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Treasury Regulations · 26 CFR

§ 1.1502-43. Consolidated accumulated earnings tax.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 1502

Cite as 26 CFR § 1.1502-43

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
January 27, 1984 by T.D. 7937
Last amended
December 30, 2024 by T.D. 10018
Issued under
26 U.S.C. § 1502
Length
1,416 words · about 6 min to read
Cross-references
cites 13 Code sections and 12 regulations; cited by 2
(a) Group subject to tax—
(1) General rule. For a group filing a consolidated return for the taxable year, the accumulated earnings tax under section 531 is imposed on consolidated accumulated taxable income (as defined in paragraph (b) of this section). This tax applies to any group that is formed or availed of to avoid or prevent the imposition of the individual income tax on the shareholders of either any of its members or any other corporation by permitting earnings and profits to accumulate instead of dividing or distributing them. Section 531 and this section do not apply to a group that is treated as a “personal holding company” under section 542(a)(1) as a result of the application of section 542(b)(1). Special rules are provided in this section for other groups which include one or more personal holding companies.
(2) Evidence of purpose to avoid income tax.
(i) Under section 533(a), the fact that the group's earnings and profits are permitted to accumulate beyond the reasonable needs of its business is determinative of the purpose to avoid the income tax with respect to shareholders, unless the group by the preponderance of the evidence proves to the contrary.
(ii) The fact that a group is a mere holding or investment group is prima facie evidence of the group's purpose to avoid the income tax with respect to the shareholders. The activities of a member which is a personal holding company are not taken into account in determining if the group is a mere holding or investment group.
(3) Earnings and profits. For purposes of this paragraph (a) and paragraph (d) of this section, the following rules apply:
(i) If no member of the group is a personal holding company, the group's earnings and profits are the aggregate of the earnings and profits (or deficit) of each corporation that is a member at the close of the taxable year, determined in accordance with § 1.1502-33.
(ii) Earnings and profits resulting from the application of § 1.1502-33(b) are not taken into account.
(iii) Earnings and profits resulting from the disposition of a member's stock are determined without regard to the stock basis adjustments under §§ 1.1502-32 and 1.1502-33(c)(1).
(4) Reasonable needs of the business. The reasonable needs of the group's business include the reasonable needs of the business of any corporation (other than a personal holding company) that is a member at the close of the taxable year. Thus, the earnings and profits of one member may be accumulated with respect to the reasonable business needs of another member. If under § 1.537-3(b) the business of a nonmember corporation is considered the business of a member, then the earnings and profits of any member may be accumulated with respect to such nonmember's reasonable business needs.
(5) Burden of proof. The notification described in section 534(b) and the statement described in section 534(c) are made to or by the common parent corporation in accordance with § 1.1502-77.
(b) Consolidated accumulated taxable income—
(1) In general. “Consolidated accumulated taxable income” is the group's consolidated taxable income determined under § 1.1502-11 adjusted in the manner provided in paragraph (b)(2) of this section, minus the sum of—
(i) The consolidated dividends paid deduction determined under paragraph (c) of this section and
(ii) The consolidated accumulated earnings credit determined under paragraph (d) of this section.
(2) Adjustments to consolidated taxable income. For purposes of paragraph (b)(1) of this section, consolidated taxable income is adjusted as follows:
(i) Under section 535(b)(1), the deduction for taxes is the excess of—
(A) The consolidated liability for tax determined without § 1.1502-2(a)(2) through (4), and without the foreign tax credit provided by section 27, over
(B) The consolidated foreign tax credit determined pursuant to § 1.1502-4. Foreign taxes deductible under § 1.535-2(a)(2) are also allowed as a deduction under section 535(b)(1).
(ii) The consolidated charitable contributions deduction under § 1.1502-24 does not apply. Under section 535(b)(2), there shall be allowed the aggregate charitable contributions of the members allowable under section 170, determined without section 170 (b)(2) and (d)(2).
(iii) Under section 535(b)(3), the deduction determined under § 1.1502-26 is not allowed.
(iv) Under section 535(b)(4), the consolidated net operating loss deduction described in § 1.1502-21(a) is not allowed.
(v) Under section 535(b)(5), there is allowed as a deduction the consolidated net capital loss, determined under § 1.1502-22(a).
(vi) Under section 535(b)(6), there is allowed as a deduction an amount equal to—
(A) The consolidated capital gain net income for the taxable year (determined under § 1.1502-22(a) and without the consolidated net capital loss carryovers and carrybacks to the taxable year), minus
(B) The taxes attributable to such gain.
(vii) Under section 535(b)(7), the consolidated net capital loss carryovers and carrybacks are not allowed. See § 1.1502-22(b).
(viii) Section 1.1502-15 does not apply.
(3) Personal holding company a member. If a member is a personal holding company for the taxable year—
(i) [Reserved]
(ii) In applying paragraph (b)(2)(i) of this section, consolidated liability for tax (as determined under that paragraph (b)(2)(i)) is reduced by the portion thereof allocable to that member under section 1552(a) (1), (2), (3), or (4) (or § 1.1502-33(d)), whichever is applicable. The consolidated foreign tax credit is computed by excluding the taxable income and any foreign taxes paid or accrued by that member, and foreign taxes deductible under § 1.535-2(a)(2) do not include foreign taxes attributable to that member.
(c) Consolidated dividends paid deduction—
(1) General rule. For purposes of this section, the consolidated dividends paid deduction is the aggregate of the members' deductions under section 561(a) (1) and (2). This deduction is determined by excluding deductions for dividends paid to other members.
(2) Exception for certain personal holding companies. [Reserved]
(3) Dividends paid defined. For purposes of this paragraph (c), “dividends paid” and “dividend (or portion thereof) paid” include amounts treated as dividends paid during the taxable year under sections 562(b)(1), 563, and 565 (relating respectively to liquidating distributions, dividends paid after year end, and consent dividends).
(4) Examples. This paragraph (c) can be illustrated by the following examples:
Example 1.

Corporations P and S constitute an affiliated group which files a consolidated return on a calendar year basis for 1984 and 1985. P owns all of S's stock and two individuals own all of P's stock. Neither member of the group is a personal holding company for 1984. Assume that on December 15, 1984, S pays a dividend (as defined in section 316 (a)) of $2,000 to P, and P pays a dividend (as so defined) of $3,000 on January 15, 1985, to its individual shareholders. All dividends are paid in cash and are pro rata with no preference as to any shares or class of stock. For purposes of this paragraph (c), the consolidated dividends paid deduction for 1984 is $3,000, i.e., the dividend paid on January 15, 1985, by P to its nonmember shareholders. See section 563 (a). The $2,000 dividend paid by S to P is not taken into account in computing the consolidated dividends paid deduction.

Example 2.

[Reserved]

(d) Consolidated accumulated earnings credit—
(1) In general. [Reserved]
(2) Special rule if a consolidated group is part of a controlled group. If a consolidated group is treated collectively as being one component member of a controlled group, or if each member of a consolidated group is treated as being a separate component member of a controlled group, see section 1561 for determining the portion of the accumulated earnings credit to be allocated to such group or to such members.
(e) Effective/applicability date. This section applies to any consolidated Federal income tax return due (without extensions) on or after December 21, 2009.

[T.D. 7937, 49 FR 3462, Jan. 27, 1984, as amended by T.D. 8560, 59 FR 41674, Aug. 15, 1994; T.D. 8677, 61 FR 33324, June 27, 1996; T.D. 8560, 62 FR 12098, Mar. 14, 1997; T.D. 8823, 64 FR 36100, July 2, 1999; T.D. 9304, 71 FR 76907, Dec. 22, 2006; T.D. 9476, 74 FR 68532, Dec. 28, 2009; T.D. 9885, 84 FR 67039, Dec. 6, 2019; T.D. 10018, 89 FR 106872, Dec. 30, 2024]

Other regulations under § 1502

Show 25 more

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 2 other regulations

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Amended by T.D. 10018 (89 FR 106872)
  2. Amended by T.D. 9885 (84 FR 67039)
  3. Amended by T.D. 9476 (74 FR 68532)
  4. Amended by T.D. 9304 (71 FR 76907)
  5. Amended by T.D. 8823 (64 FR 36100)
  6. Amended by T.D. 8560 (62 FR 12098)
  7. Amended by T.D. 8677 (61 FR 33324)
  8. Amended by T.D. 8560 (59 FR 41674)
  9. Issued by T.D. 7937 (49 FR 3462)

Where it sits in 26 CFR

  1. Subchapter A Income tax
  2. Part 1 Income taxes
  3. Special Taxes and Taxpayers

Nearby sections