Title 26 — Internal Revenue Code
Chapter 6 — Consolidated Returns
§ 1502. Regulations
Statutory text
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. In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Aug. 16, 1954, ch. 736, 68A Stat. 367 · 68A Stat. 367
Enacted · 26 U.S.C. § 1502
Aug. 16, 1954, ch. 736, 68A Stat. 367
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 367Pub. L. 94–455 title XIX § 1906(b) · 90 Stat. 1520
Struck · 26 U.S.C. § 1502
Pub. L. 94–455 struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Pub. L. 94–455 struck out “or his delegate” after “Secretary”.Enacted provision · exact public law section
(b) Conforming and Clerical Amendments.— (1) Amendment conforming to the repeal of section 6105.— The table of sections for subchapter B of chapter 61 is amended by striking out the item relating to section 6105. (2) Amendment conforming to amendment of section 6111.— The item relating to section 6111 in the table of sections for subchapter B of chapter 61 is amended to read as follows: “Sec. 6111. Cross reference.” (3) Amendments conforming to amendments of section 6154.— (A) Paragraph (1)(B) of section 6655(e) is amended: 26 USC 6655. (i) by adding “and” at the end of clause (i), and (ii) by striking out clauses (ii) and (iii) and inserting in lieu thereof the following: “(ii) in the case of a taxable year beginning before January 1, 1977, the amount of the corporation’s temporary estimated tax exemption for such year.” (B) Paragraph (2)(B) of section 6655(e) is amended by striking out “clauses (ii) and (iii)” and inserting in lieu thereof “clause (ii)”. (C) (i) Section 6655(e) is amended by striking out paragraph (3) and by redesignating paragraph (4) as paragraph (3). (ii) Section 243(b)(3)(C)(iv), as redesignated by section Ante, p. 1797. 1901 (b)(20)(A) of this Act, is amended by striking out “sections 6154(c)(2) and (3)” and inserting in lieu thereof “section 6154(c)(2)”, and by striking out. “sections 6655(e)(2) and (3)” and inserting in lieu thereof “section 6655(e)(2)”. (4) Amendment conforming to the re feat, of section 6162.— The table of sections for subchapter B of chapter 62 is amended by striking out the item relating to section 6162. (5) Amendment conforming to the repeal of section 6304.— The table of sections for subchapter A of chapter 64 is amended by striking out the item relating to section 6304. (6) Amendments conforming to the amendment of section 6416.— (A) Subparagraph (A) of section 6420(c)(3) is amended 26 USC 6420. to read as follows: “(A) by the owner, tenant, or operator of a farm, in connection with cultivating the soil, or in connection with raising or harvesting any agricultural or horticultural commodity, including the raising, shearing, feeding, caring for, training, and management of livestock, bees, poultry, and fur-bearing animals and wildlife, on a farm of which he is the owner, tenant, or operator; except that, if such use is by any person other than the owner, tenant, or operator of such farm, then for purposes of this subparagraph, in applying subsection (a) to this subparagraph, the owner, tenant, or operator of the farm on which gasoline or a liquid taxable under section 26 USC 4041. 4041 issued shall be treated as the user and the ultimate purchaser of such gasoline or liquid;”. (B) The amendments made by subparagraph (A) shall apply with respect to the use of liquids after December 31, 1970. (7) Amendment conforming to the repeal of section 6417.— The table of sections for subchapter B of chapter 65 is amended Ante, p. 1827. by striking out the item relating to section 6417. (8) Amendment conforming to amendment of section 6420.— Section 39(a)(1) is amended by striking out “section 6420(h)” and inserting in lieu thereof “section 6420(g)”. (9) Amendment conforming to amendment of section 6424.— Section 39(a)(3) is amended by striking out “section 6424(g)” Ante, p, 1829. and inserting in lieu thereof “section 6424(f)”. (10) Amendment conforming to amendment of section 7448.— The item relating to section 7448 in the table of sections for part I of subchapter C of chapter 76 is amended to read as follows: “Sec. 7448. Annuities of surviving spouses and dependent children.”. (11) Amendment conforming to amendment of section 7508.— The item relating to section 7508 in the table of sections for chapter 77 is amended to read as follows: “Sec. 7508. Time for performing certain acts postponed by reason of service in combat gone.”. (12) Amendment conforming to amendment of section 7500.— The item relating to section 7509 in the table of sections for chapter 77 is amended to read as follows: “Sec. 7509. Expenditures incurred by the United States Postal Service,”. (13) Amendment conforming to repeal of section 7641.— The table of subchapters for chapter 78 is amended by striking Ante, p. 1832. 26 USC 1 el seq. out the item relating to subchapter C. (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”. (B) The following provisions are each amended by striking 26 USC 4293, 4483, 5551, 7801, 7802, 9006, 9007. 26 USC 3121, 3303, 3304, 3305, 3306, 9005, 9007, 9010, 9012. 26 USC 31. 26 USC 3304. out “Secretary” each place it appears and inserting in lieu thereof “Secretary of the Treasury”: sections 4293, 4483 (b), 5551, 7801(b). 7802(a), 9006(a), 9006(b), and 9007(d). (C) The following provisions are each amended by striking out “to the Secretary” each place it appears and inserting in lieu thereof “to the Secretary of the Treasury”: sections 3121 (b)(12)(B). 3303(b), 3304(a)(3). 3304(c), 3305(j), 3306(c)(12)(B), 9005(a), 9007(b), 9010(b), and 9012(e)(3). (D) Section 31(b)(1) is amended by striking out “(or his delegate)”. (E) The last sentence of section 3304(c) is amended by striking out “the Secretary shall” and inserting in lieu thereof “the Secretary of Labor shall”. (F) Section 3310(d)(2) is amended by striking out “the 26 USC 3310. Secretary’s action” each place it appears and inserting in lieu thereof “the Secretary of Labor’s action”. (G) Section 3221(a) and 3221(c) are each amended by 26 USC 3221. striking out “of the Treasury” each place it appears. (H) Section 3310(e) is amended by striking out “of 26 USC 3310. the Secretary” and inserting in lieu thereof “of the Secretary of Labor”. (I) Section 4412(c) is amended by striking out “he or his 26 USC 4412. delegate” and inserting in lieu thereof “the Secretary”. (J) Section 5845(f) is amended by striking out “of the 26 USC 5845. Treasury or his delegate”. (K) Section 6402(b) is amended by striking out “(or his 26 USC 6402. delegate)”. (L) Section 7458 is amended by striking out “nor his 26 USC 7458. delegate”. (M) Section 7514 is amended by striking out “functions of 26 USC 7514. the Secretary” and inserting in lieu thereof “functions of the Secretary of the Treasury”.Pub. L. 108–357 title VIII § 844(a) · 118 Stat. 1418
Inserted · 26 U.S.C. § 1502
Pub. L. 108–357 inserted at end “In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.”
Source evidence
Code amendment note
Pub. L. 108–357 inserted at end “In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.”Enacted provision · exact public law section
(a) In General.— Section 1502 is amended by adding at the end the following new sentence: “In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.”.Effective date note
Pub. L. 108–357, title VIII, § 844(c), Oct. 22, 2004, 118 Stat. 1600, provided that: “This section [amending this section], and the amendment made by this section, shall apply to taxable years beginning before, on, or after the date of the enactment of this Act [Oct. 22, 2004].”
2 of 3 references resolved to an enrolled provision · 1 partial
Editorial Notes
Amendments1976–2004 · 2 rounds
2004
Pub. L. 108–357 inserted at end “In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.”
1976
Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 844(c), , 118 Stat. 1600, provided that: “This section [amending this section], and the amendment made by this section, shall apply to taxable years beginning before, on, or after the date of the enactment of this Act [].”
Dual Resident Companies
Pub. L. 100–647, title VI, § 6126, , 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 [] 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 , 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, § 647, , 100 Stat. 2294, provided that: “If for a taxable year of an affiliated group filing a consolidated return ending on or before , 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 , 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.”
Credits
1954–2004 · 3 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 367
- 1976Pub. L. 94–455, title XIX, § 1906(b) (13)(A), , 90 Stat. 1834
- 2004Pub. L. 108–357, title VIII, § 844(a), , 118 Stat. 1600.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 367; Pub. L. 94–455, title XIX, § 1906(b) (13)(A), , 90 Stat. 1834; Pub. L. 108–357, title VIII, § 844(a), , 118 Stat. 1600.)