. L. 94–455, title XV, § 1507(c)(1), Oct. 4, 1976, 90 Stat. 1740, 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 1959 Amendments
Pub. L. 86–376, § 2(d), Sept. 23, 1959, 73 Stat. 699, 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 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. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.
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 45K of this title.
Repeal of Rules Permitting Loss Transfers by Alaska Native Corporations
Pub. L. 100–647, title V, § 5021, Nov. 10, 1988, 102 Stat. 3666, as amended by Pub. L. 101–239, title VII, § 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 [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 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
Pub. L. 94–455, title XV, § 1507(c)(2), Oct. 4, 1976, 90 Stat. 1740, as amended by Pub. L. 99–514, § 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.”
