The Code of Federal Regulations of the United States of America

with the district director with whom such return is filed.

(iii) Other members. The consent of each member referred to in subdivision (i) of this subparagraph (other than a wholly-owned subsidiary) shall be made by means of a statement, signed by any officer who is duly authorized to act on behalf of the consenting member, stating that such member consents to an election under section 243 (b) (2) for a particular taxable year of the common parent corporation. The statement shall set forth the name, address, taxpayer account number, and taxable year of the consenting member and of the common parent corporation. The consent of more than one such member may be incorporated in a single statement. The statement (or statements) shall be attached to the election filed by the common parent corporation. The consent of each such member which, after the date the election was filed and during its taxable year which includes the last day of the taxable year of the common parent corporation for which the election is made, either (a) becomes a member, or (b) ceases to be a wholly-owned subsidiary but continues to be a member, shall be filed with the district director with whom the election was filed. Any such consent shall be filed on or before the date prescribed by law (including extensions of time) for the filing of the consenting member's income tax return for such taxable year, or on or before June 10, 1964, whichever is later. A consent, once filed, is irrevocable. A copy of the statement of consent must be filed by the consenting member on or before the date prescribed by law (including extensions of time) for the filing of the income tax return for its taxable year which includes the last day of such taxable year of the common parent corporation, or on or before June 10, 1964, whichever is later. The copy shall be attached to such return or, if the due date of such return (including extensions of time) is before June 10, 1964, shall be filed on or before June 10, 1964, with the district director with whom such return is filed.

(3) Years for which election effective-(1) General rule. An election under section 243 (b) (2) fective

shall be ef

(a) For the taxable year of each member of the electing affiliated group which includes the last day of the taxable year of the common parent corporation with

respect to which such election is made, and

(b) For the taxable year of each member of such affiliated group (whether or not a member of such group at any time during such taxable year of the common parent corporation) which ends after the last day of such taxable year of the common parent corporation but which does not include such date, unless the election is terminated under section 243 (b) (4).

(ii) Special rule. In the case of a taxable year of a member (other than the common parent corporation) of an affiliated group (a) which begins in 1963 and ends in 1964, and (b) for which an election is not effective under subdivision (i) (a) of this subparagraph, if an election under subparagraph (1) of this paragraph is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, then such election shall be effective for such taxable year of such member if such member files a separate consent with respect to such taxable year. However, in order for a dividend distributed by such member during such taxable year to meet the requirements of section 243 (b) (1), an election under subparagraph (1) of this paragraph must be effective for the taxable year of each member of the affiliated group which includes the date such dividend is received. See section 243(b) (1) (A). Accordingly, if the dividend is to qualify for the 100-percent dividends received deduction under section 243 (a) (3), a consent must be filed under this subdivision by each member of the affiliated group with respect to its taxable year which includes the day the dividend is received (unless an election is effective for such taxable year under subdivision (i) (a) of this subparagraph). For purposes of this subdivision, a consent shall be made by means of a statement meeting the requirements of subparagraph (2) (iii) of this paragraph, and shall be attached to the election made by the common parent corporation for its taxable year which includes the last day of the taxable year of the consenting member with respect to which the consent is made. A copy of the statement shall be filed, within 60 days after such election is filed by the common parent corporation, with the district director with whom the consenting member filed its income tax return for such taxable year.

(iii) Examples. The provisions of subdivision (ii) of this subparagraph may be illustrated by the following examples:

Example (1). X Corporation owns all the stock of Y Corporation on each day of 1963, 1964, and 1965. X uses the calendar year as its taxable year and Y uses a fiscal year ending June 30 as its taxable year. X makes an election under subparagraph (1) of this paragraph for 1964. Since Y is a wholly-owned subsidiary for its taxable year ending June 30, 1965, it is deemed to consent to the election. However, in order for the election to be effective with respect to Y's taxable year ending June 30, 1964, a statement specifying that Y consents to the election with respect to such taxable year and containing the information required in a statement of consent under subparagraph (2)(iii) of this paragraph must be attached to the election.

Example (2). Assume the same facts as in example (1), except that X also owns all the stock of Z Corporation on each day of 1963, 1964, and 1965. Z uses a fiscal year ending May 31 as its taxable year. If Y distributes a dividend to X on January 15, 1964, the dividend may qualify under section 243 (a) (3) only if Y and Z both consent to the election made by X for 1964 with respect to their taxable years ending in 1964.

Example (3). Assume the same facts as in example (1), except that X uses a fiscal year ending on January 31 as its taxable year and makes an election under subparagraph (1) of this paragraph for its taxable year ending January 31, 1964. Since Y's taxable year beginning in 1963 and ending in 1964 includes January 31, 1964, the last day of X's taxable year for which the election was made, the election is effective, under subdivision (i) (a) of this subparagraph, for Y's taxable year ending June 30, 1964. Accordingly, the special rule of subdivision (ii) of this subparagraph has no application.

(4) Effect of election. If an election by an affiliated group is effective with respect to a taxable year of the common parent corporation, then under the regulations to be issued under section 243(b)

(i) Election of multiple surtax exemptions. No member of such affiliated group may consent to an election under section 1562 for such taxable year,

(ii) Foreign tax credit elections. The members of such affiliated group shall be treated as one taxpayer for purposes of making the elections under section 901 (a) (relating to allowance of foreign tax credit) and section 904(b) (1) (relating to election of overall limitation),

(iii) Other limitations. The members of such affiliated group shall be limited to (a) one $100,000 minimum accumulated earnings credit under section 535 (c) (2) or (3); (b) one $100,000 limitation for

exploration expenditures under section 615 (a) and (b); (c) one $400,000 limitation for exploration expenditures under section 615(c) (1); (d) one $25,000 limitation on small business deductions of life insurance companies under sections 804(a) (4) and 809 (d) (10); and (e) one $100,000 exemption for purposes of estimated tax filing requirements under section 6016 and the addition to tax under section 6655 for failure to pay estimated tax.

tax-(1) Exemption

from estimated tax-(1) General rule. In the case of an affiliated group which makes an election under paragraph (b) of this section for a taxable year of the common parent corporation beginning after December 31, 1963, the members of such group shall be limited in the aggregate to a single $100,000 exemption from estimated tax for purposes of section 6016 (relating to declaration of estimated income tax by corporations) for their taxable years which include the last day of such taxable year of the common parent corporation. Such $100,000 exemption may be apportioned among such members in accordance with the rules provided in subparagraph (2) of this paragraph.

(ii) Special rules. (a) If an election under paragraph (b) of this section is effective with respect to any member of an affiliated group for its taxable year which includes the last day of a taxable year of the common parent corporation beginning in 1963 and ending in 1964, and if the last day of the 8th month of such taxable year of the member falls after April 10, 1964, then all such members having such taxable years shall be limited in the aggregate to a single $100,000 exemption from estimated tax for such taxable years.

(b) If an election under paragraph (b) of this section is effective for a taxable year of a member of an affiliated group under the provisions of paragraph (b) (3) (ii) of this section, and if the last day of the 8th month of such taxable year falls after April 10, 1964, then all such members having such taxable years shall be limited in the aggregate to a single $100,000 exemption from estimated tax for such taxable years.

(c) The $100,000 exemption referred to in (a) or (b) of this subdivision may be apportioned in accordance with the rules provided in subparagraph (3) of this paragraph.

(iii) Examples. The provisions of this subparagraph may be illustrated by the following examples:

Example (1). Corporation P owns all the stock of corporations W, X, Y, and Z on each day of 1963, 1964, and 1965. P, W, X, Y, and Z each use the calendar year as their taxable year. P makes a valid election under paragraph (b) of this section for 1964. Under subdivision (1) of this subparagraph, P, W, X, Y, and Z are limited in the aggregate to a single $100,000 exemption from estimated tax for their 1964 taxable years.

Example (2)-(a) Facts. Assume the same facts as in example (1), except that P uses a fiscal year ending November 30 as its taxable year, W uses a fiscal year ending October 31 as its taxable year, X uses a fiscal year ending September 30 as its taxable year, and Y uses a fiscal year ending March 31 as its taxable year. P makes a valid election under paragraph (b) of this section for its taxable year ending on November 30, 1964. W, X, and Y file separate consents under paragraph (b)(3)(ii) of this section to the election with respect to their taxable years ending in 1964.

(b) Application of subdivision (ii)(b) of this subparagraph. The election by P is effective under the provisions of paragraph (b)(3)(ii) of this section for the taxable years of W, X, and Y ending in 1964. However, since the last day of the 8th month of Y's taxable year ending in 1964 does not fall after April 10, 1964, the members of the affiliated group having taxable years referred to in subdivision (ii)(b) of this subparagraph include only W and X. Accordingly, W and X are limited in the aggregate to a single $100,000 exemption from estimated tax for their taxable years ending in 1964. Y is entitled to a separate $100,000 exemption for its taxable year ending in 1964.

(c) Application of subdivision (ii)(a) of this subparagraph. The election by P is also effective, under the provisions of paragraph (b) (3) (i) (a) of this section, with respect to P, W, X, Y, and Z for their taxable years which include November 30, 1964 (the last day of P's taxable year which begins in 1963 and ends in 1964). The last day of the 8th month of each such taxable year falls after April 10, 1964. Therefore, P, W, X, Y, and Z are limited in the aggregate to a single $100,000 exemption from estimated tax for their taxable years which include November 30, 1964.

(2) Apportionment of $100,000 exemption—(i) Manner of apportionment. Any portion of the $100,000 amount specified in subparagraph (1)(i) of this paragraph may be apportioned to a member referred to in such subparagraph who is a member at any time during its taxable year (referred to in such subparagraph) prior to the date the apportionment plan is filed under subdivision (ii)

of this subparagraph. Such plan may provide for the apportionment of the $100,000 amount in any manner the common parent corporation may select if all such members (other than the common parent corporation) consent, in the manner provided in subdivision (iii) or (iv) of this subparagraph, whichever is applicable, to the apportionment plan. The amount apportioned to each such member pursuant to such plan shall constitute such member's exemption from estimated tax (in lieu of the $100,000 amount specified in section 6016 (a) and (b) (2) (A)) for the period it is a member of such group during such taxable year, unless an amendment to such plan is filed under subparagraph (4) of this paragraph.

(ii) Filing of plan. The apportionment plan shall be in the form of a statement attached to the income tax return filed by the common parent corporation for its taxable year for which the election is made under paragraph (b) of this section. The statement shall be signed by any officer who is duly authorized to act on behalf of the common parent corporation and shall set forth the name, address, taxpayer account number, and taxable year of each member to whom the common parent corporation could apportion an amount under subdivision (i) of this subparagraph, the identity of the common parent corporation, and the amount actually apportioned to each such member under the plan.

(iii) Consent of wholly-owned subsidiaries. If all the stock of a corporation is owned by a member or members of the affiliated group on each day such corporation is a member of such group during its taxable year (referred to in subparagraph (1)(i) of this paragraph) prior to the date the apportionment plan is filed under subdivision (ii) of this subparagraph, such corporation (hereinafter in this subparagraph referred to as a "wholly-owned subsidiary") shall be deemed to consent to the apportionment plan. Each wholly-owned subsidiary shall attach a copy of the apportionment plan filed by the common parent corporation to its income tax return for such taxable year.

signed by any officer who is duly authorized to act on behalf of the member consenting to the plan, stating that such member consents to the apportionment plan. The consent of more than one such member may be incorporated in a single statement. The statement (or statements) shall be attached to the apportionment plan filed by the common parent corporation. Each such consenting member shall attach a copy of the apportionment plan filed by the common parent corporation to its income tax return for its taxable year referred to in subparagraph (1) (i) of this paragraph.

(3) Apportionment for certain taxable years-(i) Manner of apportionment. (a) Any portion of the $100,000 amount specified in subparagraph (1) (ii) (a) of this paragraph may be apportioned to a member referred to in such subparagraph who is a member at any time during its taxable year (referred to in such subparagraph) prior to the date the apportionment plan is filed under subdivision (ii) of this subparagraph. Such plan may provide for the apportionment of the $100,000 amount in any manner the common parent corporation may select if all such members (other than the common parent corporation) consent, in the manner provided in subdivision (iii) or (iv) of this subparagraph, whichever is applicable, to the apportionment plan. The amount apportioned to each such member pursuant to such plan shall constitute such member's exemption from estimated tax (in lieu of the $100,000 amount specified in section 6016 (a) and (b)(2) (A)) for the period it is a member of such group during such taxable year, unless an amendment to such plan is filed under subparagraph (4) of this paragraph.

(b) Any portion of the $100,000 amount specified in subparagraph (1) (ii) (b) of this paragraph may be apportioned to a member referred to in such subparagraph who is a member at any time during its taxable year (referred to in such subparagraph) prior to the date the apportionment plan is filed under subdivision (ii) of this subparagraph. Such plan may provide for the apportionment of the $100,000 amount in any manner the common parent corporation may select if all such members

consent, in the manner provided in subdivision (iii) or (iv) of this subparagraph, whichever is applicable, to the apportionment plan. The amount apportioned to each such member pursuant to such plan shall constitute such member's exemption from estimated tax (in lieu of the $100,000 amount specified in section 6016 (a) and (b) (2) (A)) for the period it is a member of such group during such taxable year, unless an amendment to such plan is filed under subparagraph (4) of this paragraph.

(ii) Filing of plan. The apportionment plan referred to in subdivision (i) (a) or (b) of this subparagraph shall be in the form of a statement which shall be filed with the district director with whom the common parent corporation files its income tax returns. In the case of an apportionment plan referred to in subdivision (i) (a) of this subparagraph, such plan shall be filed on or before the earliest date after April 10, 1964, on which a member described in such subdivision files an income tax return for a taxable year referred to in such subdivision. In the case of an apportionment plan referred to in subdivision (i) (b) of this subparagraph, such plan shall be filed on or before the earliest date after April 10, 1964, on which a member described in such subdivision files an income tax return for a taxable year referred to in such subdivision. The statement shall be signed by any officer who is duly authorized to act on behalf of the common parent corporation and shall set forth the name, address, taxpayer account number, and taxable year of each member to whom the common parent corporation could apportion an amount under subdivision (i) (a) or (b) of this subparagraph, as the case may be, the identity of the common parent corporation, and the amount actually apportioned to each such member under the plan.

graph, such corporation (hereinafter in this subparagraph referred to as a "wholly-owned subsidiary") shall be deemed to consent to the apportionment plan. Each wholly-owned subsidiary shall attach a copy of the apportionment plan to its income tax return for such taxable year.

(iv) Consent of other members. The consent of a member (other than whollyowned subsidiaries) to an apportionment plan filed pursuant to this subparagraph, shall be in the form of a statement, signed by any officer who is duly authorized to act on behalf of the member consenting to the plan, stating that such member consents to the apportionment plan. The consent of more than one member may be incorporated in a single statement. The statement (or statements) shall be attached to the apportionment plan filed by the common parent corporation. Each such consenting member shall attach a copy of the apportionment plan filed by the common parent corporation to its income tax return for its taxable year which is referred to in subparagraph (1)(ii) (a) or (b) of this paragraph, as the case may be.

(4) Amendment of apportionment plan. An apportionment plan filed pursuant to subparagraph (2) or (3) of this paragraph may be amended in the manner and subject to such conditions as will be specified in the regulations to be issued under section 243(b) (3).

(5) Additions to tax. The provisions of section 6655 (relating to additions to tax for failure to pay estimated tax) shall be applied to the members of an affiliated group referred to in subparagraph (1)(i) of this paragraph for their taxable years referred to in such subparagraph by limiting such members in the aggregate to a single $100,000 exemption from estimated tax for purposes of section 6655 (d) (1) and (e) (2) (A). Such provisions shall be similarly applied to the members of an affiliated group referred to in subparagraph (1) (ii) (a) or (b) of this paragraph. If an apportionment plan is filed pursuant to this paragraph, the amount apportioned to any such member under the plan shall constitute such member's exemption from estimated tax (in lieu of the $100,000 amount specified in section 6655 (d) (1) and (e) (2) (A)) for the

period it is a member of such group during its taxable year for which an election under paragraph (b) of this section is effective. If an apportionment plan is not filed, such member's exemption shall be determined under the regulations to be issued under section 243 (b) (3).

(6) Examples. The provisions of this paragraph may be illustrated by the following examples:

Example (1). Corporation P owns all the stock of corporations X, Y, and Z on each day of 1964. P, X, Y, and Z each use the calendar year as their taxable year. On March 31, 1964, the affiliated group consisting of P, X, Y, and Z anticipates making an election under paragraph (b) of this section for P's taxable year ending on December 31, 1964. Accordingly, P computes its estimated tax liability for 1964 on the basis of a $100,000 exemption and X, Y, and Z compute their estimated tax liability for 1964 on the basis of a zero exemption. P, X, Y, and Z file declarations of estimated tax on April 15, 1964, on such basis and make payments with respect to such declarations on such basis. Assume P does make an election under paragraph (b) of this section for its taxable year ending December 31, 1964. Under subparagraph (1)(1) of this paragraph, P, X, Y, and Z are limited in the aggregate to a single $100,000 exemption from estimated tax for their taxable years ending on such date. P should attach an apportionment plan to its income tax return for 1964 pursuant to subparagraph (2)(ii) of this paragraph apportioning $100,000 to P, and zero to X, Y, and Z, for their taxable years ending on December 31, 1964, in order to minimize additions to tax for failure to pay estimated tax under section 6655 for such taxable years.

Example (2). Assume the same facts as in example (1) except that P, X, Y, and Z file declarations of estimated tax on April 15, 1964, on the basis of separate $100,000 exemptions from estimated tax for their taxable years ending on December 31, 1964, and make payments with respect to such declarations on such basis. Since, under subparagraph (1)(i) of this paragraph, P, X, Y, and Z are limited in the aggregate to a single, $100,000 exemption from estimated tax for their taxable years ending on December 31, 1964, the provisions of section 6655 will be applied to such taxable years on the basis of a single exemption. Since the election was made under paragraph (b) of this section, regardless of whether or not the affiliated group anticipated making such election, the members of such group may incur additions to tax under section 6655 in respect of their taxable years ending on December 31, 1964.

[T.D. 6721, 29 F.R. 4997, Apr. 10, 1964]

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