IRS finalizes single-entity treatment of consolidated groups under Section 951(a)(2)(B)


The IRS recently issued final regulations (TD 9973) treating members of a consolidated group as a single U.S. shareholder in certain cases for purposes of Section 951(a)(2)(B) with respect to controlled foreign corporation-to-controlled foreign corporation (CFC-to-CFC) distributions of previously taxed earnings and profits under Section 959(b) (PTEP distributions).


Per the preamble to the regulations, the IRS did not receive any comments, nor was a public hearing requested or held. As a result, the preamble does not provide a description of the provisions, and the IRS finalized the previously proposed regulations without modification.


Under the final regulations, members of a consolidated group will be treated as a single U.S. shareholder for purposes of determining the amount described in Section 951(a)(2)(B) subsequent to a PTEP distribution from one CFC to another CFC before a transfer of such CFC between members within the consolidated group. As a result of such treatment, the transferee member’s pro rata share would reflect the period that both members owned stock of the CFC.


The regulations apply to tax years for which the original consolidated return is due (without extensions) after Feb. 23, 2023. Therefore, for calendar-year taxpayers, the regulations would apply to transactions occurring in 2022. 




Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “§,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics