SERVICE PROVIDES SHORTCUT TO RECONSOLIDATION INSIDE A FIVE YEAR PERIOD.

Rev. Proc. 90-53

SECTION 1. PURPOSE

01 This revenue procedure grants certain taxpayers a waiver of the general rule of section 1504(a)(3)(A) of the Internal Revenue Code, which generally provides that a corporation that ceased to be a member of a consolidated group is prohibited from being included in a consolidated return of that group (or of another affiliated group with the same common parent) for five years after the corporation ceased to be a member of the group.

02 If a corporation qualifies to use this revenue procedure, then this revenue procedure is the exclusive procedure available for obtaining a waiver of the general rule of section 1504(a)(3)(A) of the Code.

SEC. 2. BACKGROUND

01 Section 60 of the Tax Reform Act of 1984, 1984-3 (Vol. 1) C.B. 1, 85, amended section 1504(a) of the Code by, among other things, adding section 1504(a)(3).

02 Section 1504(a)(3)(A) of the Code provides that (1) if a corporation is included (or required to be included) in a consolidated return filed by an affiliated group for a taxable year which includes any period after December 31, 1984, and (2) the corporation ceases to be a member of the affiliated group in a taxable year beginning after December 31, 1984, the corporation (and any successor of the 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 the common parent) before the 61st month beginning after its first taxable year in which it ceased to be a member of the affiliated group.

03 Section 1504(a)(3)(B) of the Code provides that the Secretary may waive the application of section 1504(a)(3)(A) to any corporation for any period subject to such conditions as the Secretary may prescribe.

SEC. 3. APPLICATION

In accordance with section 1504(a)(3)(B) of the Code, a wavier is hereby granted to any corporation described in section 4 of this revenue procedure that complies with the requirements set forth in sections 5 and 6 of this revenue procedure so that the corporation may join in the filing of a consolidated return with the affiliated group of which it is a member.

SEC. 4. SCOPE

01 This revenue procedure applies to any corporation (1) that was a member of a consolidated group, (2) that subsequently ceased to be a member of the group, and (3) that rejoined the SAME group before the 61st month beginning after its first taxable in which it ceased to be a member of the group. For purposes of this revenue procedure, the SAME group means a group that remains in existence within the meaning of section 1.1502-75(d) of the Income Tax Regulations.

02 This revenue procedure also applies to any corporation that was a member of a consolidated group (the old group) and that ceased to be a member of the old group solely as a result of a transaction in which

(1) A nonmember corporation acquired the assets of the common parent of the old group in a reorganization described in section 368(a)(1)(A), (C), or (D) of the Code (but only if the requirements of section 354(b)(1)(A) and (B) are met) and, immediately after the acquisition, the acquiring corporation is the common parent of another affiliated group (the new group) or

(2) a member of the old group acquired (a) the assets of a nonmember corporation in a reorganization described in section 368(a)(1)(A), (C), or (D) (but only if the requirements of section 354(b)(1)(A) and (B) are met) or (b) the stock of a nonmember corporation, and the acquisition was a reverse acquisition described in section 1.1502-75(d)(3) of the regulations in which the old group ceased to exist.

This section 4.02 only applies if all the members of the old group (other than the common parent if its assets are acquired) immediately before the acquisition are members of the new group immediately after the acquisition.

03 Section 1504(a)(3)(A) and this revenue procedure do not apply to any corporation (including the common parent) that was a member of a consolidated group (the old group) and that ceased to be a member of the old group solely because of the acquisition of

(1) the assets of the common parent of the old group by a member other than the common parent of another affiliated group (the new group) or

(2) the stock of the common parent of the old group.

Section 1504(a)(3)(A) does not apply to these situations because the common parent of the new group neither was the common parent of the old group nor is a successor of the common parent of the old group, and therefore a waiver is not required to join in the filing of a consolidated return of the new group. If the new group filed (or was required to file) a consolidated return for the taxable year immediately preceding the year of the acquisition, the new group is required to file a consolidated return for the year of acquisition that includes the members acquired from the old group, unless it has obtained consent to an election to discontinue filing consolidated returns under section 1.1502-75(c) of the regulations. In the case of a corporation described in both section 4.01 and this section 4.03, however, a waiver is necessary. For example, if a corporation (S) was a member of a consolidated group (Group P) and all the stock of S was purchased by the common parent (X) of another consolidated group (Group X), and subsequently, all the stock of X was purchased by P, a waiver is required in order for S to be permitted to join in the filing of a consolidated return with Group P.

04 A waiver will be granted pursuant to this revenue procedure only to a corporation which (pursuant to this revenue procedure) joins in the filing of a consolidated return beginning with the taxable year of the affiliated group in which the corporation rejoins (or, in the case of a transaction described in section 4.02, joins) the affiliated group.

SEC. 5. MANNER OF ACQUIRING A WAIVER UNDER SECTION 1504(a)(3)(B) OF THE CODE

01 The common parent of the affiliated group of which the corporation seeking the waiver is a member must attach a statement to the consolidated return of the group, filed under penalties of perjury, which includes all the information set forth in section 5.02. However, in the case of a corporation described solely in section 4.02 of this revenue procedure, the statement must include only the information set forth in section 5.02(1), (2), (3), (5), and (6).

02 The information required under section 5.01 of this revenue procedure is as follows:

(1) The following heading typed or legibly printed at the top of the statement: "WAIVER OF THE APPLICATION OF SECTION 1504(a)(3) FILED PURSUANT TO REV. PROC. 90-53";

(2) The name, address, and employer identification number of the corporation for which the waiver is requested;

(3) The year in which the consolidated group of which the corporation is now a member elected to file consolidated returns;

(4) The date on which the corporation ceased to be a member of the consolidated group;

(5) The date on which the corporation rejoined (or, in the case of a corporation described in section 4.02, joined) the affiliated group;

(6) A description of the manner by which the corporation ceased to be a member of the consolidated group and the manner by which the corporation joined the new group or rejoined the same group (redemption of stock, new issuance of stock, etc.). This statement should include the business purpose of the transactions that caused the disaffiliation and reaffiliation and whether the transactions were with a related party;

(7) The taxable income of the consolidated group for (a) the taxable year prior to the taxable year in which the corporation left the consolidated group, (b) the taxable year in which the corporation left the consolidated group, (c) all taxable years subsequent to the taxable year in which the corporation left the consolidated group but before the corporation left the consolidated group, and (d) the taxable year in which the corporation rejoined the consolidated group;

(8) The taxable income, or separate taxable income as defined in section 1.1502-12 of the regulations, as the case may be, of the corporation for all periods described in section 5.02(7);

(9) An analysis of the effect of the dissatisfaction and reconsideration on the consolidated group and the corporation for all periods described in section 5.02(7) on the following items:

(a) Taxable income;

(b) Deferred gains and losses;

(c) Excess loss accounts;

(d) Tax liability;

(e) Net operating loss carryovers;

(f) Capital loss carryovers; and

(g) Investment and foreign tax credits; and

(10) A representation that neither the consolidated group, the corporation, nor any other person will secure or has secured the benefit of a reduction in income, increase in loss, or any other deduction, credit, or allowance that it would not otherwise secure or have secured had the disaffiliation and reconsolidation not occurred, including, but not limited to, the use of a net operating loss or credit that would have otherwise expired.

SEC. 6. EFFECT OF WAIVER

01 A waiver under section 1504(a)(3)(B) of the Code granted pursuant to this revenue procedure is binding on the consolidated group upon the filing of the consolidated return which includes the statement required by section 5.01 and may not be revoked by the taxpayer. The waiver shall be binding for all subsequent taxable years after the granting of the waiver in which the corporation remains a member of the consolidated group, unless permission is granted under section 1.1502-75(c)(3) of the regulations for the entire group to cease filing a consolidated return.

02 Notwithstanding section 6.01 if it is determined that the information provided pursuant to this revenue procedure is incorrect, the Service may revoke the waiver granted pursuant to this revenue procedure at any time. The revocation will be effective beginning with the first taxable year for which the waiver was granted.

SEC. 7. TIME FOR FILING A REQUEST FOR WAIVER UNDER SECTION 1504(a)(3)(B) OF THE CODE

A request for waiver under section 1504(a)(3)(B) of the Code pursuant to this revenue procedure must be attached to the consolidated return of the affiliated group filed on or before the due date (including extensions of time) of the consolidated return.

SEC. 8. CORPORATIONS OUTSIDE THE SCOPE OF THE REVENUE PROCEDURE OR WHICH CANNOT SATISFY ITS REQUIREMENTS

If a corporation either is outside the scope of this revenue procedure or cannot satisfy its requirements, a waiver under section 1504(a)(3)(B) of the Code must be requested in a ruling request filed in accordance with Rev. Proc. 90-1, 1990-1 C.B. 356, by the common parent of the affiliated group of which the corporation is now a member on or before the due date (including extensions of time) of the consolidated return of the affiliated group for the tax year with respect to which the waiver is requested. The ruling request should include the information set forth in section 5.02 of this revenue procedure. See Rev. Proc. 90-17, 1990-1 C.B. 479, for information regarding user fees.

SEC. 9. EFFECTIVE DATE

This revenue procedure is effective for any group for which the due date (including extensions of time) of its consolidated return for the taxable year of the group in which the corporation rejoins (or, in the case of a transaction described in section 4.02, joins) the group is on or after October 15, 1990, the date of publication of this revenue procedure in the Internal Revenue Bulletin.

DRAFTING INFORMATION

The principal author of this revenue procedure is Kenneth E. Cohen of the Office of the Assistant Chief Counsel (Corporate). For further information regarding this revenue procedure contact Mr. Cohen on (202) 566-3422 (not a toll-free call).