Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > IRS

IRS To Clarify Controlled Group Rules

Your article was successfully shared with the contacts you provided.

The Internal Revenue Service wants to write a new regulation that would affect whether it treats a life insurance company as a member of a controlled group of corporations.

In the past, an Internal Revenue Code section excluded life insurers from controlled groups, to keep the groups from enjoying a specific tax benefit, officials write in a notice about the proposed regulation that appears today in the Federal Register.

Since then, other laws and regulations have used the provision that defines controlled groups — Section 1563 of the Internal Revenue Code – for other purposes.

Some of the newer laws and regulations, such as a research tax credit provision, do treat a life insurer as being part of a corporate group, and not as a “separate life insurance controlled group,” officials write.

Section 1563 also defines terms such as “component members and “excluded members.”

“Some taxpayers have argued that a corporation that is an ”excluded member” within the meaning of section 1563(b)(2) cannot, as a consequence, be a ‘member’ of a section 1563(a) controlled group generally,” officials write. “This line of argument tends to equate a corporation’s membership generally with such corporation’s status as a component member.”

The Treasury Department and the IRS disagree with those arguments and believe that, for the purposes of some regulations, a life insurers that is an “excluded member” ought to be treated as a “member of a controlled group under” for other purposes, officials write.

“Therefore, this proposed regulation clarifies that a corporation identified in section 1563(b)(2) as an excluded member of a controlled group is nevertheless a member of such group for purposes of section 1563(a),” officials write. “Accordingly, a corporation whose stock is held by such an excluded member may be treated as a component member of the controlled group of corporations. Finally, this proposed regulation further illustrates that an excluded member of a controlled group is treated as a member of such group by adding an example demonstrating that a controlled group can consist solely of excluded members.”


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.