26 U.S.C. § 1503: Computation and payment of tax

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. 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. 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)). 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. 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. 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. 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. 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. 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 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). is in a corporation which is or was a member of an affiliated group of corporations, and is held by another corporation which is or was a member of such group. The term “consolidated year” means any taxable year for which the affiliated group makes a consolidated return. 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. 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 in the case of any property, for any basis adjustment under section 50(c). 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. no group loss item shall be allowed to reduce the disqualified separately computed income of such subsidiary for such taxable year, and no group credit item shall be allowed against the tax imposed by this chapter on such disqualified separately computed income. Any net operating loss and any net operating loss carryover or carryback under section 172. Any loss from the sale or exchange of any capital asset and any capital loss carryover or carryback under section 1212. 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. 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. by taking into account gains and losses from the sale or exchange of a capital asset and section 1231 gains and losses, without regard to any net operating loss or capital loss carryover or carryback, and with such adjustments as the Secretary may prescribe. The term “subsidiary” means any corporation which is a member of an affiliated group filing a consolidated return other than the common parent. issued after November 17, 1989 , and held by a person other than a member of the same affiliated group as the subsidiary. to prevent the avoidance of this subsection through the transfer of built-in losses to the subsidiary, to provide rules for cases in which the subsidiary owns (directly or indirectly) stock in another member of the affiliated group, and 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. The amendment made by this section [amending this section] shall apply to taxable years ending after November 17, 1989 . 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 . 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. 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. 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. 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. a subsidiary was incorporated before July 10, 1989 for the special purpose of issuing such stock, a rating agency was retained before July 10, 1989 , and such stock is issued before the date 30 days after the date of the enactment of this Act [ Dec. 19, 1989 ].” 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. 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.” 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 . 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 . 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 there is an unrecaptured amount with respect to such disposition, 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. 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).”