
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: 26USC1561]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                     CHAPTER 6--CONSOLIDATED RETURNS
 
                       Subchapter B--Related Rules
 
                PART II--CERTAIN CONTROLLED CORPORATIONS
 
Sec. 1561. Limitations on certain multiple tax benefits in the 
        case of certain controlled corporations
        

(a) General rule

    The component members of a controlled group of corporations on a 
December 31 shall, for their taxable years which include such December 
31, be limited for purposes of this subtitle to--
        (1) amounts in each taxable income bracket in the tax table in 
    section 11(b)(1) which do not aggregate more than the maximum amount 
    in such bracket to which a corporation which is not a component 
    member of a controlled group is entitled,
        (2) one $250,000 ($150,000 if any component member is a 
    corporation described in section 535(c)(2)(B)) amount for purposes 
    of computing the accumulated earnings credit under section 535(c)(2) 
    and (3),
        (3) one $40,000 exemption amount for purposes of computing the 
    amount of the minimum tax, and
        (4) one $2,000,000 amount for purposes of computing the tax 
    imposed by section 59A.

The amounts specified in paragraph (1), the amount specified in 
paragraph (3), and the amount specified in paragraph (4) shall be 
divided equally among the component members of such group on such 
December 31 unless all of such component members consent (at such time 
and in such manner as the Secretary shall by regulations prescribe) to 
an apportionment plan providing for an unequal allocation of such 
amounts. The amounts specified in paragraph (2) shall be divided equally 
among the component members of such group on such December 31 unless the 
Secretary prescribes regulations permitting an unequal allocation of 
such amounts. Notwithstanding paragraph (1), in applying the last 2 
sentences of section 11(b)(1) to such component members, the taxable 
income of all such component members shall be taken into account and any 
increase in tax under such last 2 sentences shall be divided among such 
component members in the same manner as amounts under paragraph (1). In 
applying section 55(d)(3), the alternative minimum taxable income of all 
component members shall be taken into account and any decrease in the 
exemption amount shall be allocated to the component members in the same 
manner as under paragraph (3).

(b) Certain short taxable years

    If a corporation has a short taxable year which does not include a 
December 31 and is a component member of a controlled group of 
corporations with respect to such taxable year, then for purposes of 
this subtitle--
        (1) the amount in each taxable income bracket in the tax table 
    in section 11(b), and
        (2) the amount to be used in computing the accumulated earnings 
    credit under section 535(c)(2) and (3),

of such corporation for such taxable year shall be the amount specified 
in subsection (a)(1) or (2), as the case may be, divided by the number 
of corporations which are component members of such group on the last 
day of such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were substituted 
for December 31.

(Added Pub. L. 88-272, title II, Sec. 235(a), Feb. 26, 1964, 78 Stat. 
116; amended Pub. L. 91-172, title IV, Sec. 401(a)(1), Dec. 30, 1969, 83 
Stat. 599; Pub. L. 94-12, title III, Secs. 303(c)(1), 304(b), Mar. 29, 
1975, 89 Stat. 44, 45; Pub. L. 94-164, Sec. 4(d)(1), Dec. 23, 1975, 89 
Stat. 974; Pub. L. 94-455, title IX, Sec. 901(c)(1), title XIX, 
Secs. 1901(b)(1)(J)(v), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1607, 
1791, 1834; Pub. L. 95-600, title III, Sec. 301(b)(19), title VII, 
Sec. 703(j)(7), Nov. 6, 1978, 92 Stat. 2823, 2941; Pub. L. 97-34, title 
II, Sec. 232(b)(3), Aug. 13, 1981, 95 Stat. 250; Pub. L. 97-248, title 
II, Sec. 259(b), (c), Sept. 3, 1982, 96 Stat. 539; Pub. L. 98-369, div. 
A, title I, Sec. 66(b), title II, Sec. 211(b)(21), July 18, 1984, 98 
Stat. 585, 756; Pub. L. 99-499, title V, Sec. 516(b)(3), Oct. 17, 1986, 
100 Stat. 1771; Pub. L. 99-514, title VII, Sec. 701(e)(2), Oct. 22, 
1986, 100 Stat. 2342; Pub. L. 100-647, title II, Sec. 2004(l), Nov. 10, 
1988, 102 Stat. 3606; Pub. L. 104-188, title I, Sec. 1703(f), Aug. 20, 
1996, 110 Stat. 1876.)


                               Amendments

    1996--Subsec. (a). Pub. L. 104-188 in closing provisions substituted 
``last 2 sentences'' for ``last sentence'' in two places.
    1988--Subsec. (a). Pub. L. 100-647 substituted ``section 11(b)(1)'' 
for ``section 11(b)'' in par. (1) and in penultimate sentence.
    1986--Subsec. (a). Pub. L. 99-514 added par. (3), and in concluding 
provisions, substituted ``amounts specified in paragraph (1) (and the 
amount specified in paragraph (3))'' for ``amounts specified in 
paragraph (1)'' and inserted ``In applying section 55(d)(3), the 
alternative minimum taxable income of all component members shall be 
taken into account and any decrease in the exemption amount shall be 
allocated to the component members in the same manner as under paragraph 
(3).''
    Pub. L. 99-499, in subsec. (a) as amended by Pub. L. 99-514 above, 
added par. (4), and in concluding provisions substituted ``, the amount 
specified in paragraph (3), and the amount specified in paragraph (4)'' 
for ``(and the amount specified in paragraph (3))''.
    1984--Subsec. (a). Pub. L. 98-369, Sec. 211(b)(21)(A), inserted 
``and'' at end of par. (1), substituted a period for the comma at end of 
par. (2), struck out par. (3) which read as follows: ``one $25,000 
amount for purposes of computing the limitation on the small business 
deduction of life insurance companies under sections 804(a)(3) and 
809(d)(10), and'', struck out par. (4) which read as follows: ``one 
$1,000,000 amount (adjusted as provided in section 809(f)(3) for 
purposes of computing the limitation under paragraph (1) or (2) of 
section 809(f).'', and substituted ``paragraph (2)'' for ``paragraphs 
(2), (3), and (4)'' in concluding provisions.
    Pub. L. 98-369, Sec. 66(b), inserted provision that notwithstanding 
paragraph (1), in applying last sentence of section 11(b) to such 
component members, the taxable income of all such component members 
shall be taken into account and any increase in tax under the last 
sentence shall be divided among such component members in the same 
manner as amounts under paragraph (1).
    Subsec. (b). Pub. L. 98-369, Sec. 211(b)(21)(B), inserted ``and'' at 
end of par. (1), struck out par. (3) which read as follows: ``the amount 
to be used in computing the limitation on the small business deduction 
of life insurance companies under sections 804(a)(3) and 809(d)(10), 
and'', struck out par. (4) which read as follows: ``the amount (adjusted 
as provided in section 809(f)(3)) to be used in computing the limitation 
under paragraph (1) or (2) of section 809(f),'', and substituted ``or 
(2)'' for ``, (2), (3), or (4)'' in concluding provisions.
    1982--Subsec. (a). Pub. L. 97-248, Sec. 259(b), added par. (4) and 
inserted reference to par. (4) in text following par. (4).
    Subsec. (b). Pub. L. 97-248, Sec. 259(c), added par. (4) and 
inserted reference to subsec. (a)(4) in text following par. (4).
    1981--Subsec. (a)(2). Pub. L. 97-34 substituted ``$250,000 ($150,000 
if any component member is a corporation described in section 
535(c)(2)(B))'' for ``$150,000''.
    1978--Subsec. (a). Pub. L. 95-600, Sec. 301(b)(19)(A), in par. (1) 
substituted ``amounts in each taxable income bracket in the tax table in 
section 11(b) which do not aggregate more than the maximum amount in 
such bracket to which a corporation is not a component member of a 
controlled group is entitled'' for ``the surtax exemption under section 
11(d)'' and in provisions following par. (3) substituted ``amounts'' for 
``amount'' in two places and struck out provision that in applying 
section 11(b)(2), the first $25,000 of taxable income and the second 
$25,000 of taxable income each be allocated among the component members 
of a controlled group of corporations in the same manner as the surtax 
exemption is allocated.
    Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(19)(B), substituted 
``the amount in each taxable income bracket in the tax table in section 
11(b)'' for ``the surtax exemption under section 11(d)''.
    Subsec. (b)(3). Pub. L. 95-600, Sec. 703(j)(7), substituted 
``804(a)(3)'' for ``804(a)(4)''.
    1976--Subsec. (a). Pub. L. 94-455, Secs. 901(c)(1), 1906(b)(13)(A), 
inserted ``In applying section 11(b)(2), the first $25,000 of taxable 
income and the second $25,000 of taxable income shall each be allocated 
among the component members of a controlled group of corporations in the 
same manner as the surtax exemption is allocated'' after ``unequal 
allocation of such amounts'' and struck out ``or his delegate'' after 
``Secretary'' in two places.
    Subsec. (a)(3). Pub. L. 94-455, Sec. 1901(b)(1)(J)(v), substituted 
``804(a)(3)'' for ``804(a)(4)'' after ``under sections''.
    1975--Subsec. (a)(1). Pub. L. 94-164 struck out ``$25,000'' in par. 
(1) as par. (1) is in effect for taxable years ending after Dec. 31, 
1975.
    Pub. L. 94-12, Sec. 303(c)(1), substituted ``$50,000'' for 
``$25,000''.
    Subsec. (a)(2). Pub. L. 94-12, Sec. 304(b), substituted ``$150,000'' 
for ``$100,000''.
    1969--Pub. L. 91-172 provided, with respect to taxable years 
beginning after Dec. 31, 1974, that a controlled group of corporations 
is limited to one $25,000 surtax exemption under section 11(d), one 
$100,000 amount for purposes of computing the accumulated earnings 
credit under section 535(c)(2) and (3), and one $25,000 amount for 
purposes of computing the limitation on the small business deduction of 
life insurance companies under sections 804(a)(4) and 809(d)(10).


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective as if included in the 
provision of the Revenue Reconciliation Act of 1993, Pub. L. 103-66, 
Secs. 13001-13444, to which such amendment relates, see section 1703(o) 
of Pub. L. 104-188, set out as a note under section 39 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provisions of the Revenue Act of 1987, 
Pub. L. 100-203, title X, to which such amendment relates, see section 
2004(u) of Pub. L. 100-647, set out as a note under section 56 of this 
title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to taxable years beginning 
after Dec. 31, 1986, with certain exceptions and qualifications, see 
section 701(f) of Pub. L. 99-514, set out as an Effective Date note 
under section 55 of this title.
    Amendment by Pub. L. 99-499 applicable to taxable years beginning 
after Dec. 31, 1986, see section 516(c) of Pub. L. 99-499, set out as a 
note under section 26 of this title.


                    Effective Date of 1984 Amendment

    Amendment by section 66(b) of Pub. L. 98-369 applicable to taxable 
years beginning after Dec. 31, 1983, see section 66(c) of Pub. L. 98-
369, set out as a note under section 11 of this title.
    Amendment by section 211(b)(21) 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 and Termination Date of 1982 Amendment

    Section 263(a)(1) of Pub. L. 97-248 provided that the amendment made 
by section 259(b), (c) of Pub. L. 97-248 is applicable to taxable years 
beginning after Dec. 31, 1981, and before Jan. 1, 1984.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable to taxable years beginning 
after Dec. 31, 1981, see section 232(c) of Pub. L. 97-34, set out as a 
note under section 535 of this title.


                    Effective Date of 1978 Amendment

    Amendment by section 301(b)(19) of Pub. L. 95-600 applicable to 
taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. 
L. 95-600, set out as a note under section 11 of this title.
    Amendment by section 703(j)(7) of Pub. L. 95-600 effective on Oct. 
4, 1976, see section 703(r) of Pub. L. 95-600, set out as a note under 
section 46 of this title.


                    Effective Dates of 1976 Amendment

    Amendment by section 901(c)(1) of Pub. L. 94-455 applicable to 
taxable years ending after Dec. 31, 1975, see section 901(d) of Pub. L. 
94-455, set out as a note under section 11 of this title.
    Amendment by section 1901(b)(1)(J)(v) of Pub. L. 94-455 effective 
for taxable years beginning after Dec. 31, 1976, see section 1901(d) of 
Pub. L. 94-455, set out as a note under section 2 of this title.


           Effective and Termination Dates of 1975 Amendments

    Amendment by Pub. L. 94-164 applicable to taxable years beginning 
after Dec. 31, 1975, see section 4(e) of Pub. L. 94-164, set out as a 
note under section 11 of this title.
    Amendment by section 303(c)(1) of Pub. L. 94-12 applicable to 
taxable years ending after Dec. 31, 1974, but to cease to apply for 
taxable years ending after Dec. 31, 1975, see section 305(b)(1) of Pub. 
L. 94-12, set out as a note under section 11 of this title.
    Amendment by section 304(b) of Pub. L. 94-12 applicable to taxable 
years beginning after Dec. 31, 1974, see section 305(c) of Pub. L. 94-
12, set out as an Effective Date of 1975 Amendment note under section 
535 of this title.


                    Effective Date of 1969 Amendment

    Section 401(h) of Pub. L. 91-172 provided that:
    ``(1) The amendments made by subsection (a) [amending this section 
and repealing section 1562 of this title] shall apply with respect to 
taxable years beginning after December 31, 1974.
    ``(2) The amendments made by subsection (b) [enacting section 1564 
and amending sections 11, 535, 804, and 1562] shall apply with respect 
to taxable years beginning after December 31, 1969.
    ``(3) The amendments made by subsections (c), (d), (e), and (f) 
[amending sections 46, 48, 179, and 1563] shall apply with respect to 
taxable years ending on or after December 31, 1970.''


                             Effective Date

    Section applicable with respect to taxable years ending after Dec. 
31, 1963, see section 235(d) of Pub. L. 88-272, set out as an Effective 
Date of 1964 Amendment note under section 1551 of this title.


  Applicability of Certain Amendments by Pub. L. 99-514 in Relation to 
                   Treaty Obligations of United States

    For applicability of amendment by section 701(e)(2) of Pub. L. 99-
514 notwithstanding any treaty obligation of the United States in effect 
on Oct. 22, 1986, see section 1012(aa)(2) of Pub. L. 100-647, set out as 
a note under section 861 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 535, 4980B, 4980D, 6655 of 
this title.
