Internal Revenue Code · 26 U.S.C.
§ 1504. Definitions
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 1504
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- September 2, 1958 by Pub. L. 85–866
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 16 dated changes in the source credit
- Length
- 6 subsections · 1,334 words · about 6 min to read
- Defines
- 3 terms
- Cross-references
- cites 6; cited by 55 Code sections and 129 other regulations
- Regulations
- 4 issued under this section
¶(A) 1 or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if—
¶(B)
¶(i) the common parent owns directly stock meeting the requirements of paragraph (2) in at least 1 of the other includible corporations, and
¶(ii) stock meeting the requirements of paragraph (2) in each of the includible corporations (except the common parent) is owned directly by 1 or more of the other includible corporations.
¶(2) 80-percent voting and value test The ownership of stock of any corporation meets the requirements of this paragraph if it—
¶(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and
¶(B) has a value equal to at least 80 percent of the total value of the stock of such corporation.
¶(i) a corporation is included (or required to be included) in a consolidated return filed by an affiliated group, and
¶(ii) such corporation ceases to be a member of such group,
with respect to periods after such cessation, such corporation (and any successor of such corporation) may not be included in any consolidated return filed by the affiliated group (or by another affiliated group with the same common parent or a successor of such common parent) before the 61st month beginning after its first taxable year in which it ceased to be a member of such affiliated group.
¶(B) Secretary may waive application of subparagraph (A)
The Secretary may waive the application of subparagraph (A) to any corporation for any period subject to such conditions as the Secretary may prescribe.
¶(4) Stock not to include certain preferred stock For purposes of this subsection, the term “stock” does not include any stock which—
¶(A) is not entitled to vote,
¶(B) is limited and preferred as to dividends and does not participate in corporate growth to any significant extent,
¶(C) has redemption and liquidation rights which do not exceed the issue price of such stock (except for a reasonable redemption or liquidation premium), and
¶(D) is not convertible into another class of stock.
¶(5) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including (but not limited to) regulations—
¶(A) which treat warrants, obligations convertible into stock, and other similar interests as stock, and stock as not stock,
¶(B) which treat options to acquire or sell stock as having been exercised,
¶(C) which provide that the requirements of paragraph (2)(B) shall be treated as met if the affiliated group, in reliance on a good faith determination of value, treated such requirements as met,
¶(D) which disregard an inadvertent ceasing to meet the requirements of paragraph (2)(B) by reason of changes in relative values of different classes of stock,
¶(E) which provide that transfers of stock within the group shall not be taken into account in determining whether a corporation ceases to be a member of an affiliated group, and
¶(F) which disregard changes in voting power to the extent such changes are disproportionate to related changes in value.
¶(b) Definition of “includible corporation” As used in this chapter, the term “includible corporation” means any corporation except—
¶(3) Foreign corporations.
¶(4) Regulated investment companies and real estate investment trusts subject to tax under subchapter M of chapter 1.
¶(6) An S corporation.
¶(c) Includible insurance companies Notwithstanding the provisions of paragraph (2) of subsection (b)—
¶(1) Two or more domestic insurance companies each of which is subject to tax under section 801 shall be treated as includible corporations for purposes of applying subsection (a) to such insurance companies alone.
¶(2)
¶(A) If an affiliated group (determined without regard to subsection (b)(2)) includes one or more domestic insurance companies taxed under section 801, the common parent of such group may elect (pursuant to regulations prescribed by the Secretary) to treat all such companies as includible corporations for purposes of applying subsection (a) except that no such company shall be so treated until it has been a member of the affiliated group for the 5 taxable years immediately preceding the taxable year for which the consolidated return is filed.
¶(B) If an election under this paragraph is in effect for a taxable year—
¶(i) section 243(b)(3) and the exception provided under section 243(b)(2) with respect to subsections (b)(2) and (c) of this section,
¶(iii) subsection (a)(4) and (b)(2)(D) of section 1563, and the reference to section 1563(b)(2)(D) contained in section 1563(b)(3)(C),
shall not be effective for such taxable year.
¶(d) Subsidiary formed to comply with foreign law
In the case of a domestic corporation owning or controlling, directly or indirectly, 100 percent of the capital stock (exclusive of directors’ qualifying shares) of a corporation organized under the laws of a contiguous foreign country and maintained solely for the purpose of complying with the laws of such country as to title and operation of property, such foreign corporation may, at the option of the domestic corporation, be treated for the purpose of this subtitle as a domestic corporation.
¶(e) Includible tax-exempt organizations
Despite the provisions of paragraph (1) of subsection (b), two or more organizations exempt from taxation under section 501, one or more of which is described in section 501(c)(2) and the others of which derive income from such 501(c)(2) organizations, shall be considered as includible corporations for the purpose of the application of subsection (a) to such organizations alone.
¶(f) Special rule for certain amounts derived from a corporation previously treated as a DISC In determining the consolidated taxable income of an affiliated group for any taxable year beginning after December 31, 1984, a corporation which had been a DISC and which would otherwise be a member of such group shall not be treated as such a member with respect to—
¶(1) any distribution (or deemed distribution) of accumulated DISC income which was not treated as previously taxed income under section 805(b)(2)(A) of the Tax Reform Act of 1984, and
¶(2) any amount treated as received under section 805(b)(3) of such Act.
(Aug. 16, 1954, ch. 736, 68A Stat. 369; Mar. 13, 1956, ch. 83, § 5(8), 70 Stat. 49; Pub. L. 85–866, title I, § 64(d)(3), Sept. 2, 1958, 72 Stat. 1657; Pub. L. 86–69, § 3(f)(1), June 25, 1959, 73 Stat. 140; Pub. L. 86–376, § 2(c), Sept. 23, 1959, 73 Stat. 699; Pub. L. 86–779, § 10(j), Sept. 14, 1960, 74 Stat. 1009; Pub. L. 89–389, § 4(b)(3), Apr. 14, 1966, 80 Stat. 116; Pub. L. 91–172, title I, § 121(a)(4), Dec. 30, 1969, 83 Stat. 537; Pub. L. 92–178, title V, § 502(e), Dec. 10, 1971, 85 Stat. 550; Pub. L. 94–455, title VIII, § 803(b)(3), title X, §§ 1051(g), 1053(d)(2), title XV, § 1507(a), Oct. 4, 1976, 90 Stat. 1584, 1646, 1649, 1739; Pub. L. 95–600, title I, § 141(f)(4), Nov. 6, 1978, 92 Stat. 2795; Pub. L. 96–222, title I, § 101(a)(7)(L)(i)(VIII), (iv)(II), Apr. 1, 1980, 94 Stat. 199, 200; Pub. L. 98–369, div. A, title I, § 60(a), title II, § 211(b)(20), July 18, 1984, 98 Stat. 577, 756; Pub. L. 99–514, title X, § 1024(c)(15), (16), title XVIII, §§ 1804(e)(1), (10), 1899A(35), Oct. 22, 1986, 100 Stat. 2408, 2800, 2804, 2960; Pub. L. 100–647, title I, § 1018(d)(10), Nov. 10, 1988, 102 Stat. 3581; Pub. L. 101–508, title XI, § 11814(b), Nov. 5, 1990, 104 Stat. 1388–557; Pub. L. 104–188, title I, §§ 1308(d)(2), 1702(h)(6), Aug. 20, 1996, 110 Stat. 1783, 1874; Pub. L. 113–295, div. A, title II, § 221(a)(93), Dec. 19, 2014, 128 Stat. 4050; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(xvii)(I), Mar. 23, 2018, 132 Stat. 1208.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 1504
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 6 other sections
- § 501 Exemption from tax on corporations, certain trusts, etc.
- § 801 Tax imposed
- § 992(a)(1) Requirements of a domestic international sales corporation
- § 243(b)(3) Dividends received by corporations
- § 542(b)(5) Definition of personal holding company
- § 1563 Definitions and special rules
Cited by 55 Code sections
- § 59A(b)(2)(B) Tax on base erosion payments of taxpayers with substantial gross receipts
- § 132(j)(5)(D) Certain fringe benefits
- § 149(e)(2)(D)(ii) Bonds must be registered to be tax exempt; other requirements
- § 162(r)(6)(B)(i) Trade or business expenses
- § 165(g)(3)(A) Losses
- § 199A(g)(5)(A)(iii) Qualified business income
- § 243(b)(2)(A) Dividends received by corporations
- § 246A(c)(4) Dividends received deduction reduced where portfolio stock is debt financed
- § 250(b)(2)(D) Foreign-derived deduction eligible income and net CFC tested income
- § 279(g) Interest on indebtedness incurred by corporation to acquire stock or assets of another corporation
- § 280G(b)(5)(A)(ii)(II) Golden parachute payments
- § 281(d)(1) Terminal railroad corporations and their shareholders
- § 304(b)(4)(B)(i) Redemption through use of related corporations
- § 332(b)(1) Complete liquidations of subsidiaries
- § 336(e)(1) Gain or loss recognized on property distributed in complete liquidation
- § 338(d)(3) Certain stock purchases treated as asset acquisitions
- § 355(b)(2)(D)(ii) Distribution of stock and securities of a controlled corporation
- § 358(g) Basis to distributees
- § 367(a)(4) Foreign corporations
- § 382(e)(1) Limitation on net operating loss carryforwards and certain built-in losses following ownership change
- § 384(c)(5) Limitation on use of preacquisition losses to offset built-in gains
- § 404(a)(3)(B) Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan
- § 448(d)(4)(C) Limitation on use of cash method of accounting
- § 465(c)(7)(F)(ii) Deductions limited to amount at risk
Show 31 more
- § 472(g)(2)(A) Last-in, first-out inventories
- § 542(b)(5) Definition of personal holding company
- § 543(d)(6)(B) Personal holding company income
- § 584(a)(2) Common trust funds
- § 593(d)(1)(D) Reserves for losses on loans
- § 732(f)(5) Basis of distributed property other than money
- § 805(a)(4)(E) General deductions
- § 818(e)(1) Other definitions and special rules
- § 832(b)(5)(D)(ii)(II) Insurance company taxable income
- § 864(e)(5)(A) Definitions and special rules
- § 865(i)(4) Source rules for personal property sales
- § 871(l)(3)(B) Tax on nonresident alien individuals
- § 904(d)(2)(C)(ii) Limitation on credit
- § 952(c)(1)(B)(vii)(II) Subpart F income defined
- § 954(h)(4)(F)(ii) Foreign base company income
- § 965(b)(5)(F) Treatment of deferred foreign income upon transition to participation exemption system of taxation
- § 1042(b)(2)(A) Sales of stock to employee stock ownership plans or certain cooperatives
- § 1092(d)(3)(B) Straddles
- § 1313(c)(7) Definitions
- § 1362(d)(3)(C)(iv) Election; revocation; termination
- § 1471(e)(2) Withholdable payments to foreign financial institutions
- § 1503(c)(1) Computation and payment of tax
- § 4216(b)(3)(A) Definition of price
- § 4282(c) Transportation by air for other members of affiliated group
- § 4612(d)(2) Definitions and special rules
- § 4985(e)(4) Stock compensation of insiders in expatriated corporations
- § 6166(b)(10)(B)(ii)(V) Extension of time for payment of estate tax where estate consists largely of interest in closely held business
- § 6715A(c)(2) Tampering with or failing to maintain security requirements for mechanical dye injection systems
- § 6717(b)(2) Refusal of entry
- § 7701(a)(33)(H) Definitions
- § 7874(c)(1) Rules relating to expatriated entities and their foreign parents
Cited in 129 regulations not issued under it
- § 1.50-2 Recapture of the advanced manufacturing investment credit in the case of certain expansions.
- § 1.59A-2 Applicable taxpayer.
- § 1.59A-5 Base erosion minimum tax amount.
- § 1.59A-9 Anti-abuse and recharacterization rules.
- § 1.101-1 Exclusion from gross income of proceeds of life insurance contracts payable by reason of death.
- § 1.108(i)-1 Deferred discharge of indebtedness income and deferred original issue discount deductions of C corporations.
- § 1.132-4 Line of business limitation.
- § 1.162-27 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning on or after January 1, 1994, and for taxable years beginning prior to January 1, 2018.
- § 1.162-33 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning after December 31, 2017.
- § 1.163-5 Denial of interest deduction on certain obligations issued after December 31, 1982, unless issued in registered form.
- § 1.163(j)-7 Application of the section 163(j) limitation to foreign corporations and United States shareholders.
- § 1.163(j)-10 Allocation of interest expense, interest income, and other items of expense and gross income to an excepted trade or business.
- § 1.163(j)-11 Transition rules.
- § 1.165-5 Worthless securities.
- § 1.167(a)-11 Depreciation based on class lives and asset depreciation ranges for property placed in service after December 31, 1970.
- § 1.168(k)-1 Additional first year depreciation deduction.
- § 1.168(k)-2 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
- § 1.197-2 Amortization of goodwill and certain other intangibles.
- § 1.199A-12 Expanded affiliated groups.
- § 1.243-4 Qualifying dividends.
- § 1.250(b)-1 Computation of foreign-derived intangible income (FDII).
- § 1.269B-1 Stapled foreign corporations.
- § 1.279-2 Amount of disallowance of interest on corporate acquisition indebtedness.
- § 1.280G-1 Golden parachute payments.
Show 105 more
- § 1.281-3 Definitions.
- § 1.305-5 Distributions on preferred stock.
- § 1.332-2 Requirements for nonrecognition of gain or loss.
- § 1.336-1 General principles, nomenclature, and definitions for a section 336(e) election.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.336-3 Aggregate deemed asset disposition price; various aspects of taxation of the deemed asset disposition.
- § 1.337(d)-3 Gain recognition upon certain partnership transactions involving a partner's stock.
- § 1.338-2 Nomenclature and definitions; mechanics of the section 338 election.
- § 1.338-3 Qualification for the section 338 election.
- § 1.338-4 Aggregate deemed sale price; various aspects of taxation of the deemed asset sale.
- § 1.338-6 Allocation of ADSP and AGUB among target assets.
- § 1.338-8 Asset and stock consistency.
- § 1.338-10 Filing of returns.
- § 1.338(h)(10)-1 Deemed asset sale and liquidation.
- § 1.355-2 Limitations.
- § 1.355-3 Active conduct of a trade or business.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.355-7 Recognition of gain on certain distributions of stock or securities in connection with an acquisition.
- § 1.355-8 Definition of predecessor and successor and limitations on gain recognition under section 355(e) and section 355(f).
- § 1.367(a)-1T Transfers to foreign corporations subject to section 367(a): In general (temporary).
- § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).
- § 1.367(a)-8 Gain recognition agreement requirements.
- § 1.367(b)-0 Table of contents.
- § 1.367(b)-2 Definitions and special rules.
- § 1.367(b)-4 Acquisition of foreign corporate stock or assets by a foreign corporation in certain nonrecognition transactions.
- § 1.368-1 Purpose and scope of exception of reorganization exchanges.
- § 1.368-2 Definition of terms.
- § 1.382-2 General rules for ownership change.
- § 1.382-2T Definition of ownership change under section 382, as amended by the Tax Reform Act of 1986 (temporary).
- § 1.382-3 Definitions and rules relating to a 5-percent shareholder.
- § 1.382-4 Constructive ownership of stock.
- § 1.382-9 Special rules under section 382 for corporations under the jurisdiction of a court in a title 11 or similar case.
- § 1.385-1 General provisions.
- § 1.385-3 Certain distributions of debt instruments and similar transactions.
- § 1.385-4 Treatment of consolidated groups.
- § 1.401(b)-1 Certain retroactive changes in plan.
- § 1.404(a)-10 Profit-sharing plan of an affiliated group; application of section 404(a)(3)(B).
- § 1.448-1T Limitation on the use of the cash receipts and disbursements method of accounting (temporary).
- § 1.475(a)-4 Valuation safe harbor.
- § 1.475(c)-1 Definitions—dealer in securities.
- § 1.482-7A Methods to determine taxable income in connection with a cost sharing arrangement.
- § 1.511-2 Organizations subject to tax.
- § 1.514(f)-1 Definition of business lease.
- § 1.584-1 Common trust funds.
- § 1.584-4 Admission and withdrawal of participants in the common trust fund.
- § 1.597-1 Definitions.
- § 1.597-5 Taxable Transfers.
- § 1.861-11 Special rules for allocating and apportioning interest expense of an affiliated group of corporations.
- § 1.861-11T Special rules for allocating and apportioning interest expense of an affiliated group of corporations (temporary).
- § 1.861-14 Special rules for allocating and apportioning certain expenses (other than interest expense) of an affiliated group of corporations.
- § 1.881-1 Manner of taxing foreign corporations.
- § 1.884-2T Special rules for termination or incorporation of a U.S. trade or business or liquidation or reorganization of a foreign corporation or its domestic subsidiary (temporary).
- § 1.884-5 Qualified resident.
- § 1.904-4 Separate application of section 904 with respect to certain categories of income.
- § 1.904-5 Look-through rules as applied to controlled foreign corporations and other entities.
- § 1.904(i)-1 Limitation on use of deconsolidation to avoid foreign tax credit limitations.
- § 1.905-5 Foreign tax redeterminations of foreign corporations that relate to taxable years of the foreign corporation beginning before January 1, 2018.
- § 1.907(c)-1 Definitions relating to FOGEI and FORI (for taxable years beginning after December 31, 1982).
- § 1.909-2 Splitter arrangements.
- § 1.909-6 Pre-2011 foreign tax credit splitting events.
- § 1.951A-2 Tested income and tested loss.
- § 1.954-3 Foreign base company sales income.
- § 1.965-4 Disregard of certain transactions.
- § 1.965-8 Affiliated groups (including consolidated groups).
- § 1.988-1 Certain definitions and special rules.
- § 1.989(a)-1 Definition of a qualified business unit.
- § 1.1297-1 Definition of passive foreign investment company.
- § 1.1297-2 Special rules regarding look-through subsidiaries and look-through partnerships.
- § 1.1362-2 Termination of election.
- § 1.1362-8 Dividends received from affiliated subsidiaries.
- § 1.1471-5 Definitions applicable to section 1471.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-14Z Application of opportunity zone rules to members of a consolidated group.
- § 1.1502-19 Excess loss accounts.
- § 1.1502-21 Net operating losses.
- § 1.1502-32 Investment adjustments.
- § 1.1502-33 Earnings and profits.
- § 1.1502-36 Unified loss rule.
- § 1.1502-47 Consolidated returns by life-nonlife groups.
- § 1.1502-68 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
- § 1.1502-80 Applicability of other provisions of law.
- § 1.1502-90 Table of contents.
- § 1.1502-91 Application of section 382 with respect to a consolidated group.
- § 1.1502-92 Ownership change of a loss group or a loss subgroup.
- § 1.1502-93 Consolidated section 382 limitation (or subgroup section 382 limitation).
- § 1.1502-95 Rules on ceasing to be a member of a consolidated group (or loss subgroup).
- § 1.1502-96 Miscellaneous rules.
- § 1.1502-100 Corporations exempt from tax.
- § 1.1503(d)-1 Definitions, special rules, and filings.
- § 1.1502-77B Agent for the group applicable for consolidated return years beginning on or after June 28, 2002, and before April 1, 2015.
- § 1.1563-1 Definition of controlled group of corporations and component members and related concepts.
- § 1.6038-1 Information returns required of domestic corporations with respect to annual accounting periods of certain foreign corporations beginning before January 1, 1963.
- § 1.6038B-1 Reporting of certain transfers to foreign corporations.
- § 1.6038B-1T Reporting of certain transactions to foreign corporations (temporary).
- § 1.7874-12 Definitions.
- § 1.9200-1 Deduction for motor carrier operating authority.
- § 48.4216(b)-1 Constructive sale price; scope and application.
- § 48.4216(b)-4 Constructive sale price; affiliated corporations.
- § 53.4943-10 Business enterprise; definition.
- § 53.4960-1 Scope and definitions.
- § 58.4501-1 Excise tax on stock repurchases.
- § 58.4501-5 Examples.
- § 301.6111-2 Confidential corporate tax shelters.
- § 301.6402-7 Claims for refund and applications for tentative carryback adjustments involving consolidated groups that include insolvent financial institutions.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (b)(4)
- Amended by Pub. L. 113–295Parts changed in 2014: (a)(3)(A)
- Amended by Pub. L. 104–188Parts changed in 1996: (b)(8) (c)(2)(B)(i)
- Amended by Pub. L. 101–508Parts changed in 1990: (c)(2)(B)(i)
- Amended by Pub. L. 100–647Parts changed in 1988: (b)(7) (f)
- Amended by Pub. L. 99–514Parts changed in 1986: (a)(4)(C) (b)(2) (b)(7) (c)(2)(A)
- Amended by Pub. L. 98–369Parts changed in 1984: (a) (b)(2)
- Amended by Pub. L. 96–222Parts changed in 1980: (a)
- Amended by Pub. L. 95–600Parts changed in 1978: (a)
- Amended by Pub. L. 94–455Parts changed in 1976: (a) (b)(4) (b)(5) (c)
- Amended by Pub. L. 92–178Parts changed in 1971: (b)(7)
- Amended by Pub. L. 91–172Parts changed in 1969: (e)
- Amended by Pub. L. 89–389Parts changed in 1966: (b)(7)
- Amended by Pub. L. 86–779Parts changed in 1960: (b)(6)
- Amended by Pub. L. 86–376Parts changed in 1959: (b)(2) (b)(8)
- Amended by Pub. L. 86–69
- Enacted by Pub. L. 85–866Parts changed in 1958: (b)(8)
Where it sits in the Code
Nearby sections
Official notes
The Law Revision Counsel's notes for this section (amendments, effective dates and related laws) are long, so they have their own page.