Specific Instructions

Identifying Information

Component member filing Schedule O.   On page 1, enter the name and employer identification number (EIN) of the component member filing this Schedule O.

  In Part II, column (a), line 1, enter the component member's name and EIN. In column (b), enter the member's tax year ending date (Yr-Mo). In Parts III and IV, column (a), line 1, enter only the name of the component member.

Other component members of the controlled group.   For Parts II, III, and IV, column (a), lines 2 through 10, and Part II, column (b), enter the corresponding information for each of the other component members of the controlled group, in the same manner as the member filing this Schedule O. If more space is needed, attach additional sheets.

Consolidated groups.   If several component members are also members of a single consolidated group, then with respect to those members, in Parts II, III, and IV, column (a), and Part II, column (b), enter only the information of the common parent of the consolidated group.

If any component members of the controlled group are also members of a consolidated group, the parent of such consolidated group should file only one Schedule O on behalf of all such members of the controlled group. Such form must contain the required information for each such member. See Regulations section 1.1561-3(a)(2).

Part I. Apportionment Plan Information

Line 1. Type of controlled group.   A component member of a controlled group must check the applicable box to indicate the type of group. For more information, see Types of Controlled Groups, earlier.

For a brother-sister controlled group, check box 1b whether that group is a brother-sister group for purposes of applying only the 50% test, or for purposes of applying both the 80% and 50% test.

Line 2. Member status.   If a corporation was not a component member of the group for each day of its tax year, check box 2b and provide the required information. If the taxable year of this corporation does not include a December 31 date, a special apportionment rule applies. See Special allocation rules for a short tax year, earlier.

Line 3. Consent and represent.   If all the component members consent to adopt an apportionment plan, check box 3a. By checking box 3a, this corporation is consenting to the adoption of an apportionment plan and is also representing that the other component members of the group are also consenting to the adoption of that plan. See Completing and Filing Schedule O, earlier.

If all the component members consent to amend an apportionment plan, check box 3b. By checking box 3b this corporation is consenting to the amendment of an apportionment plan and is also representing that the other component members of the group are consenting to the amendment of that plan. However, to amend a plan both of the following conditions must be satisfied.

  • The controlled group already has an apportionment plan in effect, and

  • There has been no change in the component-member composition of the group from the previous taxable year.

If the component members of a group are either adopting a new apportionment plan or amending an existing apportionment plan that involves prior tax years of those component members, at least one year must remain on each of the statutes of limitations for assessing a tax deficiency against all of the component members of the group for such prior tax years. See the instructions, below.

If the apportionment plan for the component members of a controlled group is terminated:

  • Check box 3c, if the remaining component members choose not to adopt (or are not able to adopt) a new apportionment plan; or

  • Check box 3d, if the remaining component members choose to adopt a new apportionment plan.

With regard to box 3c, the remaining component members will not be able to adopt a new apportionment plan if, for example, such component members have left the group.

Example.

For years prior to 2012, Corporation X has been a member of controlled group XYZ and has a calendar tax year. Corporations X, Y, and Z are component members of a controlled group and each has a calendar tax year. On August 31, 2012, X is sold to an unrelated party. Even though X will not be a member of the group on its December 31, 2012, testing date, it is treated as an additional member of the group on that date. Consequently, for 2012 the XYZ controlled group must apportion the tax-benefit items according to the terms of its apportionment plan. Therefore, X, Y, and Z would each check box 3c on its 2012 Schedule O.

If box 3c or 3d is checked, complete Parts II, III, and IV under either of the following circumstances.

  • If a corporation which is joining or leaving the group still qualifies as a component member for its tax year, complete Parts II, III, and IV according to the terms of any applicable apportionment plan.

  • If a corporation which is joining or leaving the group will not qualify as a component member for its tax year then, following the corporation's name in column (a), enter the notation “(E)” for excluded member. In Part II, column (b), enter the ending date of the tax year (Yr-Mo) and enter “0” in the remaining columns, as applicable. The remaining component members of the group will apportion the various tax items according to terms of any newly adopted apportionment plan, in the event a new apportionment plan is adopted by those remaining members.

Note.

Do not check more than one box on line 3. If a corporation does not adopt an apportionment plan, amend a previous apportionment plan, or terminate an existing apportionment plan, skip line 3 and go to line 5.

Line 4. Reason for termination of existing apportionment plan.   Check box 4a if all the component members of a controlled group of corporations are consenting to terminate the apportionment plan. Check box 4b if:
  • The controlled group has ceased to remain in existence within the meaning of section 1563,

  • A corporation that was a component member of the group on the testing date for the preceding tax year is no longer a component member in the current tax year, or

  • A corporation that was not a component member of the group on the testing date for the preceding tax year is a component member for the current tax year.

 

Line 5. Status of apportionment plan.   Check the applicable box to indicate the status of any apportionment plan of the controlled group.
  • Check box 5a, if the controlled group does not have an apportionment plan in effect and is not adopting one.

  • Check box 5b, if the controlled group already has an apportionment plan in effect and is not amending or terminating this plan.

  If box 5a is checked, then the component members must share all tax-benefits equally and tax-benefit information is to be reported in Parts II, III, and IV.

Line 6. Statute of limitations.   An apportionment plan may not be adopted or amended for a tax year of a component member unless there is at least one year remaining in the statutory period (including any extensions) for assessing a deficiency against the corporation for that tax year, but only where the tax liability for such tax year of that corporation would be increased by adopting such plan.

  If there is less than one year remaining in the statutory period, the corporation must have entered into an agreement with the IRS extending the statutory period for the limited purpose of assessing any deficiency against that corporation for a tax year affected by the adoption or the amendment of an apportionment plan. See Regulations section 1.1561-3(c)(2).

Line 7. Required information and elections for component members.   The component members of a controlled group must determine their additional taxes liability, as imposed by section 11(b)(1), for their tax years that are subject to the same December 31 testing date by combining their taxable incomes for such tax years and then apportioning the additional taxes among such component members in the same manner that the tax brackets were so allocated. See Component Member's Liability for its Additional Taxes, earlier.

If a corporation does not know the combined taxable income of the other component members of its group (for example, because those other component members have adopted substantially different tax years), it can avoid underpayment of tax by applying the maximum tax rate of 35% to the entire amount of its taxable income. If the corporation later determines its tax liability is less, it may file a claim for refund of overpayment.

Line 7a.

A corporation choosing to compute its tax liability by applying the maximum 35% rate to the entire amount of its taxable income should check box 7a. Further, a corporation checking box 7a does not have to provide taxable income or tax apportionment information with respect to the other component members of the group. Instead, only provide the identifying information (for example, name, EIN, and ending date of the tax year) for these other members. Enter zero in the other columns for these members.

Line 7b.

The controlled group may elect to apportion their additional taxes liability under the FIFO method, rather than the proportionate method. To make this election, each component member of the group must check box 7b. If the members do not check box 7b, they will be required to apportion their additional taxes liability using the proportionate method of allocation. See The proportionate method and The FIFO method, earlier.

Line 7c.

If a component member of a controlled group of corporations has a short tax year that does not include a December 31 date, check box 7c. If a corporation checks box 7c, it does not have to provide taxable income or tax apportionment information with regard to the other component members of the group. Instead, only provide the identifying information (for example, name, EIN, and ending date of the tax year) for these other members. See Special allocation rules for a short tax year, earlier.

Part II. Taxable Income Apportionment

Enter each component member's share of the taxable income used from each tax bracket, as is applicable. The component members of a controlled group, collectively, are entitled to one $50,000, one $25,000, and one $9,925,000 taxable income bracket amount (in that order) for columns (c), (d), and (e).

Note.

If a corporation has a loss, enter zero in columns (c) through (g).

Column (c).   Enter the lesser of the corporation's taxable income (as shown on Form 1120, or on the applicable corporation's income tax return) or the corporation's computed share of the $50,000 bracket.

Column (d).   Enter the lesser of the corporation's taxable income (as shown on Form 1120, or on the applicable corporation's income tax return) minus the amount entered for this corporation in column (c), or the corporation's computed share of the $25,000 bracket.

Column (e).   Enter the lesser of the corporation's taxable income (as shown on Form 1120, or on the applicable corporation's income tax return) minus the amounts entered for this corporation in columns (c) and (d), or the corporation's computed share of the $9,925,000 bracket.

Column (f).   Enter the corporation's taxable income (from Form 1120 or the applicable corporation's income tax return) minus the amounts entered for this corporation in columns (c) through (e).

Column (g).   Enter the total allocated taxable income amounts of each component member (add columns (c) through (f)). Each total in Part II, column (g), for each component member must equal taxable income from such component member's income tax return.

Part III. Income Tax Apportionment

Column (b).   Multiply the taxable income amount in Part II, column (c) by 15% (0.15) and enter the result here.

Column (c).   Multiply the taxable income amount in Part II, column (d) by 25% (0.25) and enter the result here.

Column (d).   Multiply the taxable income amount in Part II, column (e) by 34% (0.34) and enter the result here.

Column (e).   Multiply the taxable income amount in Part II, column (f) by 35% (0.35) and enter the result here.

Column (f) and (g).   A corporation's share of any additional taxes liability imposed by section 11(b)(1) is determined as explained in Determining the amount of additional taxes, earlier.

Column (h).   Enter here the total apportioned income tax for each component member. Combine all the amounts of apportioned tax of each such member, as shown in columns (b) through (g).

Part IV. Other Apportionments

Brother-sister controlled group.   For purposes of apportioning the amounts included in columns (b) through (d), determine the component members of a brother-sister controlled group, using only the 50% test as provided in section 1563(a)(2). For purposes of apportioning the amounts included in column (e) and, except as provided elsewhere in the Internal Revenue Code, in column (f), determine the component members of a brother-sister controlled group using both the 50% and 80% tests as provided in section 1563(f)(5). See Brother-sister group, earlier.

Column (a).   If a corporation qualifies as a component member of a brother-sister controlled group, solely because it satisfies only the 50% ownership affiliation test, insert the notation “(50)” after that corporation's name. If a corporation is a component member of that group because it satisfies both the 50% and 80% ownership affiliation tests, no notation is necessary.

Column (b).   The component members of a controlled group may allocate the $250,000 accumulated earnings credit unequally if they adopt an apportionment plan or have an apportionment plan in effect.

Note.

If any component member of a controlled group is the type of service corporation described in section 535(c)(2)(B), the amount to be apportioned among the component members is $150,000 (rather than $250,000).

Column (c).   The component members of a controlled group may allocate the $40,000 AMT exemption amount unequally if they adopt an apportionment plan or have an apportionment plan in effect.

Column (d).   The component members of a controlled group must apportion the reduction to the AMT exemption amount to the same corporations, and in the same proportions, as the AMT exemption amount was apportioned in Column (c). If the combined AMTI of the members of the group is at least $310,000, the corporation is not required to complete columns (c) and (d) of Part IV, since the exemption amount is fully phased out at $310,000. See Allocation of AMT Exemption Amount and the Reduction of the AMT Exemption Amount, earlier.

Column (e).   For purposes of determining whether the component members of a controlled group are subject to a penalty for failure to pay the correct amount of estimated tax under section 6655(g), those component members of a controlled group must combine their taxable incomes for their tax years that were subject to the same December 31 testing date. If that amount is at least $1 million for any tax year during the testing period (as defined in section 6655(g)(2)(B)(i)), those members must then divide that $1 million amount equally unless they have an apportionment plan in effect.

Column (f).   Enter each component member's share of any other tax-benefit items not included in columns (b) through (e). Provide the applicable Internal Revenue Code section followed by the amount apportioned to that member.

  

Note.

Do not include on Schedule O an apportionment among the component members of any deduction for certain depreciable property for which a section 179 expense election has been made. Report this apportionment as required under section 179. See Regulations section 1.179-2(b)(7).


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