U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 6— CONSOLIDATED RETURNS › Subchapter Subchapter B— Related Rules › Part PART I— IN GENERAL

26 U.S.C. § 1552

Earnings and profits

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(a) General rulePursuant to regulations prescribed by the Secretary the earnings and profits of each member of an affiliated group required to be included in a consolidated return for such group filed for a taxable year shall be determined by allocating the tax liability of the group for such year among the members of the group in accord with whichever of the following methods the group shall elect in its first consolidated return filed for such a taxable year:(1) The tax liability shall be apportioned among the members of the group in accordance with the ratio which that portion of the consolidated taxable income attributable to each member of the group having taxable income bears to the consolidated taxable income.(2) The tax liability of the group shall be allocated to the several members of the group on the basis of the percentage of the total tax which the tax of such member if computed on a separate return would bear to the total amount of the taxes for all members of the group so computed.(3) The tax liability of the group (excluding the tax increases arising from the consolidation) shall be allocated on the basis of the contribution of each member of the group to the consolidated taxable income of the group. Any tax increases arising from the consolidation shall be distributed to the several members in direct proportion to the reduction in tax liability resulting to such members from the filing of the consolidated return as measured by the difference between their tax liabilities determined on a separate return basis and their tax liabilities based on their contributions to the consolidated taxable income.(4) The tax liability of the group shall be allocated in accord with any other method selected by the group with the approval of the Secretary.(b) Failure to elect

If no election is made in such first return, the tax liability shall be allocated among the several members of the group pursuant to the method prescribed in subsection (a)(1).

(Aug. 16, 1954, ch. 736, 68A Stat. 371; Pub. L. 88–272, title II, § 234(b)(8), Feb. 26, 1964, 78 Stat. 116; Pub. L. 94–455, title XIX, §§ 1901(a)(159), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1790, 1834.)Editorial NotesAmendments

1976—Subsec. (a). Pub. L. 94–455, §§ 1901(a)(159), 1906(b)(13)(A), struck out “beginning after December 31, 1953, and ending after the date of enactment of this title” after “group filed for a taxable year”, and “or his delegate” after “Secretary” in two places.

1964—Subsec. (a)(3). Pub. L. 88–272 struck out “(determined without regard to the 2 percent increase provided by section 1503(a))”, before “based on their contributions”.

Statutory Notes and Related SubsidiariesEffective Date of 1976 Amendment

Amendment by section 1901(a)(159) of Pub. L. 94–455 applicable with respect to 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 Date of 1964 Amendment

Amendment by Pub. L. 88–272 applicable to taxable years beginning after Dec. 31, 1963, see section 234(c) of Pub. L. 88–272, set out as a note under section 1503 of this title.

Notes of Decisions
Cited in 8 cases, 1967–2014 · leading case: Mid-Am. Television Co. v. State Tax Comm'n, 652 S.W.2d 674 (Mo. 1983).
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Mid-Am. Television Co. v. State Tax Comm'n, 652 S.W.2d 674 (Mo. 1983). · cites it 4× “In so doing the director in general used the same formula as set forth in 26 U.S.C. § 1552 (a)(1), which is one of the four alternative methods provided by § 1552 to determine the amount of consolidated tax liability to be allocated to each member of the group in arriving at…”
Fed. Power Comm'n v. United Gas Pipe Line Co., 386 U.S. 237 (1967). · cites it 2× “This statement is somewhat misleading since it is directed to the allocation made for earnings and profits tax purposes under 26 U. S. C. § 1552 (a) (1) and that allocation bears no necessary relation to the actual allocation of liability for corporate purposes.”
City of Charlottesville v. Fed. Energy Regulatory Comm'n, 774 F.2d 1205 (D.C. Cir. 1985). “We note that the allocation rules prescribed by 26 U.S.C. § 1552 , pertain only to determination of earnings and profits for accounting purposes and do not prescribe an amount that the parent must collect from each subsidiary in discharge of the consolidated liability.”
M & M Transp. Co. v. U. S. Indus., Inc., 416 F. Supp. 865 (S.D.N.Y. 1976). “§ 1501 , the USI group filed a consolidated federal income tax return for calendar year 1971; plaintiff has alleged that it paid, through the agency of USI, its own portion of the group’s 1971 federal income tax liability, as allocated in accordance with 26 U.S.C. § 1552 (a)(1).…”
State v. Chesebrough-Ponds, Inc., 441 So. 2d 596 (Ala. Civ. App. 1983). “The allocation of the federal tax among the individual corporations is controlled by 26 U.S.C.A. § 1552 (West 1982), as adopted by Alabama Income Tax Regulation 35.”
Cont'l Tel. Co. v. Pennsylvania Pub. Util. Comm'n, 548 A.2d 344 (Pa. Commw. Ct. 1988). “See section 1552 of the Code, 26 U.S.C. §1552 . Because Mr. Catlins method of calculating the consolidated tax savings excluded losses of the regulated companies in determining tax savings, and then limited the amount of the adjustment resulting from those savings to current…”
JPMCC 2007-CIBC 19 East Greenway, LLC v. Bataa/Kierland LLC, 517 B.R. 155 (D. Ariz. 2014). “26 U.S.C. § 1552 . . 26 U.S.C. § 1366 . .”
State Auto. Cas. Underwriters v. United States, 462 F. Supp. 514 (S.D. Iowa 1978). “Such return is proper for affiliated corporations under 26 U.S.C. § 1552 . The group is taxed as a unit upon its dealings with the public at large without taking into account the dealings of members of the group among themselves.”
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