
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1504]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                     CHAPTER 6--CONSOLIDATED RETURNS
 
                Subchapter A--Returns and Payment of Tax
 
Sec. 1504. Definitions


(a) Affiliated group defined

    For purposes of this subtitle--

                           (1) In general

        The term ``affiliated group'' means--
            (A) 1 or more chains of includible corporations connected 
        through stock ownership with a common parent corporation which 
        is an includible corporation, but only if--
            (B)(i) the common parent owns directly stock meeting the 
        requirements of paragraph (2) in at least 1 of the other 
        includible corporations, and
            (ii) stock meeting the requirements of paragraph (2) in each 
        of the includible corporations (except the common parent) is 
        owned directly by 1 or more of the other includible 
        corporations.

                (2) 80-percent voting and value test

        The ownership of stock of any corporation meets the requirements 
    of this paragraph if it--
            (A) possesses at least 80 percent of the total voting power 
        of the stock of such corporation, and
            (B) has a value equal to at least 80 percent of the total 
        value of the stock of such corporation.

           (3) 5 years must elapse before reconsolidation

        (A) In general

            If--
                (i) a corporation is included (or required to be 
            included) in a consolidated return filed by an affiliated 
            group for a taxable year which includes any period after 
            December 31, 1984, and
                (ii) such corporation ceases to be a member of such 
            group in a taxable year beginning after December 31, 1984,

        with respect to periods after such cessation, such corporation 
        (and any successor of such corporation) may not be included in 
        any consolidated return filed by the affiliated group (or by 
        another affiliated group with the same common parent or a 
        successor of such common parent) before the 61st month beginning 
        after its first taxable year in which it ceased to be a member 
        of such affiliated group.

        (B) Secretary may waive application of subparagraph (A)

            The Secretary may waive the application of subparagraph (A) 
        to any corporation for any period subject to such conditions as 
        the Secretary may prescribe.

          (4) Stock not to include certain preferred stock

        For purposes of this subsection, the term ``stock'' does not 
    include any stock which--
            (A) is not entitled to vote,
            (B) is limited and preferred as to dividends and does not 
        participate in corporate growth to any significant extent,
            (C) has redemption and liquidation rights which do not 
        exceed the issue price of such stock (except for a reasonable 
        redemption or liquidation premium), and
            (D) is not convertible into another class of stock.

                           (5) Regulations

        The Secretary shall prescribe such regulations as may be 
    necessary or appropriate to carry out the purposes of this 
    subsection, including (but not limited to) regulations--
            (A) which treat warrants, obligations convertible into 
        stock, and other similar interests as stock, and stock as not 
        stock,
            (B) which treat options to acquire or sell stock as having 
        been exercised,
            (C) which provide that the requirements of paragraph (2)(B) 
        shall be treated as met if the affiliated group, in reliance on 
        a good faith determination of value, treated such requirements 
        as met,
            (D) which disregard an inadvertent ceasing to meet the 
        requirements of paragraph (2)(B) by reason of changes in 
        relative values of different classes of stock,
            (E) which provide that transfers of stock within the group 
        shall not be taken into account in determining whether a 
        corporation ceases to be a member of an affiliated group, and
            (F) which disregard changes in voting power to the extent 
        such changes are disproportionate to related changes in value.

(b) Definition of ``includible corporation''

    As used in this chapter, the term ``includible corporation'' means 
any corporation except--
        (1) Corporations exempt from taxation under section 501.
        (2) Insurance companies subject to taxation under section 801.
        (3) Foreign corporations.
        (4) Corporations with respect to which an election under section 
    936 (relating to possession tax credit) is in effect for the taxable 
    year.
        [(5) Repealed. Pub. L. 94-455, title X, Sec. 1053(d)(2), Oct. 4, 
    1976, 90 Stat. 1649.]
        (6) Regulated investment companies and real estate investment 
    trusts subject to tax under subchapter M of chapter 1.
        (7) A DISC (as defined in section 992(a)(1)).
        (8) An S corporation.

(c) Includible insurance companies

    Notwithstanding the provisions of paragraph (2) of subsection (b)--
        (1) Two or more domestic insurance companies each of which is 
    subject to tax under section 801 shall be treated as includible 
    corporations for purposes of applying subsection (a) to such 
    insurance companies alone.
        (2)(A) If an affiliated group (determined without regard to 
    subsection (b)(2)) includes one or more domestic insurance companies 
    taxed under section 801, the common parent of such group may elect 
    (pursuant to regulations prescribed by the Secretary) to treat all 
    such companies as includible corporations for purposes of applying 
    subsection (a) except that no such company shall be so treated until 
    it has been a member of the affiliated group for the 5 taxable years 
    immediately preceding the taxable year for which the consolidated 
    return is filed.
        (B) If an election under this paragraph is in effect for a 
    taxable year--
            (i) section 243(b)(3) and the exception provided under 
        section 243(b)(2) with respect to subsections (b)(2) and (c) of 
        this section,
            (ii) section 542(b)(5), and
            (iii) subsection (a)(4) and (b)(2)(D) of section 1563, and 
        the reference to section 1563(b)(2)(D) contained in section 
        1563(b)(3)(C),

    shall not be effective for such taxable year.

(d) Subsidiary formed to comply with foreign law

    In the case of a domestic corporation owning or controlling, 
directly or indirectly, 100 percent of the capital stock (exclusive of 
directors' qualifying shares) of a corporation organized under the laws 
of a contiguous foreign country and maintained solely for the purpose of 
complying with the laws of such country as to title and operation of 
property, such foreign corporation may, at the option of the domestic 
corporation, be treated for the purpose of this subtitle as a domestic 
corporation.

(e) Includible tax-exempt organizations

    Despite the provisions of paragraph (1) of subsection (b), two or 
more organizations exempt from taxation under section 501, one or more 
of which is described in section 501(c)(2) and the others of which 
derive income from such 501(c)(2) organizations, shall be considered as 
includible corporations for the purpose of the application of subsection 
(a) to such organizations alone.

(f) Special rule for certain amounts derived from a corporation 
        previously treated as a DISC

    In determining the consolidated taxable income of an affiliated 
group for any taxable year beginning after December 31, 1984, a 
corporation which had been a DISC and which would otherwise be a member 
of such group shall not be treated as such a member with respect to--
        (1) any distribution (or deemed distribution) of accumulated 
    DISC income which was not treated as previously taxed income under 
    section 805(b)(2)(A) of the Tax Reform Act of 1984, and
        (2) any amount treated as received under section 805(b)(3) of 
    such Act.

(Aug. 16, 1954, ch. 736, 68A Stat. 369; Mar. 13, 1956, ch. 83, 
Sec. 5(8), 70 Stat. 49; Pub. L. 85-866, title I, Sec. 64(d)(3), Sept. 2, 
1958, 72 Stat. 1657; Pub. L. 86-69, Sec. 3(f)(1), June 25, 1959, 73 
Stat. 140; Pub. L. 86-376, Sec. 2(c), Sept. 23, 1959, 73 Stat. 699; Pub. 
L. 86-779, Sec. 10(j), Sept. 14, 1960, 74 Stat. 1009; Pub. L. 89-389, 
Sec. 4(b)(3), Apr. 14, 1966, 80 Stat. 116; Pub. L. 91-172, title I, 
Sec. 121(a)(4), Dec. 30, 1969, 83 Stat. 537; Pub. L. 92-178, title V, 
Sec. 502(e), Dec. 10, 1971, 85 Stat. 550; Pub. L. 94-455, title VIII, 
Sec. 803(b)(3), title X, Secs. 1051(g), 1053(d)(2), title XV, 
Sec. 1507(a), Oct. 4, 1976, 90 Stat. 1584, 1646, 1649, 1739; Pub. L. 95-
600, title I, Sec. 141(f)(4), Nov. 6, 1978, 92 Stat. 2795; Pub. L. 96-
222, title I, Sec. 101(a)(7)(L)(i)(VIII), (iv)(II), Apr. 1, 1980, 94 
Stat. 199, 200; Pub. L. 98-369, div. A, title I, Sec. 60(a), title II, 
Sec. 211(b)(20), July 18, 1984, 98 Stat. 577, 756; Pub. L. 99-514, title 
X, Sec. 1024(c)(15), (16), title XVIII, Secs. 1804(e)(1), (10), 
1899A(35), Oct. 22, 1986, 100 Stat. 2408, 2800, 2804, 2960; Pub. L. 100-
647, title I, Sec. 1018(d)(10), Nov. 10, 1988, 102 Stat. 3581; Pub. L. 
101-508, title XI, Sec. 11814(b), Nov. 5, 1990, 104 Stat. 1388-557; Pub. 
L. 104-188, title I, Secs. 1308(d)(2), 1702(h)(6), Aug. 20, 1996, 110 
Stat. 1783, 1874.)

                       References in Text

    Section 805(b)(2)(A) and (3) of the Tax Reform Act of 1984, referred 
to in subsec. (f)(1), (2), is section 805(b)(2)(A) and (3) of Pub. L. 
98-369, which is set out as a note under section 991 of this title.


                               Amendments

    1996--Subsec. (b)(8). Pub. L. 104-188, Sec. 1308(d)(2), added par. 
(8).
    Subsec. (c)(2)(B)(i). Pub. L. 104-188, Sec. 1702(h)(6), inserted 
``section'' before ``243(b)(2)''.
    1990--Subsec. (c)(2)(B)(i). Pub. L. 101-508, Sec. 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, Sec. 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, Sec. 1018(d)(10)(B), added subsec. 
(f).
    1986--Subsec. (a)(4)(C). Pub. L. 99-514, Sec. 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, Sec. 1024(c)(15), struck out ``or 
821'' after ``section 802''.
    Subsec. (b)(7). Pub. L. 99-514, Sec. 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, Sec. 1899A(35), struck out ``or 
821'' after ``section 801''.
    Pub. L. 99-514, Sec. 1024(c)(16), substituted ``subsection (b)(2)) 
includes'' for ``subsection (b)(2) includes''.
    1984--Subsec. (a). Pub. L. 98-369, Sec. 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, Sec. 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, Sec. 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, Sec. 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, Sec. 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, Sec. 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.


                    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 1990 Amendment

    Amendment by Pub. L. 101-508 applicable to taxable years beginning 
after Dec. 31, 1990, and for purposes of section 243(b)(3) of this 
title, references to elections under such section to include references 
to an election under section 243(b) of this title as in effect on Nov. 
4, 1990, see section 11814(c) of Pub. L. 101-508, set out as a note 
under section 243 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 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

    Section 60(b) of Pub. L. 98-369, as amended by Pub. L. 99-514, 
Sec. 2, title XVIII, Sec. 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
            ``(ii) is issued,
    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 1980 Amendment

    Amendment by Pub. L. 96-222 effective, except as otherwise provided, 
as if it had been included in the provisions of the Revenue Act of 1978, 
Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. 
L. 96-222, set out as a note under section 32 of this title.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-600 effective with respect to qualified 
investment for taxable years beginning after Dec. 31, 1978, see section 
141(g)(1) of Pub. L. 95-600, set out as a Effective Date note under 
section 409 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.
    Section 1053(e) of Pub. L. 94-455 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.''
    Section 1507(c)(1) of Pub. L. 94-455 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 1971 Amendment

    Amendment by Pub. L. 92-178 applicable with respect to taxable years 
ending after Dec. 31, 1971, except that a corporation may not be a DISC 
for any taxable year beginning before Jan. 1, 1972, see section 507 of 
Pub. L. 92-178, set out as an Effective Date note under section 991 of 
this title.


                    Effective Date of 1969 Amendment

    Amendment by Pub. L. 91-172 applicable to taxable years beginning 
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out as a 
note under section 511 of this title.


                    Effective Date of 1966 Amendment

    Section 4(b) of Pub. L. 89-389 provided that the amendment made by 
that section is effective on Jan. 1, 1969.


                    Effective Date of 1960 Amendment

    Amendment by Pub. L. 86-779 applicable with respect to taxable years 
of real estate investment trusts beginning after Dec. 31, 1960, see 
section 10(k) of Pub. L. 86-779, set out as an Effective Date note under 
section 856 of this title.


                    Effective Date of 1959 Amendments

    Section 2(d) of Pub. L. 86-376 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 1958 Amendment

    Amendment by Pub. L. 85-866 applicable only with respect to taxable 
years beginning after Dec. 31, 1958, see section 64(e) of Pub. L. 85-
866, set out as a note under section 172 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. 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 29 of this 
title.


 Repeal of Rules Permitting Loss Transfers by Alaska Native Corporations

    Section 5021 of Pub. L. 100-647, as amended by Pub. L. 101-239, 
title VII, Sec. 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 [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 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

    Section 1507(c)(2) of Pub. L. 94-455, as amended by Pub. L. 99-514, 
Sec. 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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 132, 149, 163, 165, 172, 
243, 246A, 279, 280G, 281, 304, 312, 332, 336, 338, 355, 358, 367, 382, 
384, 404, 448, 465, 472, 542, 543, 584, 593, 732, 805, 818, 832, 861, 
864, 865, 904, 936, 952, 954, 1042, 1092, 1313, 1362, 1503, 4216, 4282, 
4612, 7701 of this title.
