Consent Plan and Apportionment Schedule for a Controlled Group

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Instructions for Schedule O (Form 1120)

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Instructions for Schedule O
(Form 1120)

Department of the Treasury
Internal Revenue Service

(Rev. December 2008)
Consent Plan and Apportionment Schedule for a Controlled Group
Section references are to the Internal
Revenue Code unless otherwise noted.

What’s New

• Line 3 has 2 additional check

boxes to address situations where an
apportionment plan is terminated and
the remaining members have either
adopted or have not adopted a new
apportionment plan.
• Line 4 has been simplified and now
only applies when there is no change
in the controlled group’s status with
respect to adopting, amending, or
terminating an apportionment plan.
• New line 6a allows the corporation
to elect to pay the highest rate of tax
to avoid underpayment penalties.
New line 6b allows members of the
controlled group to elect to apportion
the additional tax under section
11(b)(1) by using the FIFO method
rather than the proportionate method
(the default method).
• All members of a controlled group
are treated as one taxpayer for
purposes of applying the election
under section 168(k)(4). See Rev.
Proc. 2009-16, 2009-6 I.R.B. 449, for
guidance regarding allocating the
bonus depreciation amount among
the members of the controlled group
and reporting each member’s
proportionate share on Schedule O
(Form 1120).

General Instructions
Purpose of Schedule
A corporation that is a member of a
controlled group must use Schedule
O to report the apportionment of
taxable income, income tax, and
certain tax benefits between the
members of the controlled group. The
members of the controlled group that
are component members (defined on
page 2) will be subject to limitations
on the use of certain tax benefits for
their applicable tax year. See
Apportionment of Tax Benefit Items
on page 4.
Also use this schedule to indicate
that the member filing this return
consents to and represents that all

the other members of the controlled
group:
• Are adopting an apportionment
plan, effective for the current tax year;
• Are amending the current existing
apportionment plan;
• Are terminating the existing
apportionment plan and not adopting
a new plan;
• Are terminating the current
apportionment plan and adopting a
new plan;
• Have no apportionment plan in
effect and are not adopting an
apportionment plan; or
• Already have an apportionment
plan in effect.
Check the applicable box on page
1 of Schedule O.

Who Must File
A corporation must file Schedule O
with its income tax return, amended
return, or claim for refund for each tax
year that the corporation is a
component member of a controlled
group, even if no apportionment plan
is currently in effect. See Definitions
and Special Rules below.
If one or more of the component
members of a controlled group are
also members of a consolidated
group, then the common parent of
that consolidated group must file, as
part of its consolidated income tax
return, one Schedule O on behalf of
the members of that consolidated
group. No subsidiary of that
consolidated group should file a
Schedule O on its own behalf. The
Schedule O should contain the
required consolidated information for
all members of the consolidated
group. See Identifying Information on
page 6.
Exception. If all of the members of
a parent-subsidiary controlled group
that are required to file a U.S. tax
return join in filing the same
consolidated tax return, then the
parent of that group does not have to
file a Schedule O on behalf of the
group. In this case, Schedule J, line
1, of Form 1120 should not be
checked.
Cat. No. 48211V

Completing and Filing
Schedule O
The filing of a Schedule O by a
component member provides the
required information as to the status
of the group’s apportionment plan.
Such information must indicate, when
applicable, whether all the component
members of the controlled group are
adopting, amending, or terminating
an apportionment plan. If all such
members complete the required
written agreement setting forth the
terms of the adopted or amended
apportionment plan (or an agreement
to terminate a previously adopted
plan), then each member of that
group may rely on this agreement as
the basis for representing on its
Schedule O that the other component
members of the group have also
consented to adopting, amending, or
terminating the apportionment plan.
The agreement must be signed by a
person authorized to sign on behalf of
each component member of the
controlled group and retained. No
member should attach this agreement
(or a copy of it) to their Federal
income tax returns. Each member
must keep as part of its records either
the original or a copy of the signed
agreement. The agreement must
contain the group’s apportionment
methodology (for example,
percentages) for each tax benefit item
that is apportioned.

Definitions and Special
Rules
Types of Controlled Groups
Parent-subsidiary group. A
parent-subsidiary group is one or
more chains of corporations
connected through stock ownership
with a common parent corporation if:
• Stock possessing at least 80% of
the total combined voting power of all
classes of stock entitled to vote or at
least 80% of the total value of shares
of all classes of stock of each of the
corporations, except the common
parent corporation, is directly or

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indirectly owned by one or more of
the other corporations; and
• The common parent corporation
directly or indirectly owns stock
possessing at least 80% of the total
combined voting power of all classes
of stock entitled to vote or at least
80% of the total value of shares of all
classes of stock of at least one of the
other corporations, excluding, in
computing such voting power or
value, stock owned directly by such
other corporations.
For purposes of determining
whether a corporation is a member of
a parent-subsidiary controlled group
of corporations within the meaning of
section 1563(a)(1), stock owned by a
corporation means:
• Stock owned directly by the
corporation, and
• Stock constructively owned by that
corporation through an application of
section 1563(e)(1), (2), and (3).
Brother-sister group. A
brother-sister group generally is two
or more corporations where the same
five or fewer persons who are
individuals, estates, or trusts directly
or indirectly own stock possessing:
• At least 80% of the total combined
voting power of all classes of stock
entitled to vote or at least 80% of the
total value of shares of all classes of
the stock of each corporation (the
80% test), and
• More than 50% of the total
combined voting power of all classes
of stock entitled to vote or more than
50% of the total value of shares of all
classes of stock of each corporation,
taking into account the stock
ownership of each such person only
to the extent such stock ownership is
identical with respect to each such
corporation (the 50% test).
For purposes of allocating the
following, a brother-sister group is
defined using only the 50% test
above.
• The taxable income brackets.
• The additional tax.
• The alternative minimum tax (AMT)
exemption amount.
• The reduction of the AMT
exemption amount.
• The accumulated earnings credit.
For purposes of determining
whether a corporation is a member of
a brother-sister controlled group of
corporations within the meaning of
section 1563(a)(2), stock owned by a
person who is an individual, estate, or
trust includes:
• Stock owned directly by such
person, and

• Stock constructively owned through

an application of section 1563(e).
Combined group. A combined
controlled group is three or more
corporations each of which is a
member of either a parent-subsidiary
group or a brother-sister group, and
at least one of which is both the
common parent of a
parent-subsidiary group and also a
member of a brother-sister group.
Life insurance companies. Two or
more life insurance companies
subject to tax under section 801
which are members of any of the
three broad categories of controlled
groups of corporations:
parent-subsidiary, brother-sister, or
combined group will be treated as a
controlled group of corporations
separate from any other type of
controlled group to which these
corporations would, otherwise, qualify
if they were not life insurance
companies. The life insurance
companies that comprise a life
insurance controlled group do not
have to be in an affiliated ownership
relationship with each other.
However, this rule does not apply to
any life insurance company that is a
member (whether eligible or
ineligible) of a life-nonlife affiliated
group for which a section 1504(c)(2)
election is in effect. Instead, an
eligible life insurance company will be
treated as a member of a life-nonlife
consolidated group, and an ineligible
life insurance company will be treated
as a member of a life-nonlife
controlled group (deemed to
constitute a parent-subsidiary
controlled group).
See section 1563 and the related
regulations for additional details
regarding the definition of a controlled
group.

Component Member
A corporation qualifies as a
component member of a controlled
group of corporations, for a tax year,
if the corporation:
• Is not a member of the controlled
group on the applicable December 31
testing date (defined on page 3), but
is treated as an additional member
(defined below), or
• Is a member of the controlled
group on the applicable December 31
testing date and is not treated as an
excluded member (defined below).
In general, in determining if a
member of a controlled group is a
component member of that group, the
applicable tax year of that corporation
must be tested to determine if it was
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a member of the controlled group for
at least one-half of the number of
days in its tax year that precede the
applicable tax year. Also, in order to
determine the applicable tax year of
the member being tested, the group’s
testing date must be determined. See
Testing date and Testing period, on
page 3.
If a controlled group has an
apportionment plan in effect and
some of the members of that
controlled group join in filing a
consolidated return, then the
members of that consolidated group
are treated, together, as if they were
a single member of the controlled
group. If a controlled group does not
have an apportionment plan in effect,
and some of the members of that
group join in filing a consolidated
return, then each member of that
consolidated group will be treated as
a separate member of the controlled
group.
Additional member. A member of a
controlled group is treated as an
additional member if the corporation:
• Was a member of the controlled
group at any time during a calendar
year,
• Was not a member of the
controlled group on that testing date,
• Was a member of the controlled
group for at least one-half the number
of days of its testing period, and
• Is not an excluded member
(defined next).
Any member of a controlled group
that is treated as an additional
member is also treated as a
component member of that group.
Excluded member. A corporation is
treated as an excluded member of a
controlled group of corporations on
the December 31 testing date for its
tax year that includes that December
31 testing date, if the corporation is:
• A member of such group for less
than one-half the number of days in
its testing period,
• Exempt from tax under section
501(a) (except a corporation which is
subject to tax on its unrelated
business taxable income) for such
year,
• A foreign corporation not subject to
tax under section 882(a) for such tax
year,
• A life insurance company subject to
tax under section 801 other than
either a life insurance company which
is a member of a life insurance
controlled group or a life insurance
company which is a member
(whether eligible or ineligible) of a
life-nonlife affiliated group for which a

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Instructions for Schedule O (Form 1120)

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section 1504(c)(2) election is in
effect,
• Not a franchised corporation as
defined in section 1563(f)(4), or
• An S corporation, as defined in
section 1361.
Any member of a controlled group
that is treated as an excluded
member is not a component member,
but is a member of the group.
However, no tax benefit items should
be apportioned to an excluded
member and its taxable income is not
taken into account in determining the
additional tax liability under section
11(b)(1). If an excluded member of
the group owns a controlling interest
in a corporation that meets the entity
status requirements for being a
component member, that corporation
is a component member of the group.
Example. Domestic corporation P
owns all of the stock of domestic
corporation S. Domestic corporation
S owns all of the stock of foreign
corporation F. Foreign corporation F
owns all of the stock of domestic
corporation X. Corporations P, S, and
X are component members of a
controlled group.
Exception. A corporation that (1)
was included in a controlled group at
any time during its tax year, (2) was
not included in that controlled group
on the group’s December 31 testing
date, and (3) was not included in the
controlled group for at least one-half
the number of days of its testing
period, is not treated as a component
member, additional member, or
excluded member.
Example. For years prior to 2008
Corporation X has been a member of
controlled group XYZ. Corporations
X, Y, and Z do not file consolidated
tax returns. Corporation X is on a
calendar tax year. On February 29,
2008, Corporation X was sold to an
unrelated party that is not a member
in any consolidated group.
Corporation X remained in existence
throughout its entire 2008 calendar
year. For the period from January 1,
2008, through February 29, 2008,
Corporation X is a member of that
controlled group which includes
Corporations Y and Z and which has
a testing date of December 31, 2008.
However, Corporation X is not a
component member, additional
member, or excluded member of that
group for that testing period.
Corporations Y and Z therefore are
not required to include any
information about Corporation X in
their respective 2008 Schedule O’s,

filed with their 2008 income tax
returns.
Testing date. Each member of a
controlled group qualifies as a
component member of that group on
an applicable December 31 testing
date. That date determines the tax
year of each of the component
members that will be subject to the
specified tax benefit limitations. Each
member of the group uses the
December 31 testing date included
within that member’s tax year as its
testing date (whether such member is
on a calendar or a fiscal tax year).
However, if a component member of
a controlled group has a short tax
year that does not include a
December 31 date, then the last day
of that short tax year will be the
testing date for that member. See
Special allocation rules for a short tax
year later. Each member of a
controlled group will apply those
limitations to that tax year that is
governed by the applicable
December 31 testing date applied to
that group.
Testing period. The testing period
is the time period for determining
whether a particular member of a
controlled group qualifies either as a
component member, or as an
excluded member. The testing period
begins on the first day of that
member’s tax year and ends on the
day before its testing date, but for a
component member having a short
tax year not including a December 31
date, the last day of its short tax year
is deemed to function as the
December 31 testing date for that
member only. For a member on a full
fiscal tax year, the portion of its tax
year beginning on the December 31
testing date and ending on the last
day of its tax year is not taken into
account for determining its status
either as a component member or as
an excluded member. In determining
how many days comprise a member’s
testing period, the group takes into
account the day that the member is
sold or liquidated, but does not take
into account either the day that such
member is acquired or created, or the
member’s December 31 testing date.

Overlapping Groups
If a corporation is a component
member of more than one controlled
group of corporations with respect to
any tax year, that corporation will be
treated as a component member of
only one controlled group. The
determination as to the group of
which such corporation is a
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component member shall be made
under regulations prescribed by the
Secretary.

Excluded Stock
To be a member of a controlled
group, a corporation cannot be
connected through stock ownership
based on “excluded stock”. Excluded
stock includes:
• Nonvoting stock which is limited
and preferred as to dividends,
• Treasury stock, and
• Stock which is treated as excluded
stock under section 1563(c)(2)(A) for
a parent-subsidiary controlled group
or section 1563(c)(2)(B) for a
brother-sister controlled group.

Apportionment Plan
An apportionment plan is an
agreement between the component
members of a controlled group of
corporations for apportioning certain
corporate tax benefits among the
members of that group, such as the
apportioning of bracketed income
amounts entitled to different tax rates.
By contrast, a tax sharing agreement
is an agreement entered into between
members of an affiliated group of
corporations who have joined in the
filing of a consolidated tax return.
Such an agreement generally
provides that the members of the
affiliated group will compensate each
other for certain tax benefits incurred
by members separately and shared
by all members on the consolidated
tax return.
An apportionment plan becomes
effective for a controlled group when
it is adopted by all the component
members of that group for their tax
years which tax years are subject to
the same December 31 testing date.
Once the members of a controlled
group adopt an apportionment plan, it
remains in effect until it is amended
or terminated.
An apportionment plan is amended
when the same component members
(for example, when no component
members have left or joined the
group during their testing periods
governed by the applicable,
December 31 testing date) make any
different apportionment of the
specified tax benefit items among
themselves.
An apportionment plan is
terminated when each component
member (including an additional
member) of the controlled group
consents or is deemed to consent to
the termination of that plan. Each
such member is deemed to have

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consented to the termination of the
plan for a tax year if:
• The controlled group ceased to
remain in existence as of the testing
date of that tax year,
• A corporation that was a
component member of the group on
the testing date in the preceding tax
year is not a component member on
the testing date in the current tax
year, or
• A corporation that was not a
component member of the group on
the testing date in the preceding tax
year is a component member on the
testing date in the current tax year.
Exception. If the members of a
consolidated return group are treated
as if they are one component
member, then changes in the
members belonging to that
consolidated group (as long as that
consolidated group remains in
existence) will not terminate the
group’s apportionment plan.

Apportionment of Tax
Benefit Items
Apportionment plan in effect. If
the members of a controlled group
have an apportionment plan in effect,
they must apportion the specified,
tax-benefit items, such as the tax
bracket amounts, according to the
terms of that plan. The component
members of a group are not required
to apportion equally any tax benefit
item among each of them. Nor is any
component member required to adopt
the same percentage of
apportionment for each tax benefit
item. A group therefore may
apportion all, some or none, of
amount of any these tax benefit items
to a member. However, except for a
member with a short tax year that
does not include a December 31
testing date, the total amount of a tax
benefit item apportioned to all the
members of the group cannot be
more than the total amount of a tax
item that would be allowed to a
corporation that is not subject to the
limitations imposed on the members
of a controlled group. See Special
allocation rules for a short tax year
below.
No apportionment plan in effect. If
no apportionment plan is adopted or
in effect, the members of a controlled
group must divide the amount of any
tax benefit item equally among
themselves (without regard to
whether any members are also
members of a consolidated return
group). For example, the Controlled
Group ABCDE consists of

Corporations A, B, C, D, and E.
Corporations B, C, D, and E file a
consolidated return. However, since
the controlled group does not have an
apportionment plan in effect, each
member of the consolidated group is
treated as a separate member of the
controlled group. Therefore,
corporations A, B, C, D, and E are
required to allocate one-fifth of the
tax-bracketed income amounts
between them in the following
manner:
• $10,000 (one-fifth of $50,000) on
Part II, column (c),
• $5,000 (one-fifth of $25,000) on
Part II, column (d), and
• $1,985,000 (one-fifth of
$9,925,000) on Part II, column (e).
Special allocation rules for a short
tax year. Special apportionment
rules apply to certain tax benefit items
(for example, the tax bracket amount
and the accumulated earnings credit),
if a component member (including an
additional member) has a short tax
year that does not include a
December 31 date. A corporation’s
tax year will end before the last day
of its annual tax year and will have a
short tax year if:
• The corporation is sold to a
consolidated group, or
• The corporation is liquidated,
including a deemed liquidation
resulting from a section 338 election.
Example. Corporation X is a
member of the XYZ Controlled Group
and has a calendar tax year. On May
31, 2008, Corporation X is liquidated.
Corporation X has a short tax year
that begins on January 1, 2008, and
ends on May 31, 2008. Corporation X
therefore applies the special
allocation rule to the tax bracket
amount and the accumulated
earnings credit.
Note. This rule does not affect the
amount of the tax benefit items
apportioned to the other members
with regard to their tax years
governed by the applicable,
December 31 testing date. Also, a
member with a short tax year
determines additional tax liability
under section 11(b)(1) solely for its
own taxable income. The remaining
members will determine their
additional tax based on their own
combined taxable income.
In determining the amount of a tax
benefit item apportioned to a member
for its short tax year, a short year
member cannot use the
apportionment method, which is
described in the group’s current
apportionment plan. Rather, the
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short-year member must divide the
full amount of the tax benefit item by
the number of component members
in the controlled group as of the last
day of that member’s short tax year.
That amount is the amount of that tax
benefit item to be allocated to that
member (and only to that member).
The remaining members will, in
accordance with the terms of their
apportionment plan, apportion a full
amount of each specified tax benefit
item between those corporations who
are the component members of the
group as of the ensuing December 31
testing date.
See section 1561 and the related
regulations for additional details
regarding apportionment plans and a
listing of some of the tax benefit
items.
Exceptions. This special
apportionment rule does not apply if a
component member has a short tax
year that includes the December 31
testing date in its short tax year. For
example, Corporation Y is a fiscal
year taxpayer with a tax year ending
on September 30. On January 31,
2008, Corporation Y is liquidated.
Corporation Y’s tax year beginning on
October 1, 2007, and ending on
January 31, 2008, is not a short tax
year within the meaning of section
1561(b). Thus, the normal
apportionment rules apply.
This special allocation rule also
does not apply if a member of a
controlled group has a short tax year
and is a member of a consolidated
group. Instead, such corporation’s
income for the short tax year is
included in the consolidated return
filed by the consolidated group for
that corporation’s tax year.

Additional Tax Liability
Under Section 11(b)(1)
In order to determine a component
member’s liability for additional tax
(under section 11(b)(1)) all the
component members of a controlled
group, for their tax years that are
subject to the same December 31
testing date, must:
• Combine their taxable incomes
from such tax years,
• Determine the amount of the
additional tax imposed by section
11(b)(1) by applying the appropriate
tax rate (defined later in these
instructions)) to the amount of such
combined taxable income, and
• Apportion that amount among the
members by applying the
proportionate method (defined later in
these instructions), unless all of those

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members instead elect to apply the
FIFO method (defined later in these
instructions).
Combined taxable income. All the
component members of a controlled
group must combine their taxable
incomes for their tax years that are
subject to the same December 31
testing date. Each corporation that is
a component member (which
includes additional members) of a
controlled group must include its
income for its entire tax year (their tax
years that are subject to the same
December 31 testing date) in the
calculation of the combined taxable
income, even if it was not a member
of the group for each day of that tax
year.
If a component member incurs a
loss for the tax year, the member is
treated as having zero taxable
income for purposes of determining
the controlled group’s combined
taxable income. Since the additional
tax under section 11(b)(1) is
apportioned among those members
to which any portion of the tax
bracket amount is allocated,
generally, the members of the
controlled group would not benefit by
apportioning any part of the tax
bracket amount to a member with a
net loss. Therefore, if a member has
no portion of the tax bracket allocated
to it, such member’s loss would
likewise not be taken into account in
determining the group’s additional tax
liability.
Example. A controlled group
includes corporations XYZ. For the
2008 calendar tax year, Corporation
X has taxable income of $80,000,
Corporation Y has taxable income of
$70,000, and Corporation Z incurred
a loss of ($60,000). The combined
taxable income of the XYZ controlled
group is $150,000 ($80,000 +
$70,000). Thus, the XYZ group owes
additional tax liability. Corporation Z’s
loss is not taken into account in
determining the combined taxable
income of the controlled group.
Note. If a component member has
subsequent positive adjustments to
its taxable income (for example, the
result of an IRS audit), for a tax year
(the adjustment year), all the
members of the controlled group for
their tax years that share the same
testing date as that adjustment year,
must redetermine the amount of any
additional tax imposed by section
11(b)(1) and pay that additional
amount of tax owed. These
corporations have this responsibility
even if none of the corporations that

were component members of the
group in the adjustment year still
remain as component members of
the group.
Determining the amount of the
section 11(b)(1) additional tax.
After the members of a controlled
group have determined their
combined taxable income, those
members must determine if they owe
any additional tax liability imposed by
section 11(b)(1) in the following
manner.
• If that combined taxable income
exceeds $100,000 (but is not greater
than $335,000), the total amount of
the additional tax owed by such
members is the lesser amount of 5%
of such excess or $11,750 (the 5%
additional tax).
• If that combined taxable income
exceeds $335,000 (but is not greater
than $15,000,000), the total amount
of the additional tax owed by such
members for the 5% additional tax
will be reflected in its aggregate
income tax liability. No allocation is
necessary and no such allocation
needs to be reported in Part II of this
Schedule O.
• If that combined taxable income
exceeds $15,000,000 (but is not
greater than $18,333,333), the total
amount for that additional tax liability
is the lesser of 3% of such excess or
$100,000 (the 3% additional tax).
Thus, a controlled group with a
combined taxable income that
exceeds $15,000,000 will owe not
only the 3% additional tax, but also
the full amount of the 5% additional
tax, or $11,750. A controlled group
with a combined taxable income that
exceeds $18,333,333 will owe the full
amount of the additional tax, or
$111,750. That amount will be
reflected in the group’s aggregate
income tax liability and is not required
to be separately reported in Part III of
this schedule, because in such
instance the additional tax will not
require any apportionment among the
component members of the group.
Apportioning the additional tax
under section 11(b)(1). The
additional tax must be apportioned
among the component members in
the same manner as the applicable
tax bracket amount is apportioned.
The component members are
required to use the proportionate
method unless all component
members affirmatively elect to adopt
the FIFO method by checking the box
on line 6b. See Line 6. Elections
under section 1561 on page 7.
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The proportionate method.
Under the proportionate method, the
additional tax is allocated to each
component member to whom a tax
bracket amount was apportioned, in
the same proportion as the portion of
the tax benefit from that tax bracket
which was allocated bears to the total
tax benefit amount provided to all
members from the use of that tax
bracket. These tax benefits are
attributable to the tax savings that the
members of the group realized from
having tax bracket amounts taxed at
a lower rate instead of the higher tax
rates to which income of the group
would otherwise be subject to.
The steps for applying the
proportionate method are as follows:
Step 1. The regular tax (not
including the additional tax imposed
by section 11(b)(1)) owed by a
component member under a
particular tax bracket is divided by the
total tax owed by all component
members under that tax bracket.
The maximum amount of tax that a
corporation owes under the 15% tax
bracket is $7,500. The maximum
amount of tax that a corporation owes
under the 25% tax bracket is $6,250.
The maximum amount of tax that a
corporation owes under the 34% tax
bracket is $3,374,500.
Step 2. The percentage calculated
under Step 1 is multiplied by the total
tax-benefit amount received by all the
members of the group from their use
of this tax bracket. This computed
amount equals the portion of the
group’s tax-benefit amount received
by a particular member from using its
portion of this tax bracket.
Step 3. The amount determined
under Step 2 is divided by the total
tax-benefit amount, received by all
the component members of the group
from using all the tax brackets to
which any component member’s
income was subject.
Step 4. The percentage calculated
under Step 3 is multiplied by the
amount of the group’s additional tax.
The amount determined under this
Step 4 equals the amount of the
additional tax apportioned to such
member for that tax bracket.
Step 5. If a component member is
liable for regular tax (not including the
additional tax imposed by section
11(b)(1)) under more than one tax
bracket, that member must calculate
the amount of additional tax with
respect to each tax bracket to be
apportioned to that member.

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Accordingly, steps 1 through 4
must be applied for each tax bracket
applicable to that member. The sum
of all the amounts of additional tax
apportioned to a member from each
tax bracket, to which that member is
subject, is the total amount of the
additional tax apportioned to that
member.
The FIFO method. Under a
first-in-first-out (FIFO) method for
allocating the additional tax among
the component members of the
controlled group, the first dollars of
additional tax (imposed by section
11(b)(1)) owed by the members of a
controlled group are to be allocated
proportionately to those members
availing themselves of the lowest tax
bracket (the first tax bracket), up to
the amount of the tax benefit received
by those members from having
availed themselves of that tax bracket
amount. Any remaining amount of
unallocated additional tax is then
allocated proportionately among the
component members who avail
themselves of the next higher tax
bracket, and so on, until the entire
amount of the additional tax has been
fully apportioned among the
component members. For example,
the first $9,500 of additional tax
liability of a controlled group is
apportioned entirely to the component
members that availed themselves of
the benefit of the 15% tax bracket.

Allocation of AMT Exemption
Amount and the Reduction
of the AMT Exemption
Amount
In determining the alternative
minimum tax (AMT) liability of a
corporation, the amount of alternative
minimum taxable income to which the
AMT rate is applied is reduced by
$40,000 (the exemption amount). For
a controlled group of corporations,
the exemption amount must be
apportioned among the component
members of the group. That amount
must be divided equally among the
component members for those tax
years, which are subject to the same
December 31 testing date, except
where all the members have adopted
an apportionment plan providing for
an unequal apportionment of the
exemption amount. If so, the
component members of the group will
apportion the exemption amount
according to the terms of that
apportionment plan.
The $40,000 exemption amount
shall be reduced, but not below zero,

as the amount of alternative minimum
taxable income increases. For a
controlled group of corporations, to
compute the amount of this reduction
to the AMT exemption amount, the
AMT incomes of all component
members must be combined in order
to compute the amount of that
reduction. This AMT exemption
amount completely phases out when
a controlled group’s combined AMT
income is at least $310,000. This
reduction to the AMT exemption will
effectively be allocated to each of the
component members to which the
AMT exemption amount was
apportioned and will effectively be
apportioned to the component
members in the same manner as is
the exemption amount.
Report the AMT exemption amount
and the phaseout of the AMT
exemption amount in Part IV,
columns (c) and (d), respectively.
Note. A component member with a
short tax year is not subject to the
AMT exemption amount allocation
rules. However, the member is still
required to determine its AMTI and
AMT exemption amount on an
annualized basis. See section 443(d).
For purposes of the December 31
testing date, the remaining
component members of the group
will, in accordance with the terms of
their apportionment plan, apportion or
allocate equal parts of the full amount
of the AMT exemption amount among
those corporations that qualify as the
component members of the group.
Only the combined taxable income of
the remaining members will be used
for determining any limitation by the
group in its use of the exemption
amount.

Specific Instructions
Identifying Information
On page 1, enter the name and
employer identification number (EIN)
of the component member filing this
Schedule O.
In Part II, column (a), line 1, enter
the name and EIN. In column (b),
enter the ending date of the tax year
(Yr-Mo) of the member filing this
Schedule O. In Parts III and IV,
column (a), line 1, enter only the
name of the member filing this
Schedule O. For Parts II, III, and IV,
enter the corresponding information
for each of the other members of the
controlled group in column (a) on
lines 2 through 10, in the same
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manner as the member filing this
Schedule O. If more space is needed,
attach additional sheets. If several
component members are also
members of a single consolidated
group, then with respect to those
members provide only the information
of the common parent of the
consolidated group in Parts II, III, and
IV, column (a).
If one or more component
TIP members are also members
of a consolidated group, the
parent of such consolidated group
may file only one form Schedule O on
behalf of all such members. Such
form must contain the required
information for each such member.
See Temporary Regulations section
1.1561-3T(a)(2).

Part I. Apportionment
Plan Information
Line 1. Type of controlled group.
A member of a controlled group must
check the applicable box to indicate
the type of group. For more
information, see Types of Controlled
Groups on page 1.
For a brother-sister controlled
group, check box 1b whether that
group is a brother-sister group for
purposes of applying only the 50%
test, or for purposes of applying both
the 80% and 50% test.
Line 2. Member status. If a
corporation was a member of the
group for less than it’s entire taxable
year, check box 2b and provide the
required information. If the taxable
year of this corporation does not
include a December 31 date, a
special apportionment rule applies.
See Special allocation rules for a
short tax year on page 4.
Line 3.Consent and represent. If
all the members consent to adopt an
apportionment plan, check box 3a. By
checking box 3a, this corporation is
consenting to the adoption of an
apportionment plan and is also
representing that the other members
of the group are also consenting to
the adoption of that plan. See
Completing and Filing Schedule O on
page 1.
If all the members consent to
amend an apportionment plan, check
box 3b. By checking box 3b this
corporation is consenting to the
amendment of an apportionment plan
and is also representing that the other
members of the group are consenting
to the amendment of that plan.

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However, to amend a plan both of the
following conditions must be satisfied.
• The controlled group already has
an apportionment plan in effect, and
• There has been no change in the
component-member composition of
the group from the previous taxable
year.
If the component members of a
group are either adopting a new
apportionment plan or amending an
existing apportionment plan that
involves prior tax years of those
component members, at least one
year must remain on each of the
statutes of limitations for assessing a
tax deficiency against any of the
component members of the group a
for such prior tax years. See the
instructions for line 5 below.
If all the members consent to
terminate (or are deemed to have
consented to the termination of) an
apportionment plan:
• Check box 3c, if the remaining
members choose not to adopt (or are
not able to adopt) a new
apportionment plan, or
• Check box 3d, if the remaining
members choose to adopt a new
apportionment plan.
With regard to box 3c, the
remaining members will not be able
to adopt a new apportionment plan if,
for example, such component
members have left the group.
Example. Corporations X, Y, and
Z are members of a controlled group
and each has a calendar tax year. On
August 31, 2008, X is sold to an
unrelated party. Even though X will
not be a member of the group on its
December 31, 2008, testing date, it is
treated as an additional member of
the group on that date. Consequently,
for 2008 the XYZ controlled group
must apportion the tax benefit items
according to the terms of its
apportionment plan. Therefore, X, Y,
and Z would each check box 3c on its
2008 Schedule O.
If box 3c or 3d is checked,
complete Parts II, III, and IV under
the following circumstances.
• If a corporation who is joining or
leaving the group still qualifies as a
component member (including as an
additional member) for its tax year,
complete Parts II, III, and IV
according to the terms of any
applicable apportionment plan, or
• If a corporation who is joining or
leaving the group will not qualify as a
component member (including as an
additional member) for its tax year
then, following the corporation’s

name in column (a), enter the
notation “(E)” for excluded member.
In Part II, column (b), enter the
ending date of the tax year (Yr-Mo)
and enter “0” in the remaining
columns, as are applicable. The
remaining component members of
the group will apportion the various
tax items according to terms of any
newly adopted apportionment plan, in
the event a new apportionment plan
is adopted by those remaining
members.
Note. Do not check more than one
box on line 3. If a corporation does
not adopt an apportionment plan,
amend a previous apportionment
plan, or terminate an existing
apportionment plan, skip line 3 and
go to line 4.
Line 4. Status of apportionment
plan. Check the applicable box to
indicate the status of any
apportionment plan of the controlled
group.
• Check box 4a, if the controlled
group does not have an
apportionment plan in effect and is
not adopting one.
• Check box 4b, if the controlled
group already has an apportionment
plan in effect and is not amending or
terminating this plan.
If box 4a is checked and no
apportionment plan is in effect and no
plan is adopted, then the component
members must share all tax benefits
equally and tax benefit information is
to be reported in Parts II, III and IV.
Line 5. Statute of limitations. An
apportionment plan may not be
adopted or amended for a tax year of
a component member unless there is
at least one year remaining in the
statutory period (including any
extensions) for assessing a
deficiency against the corporation for
that tax year, but only where the tax
liability for such tax year of that
corporation would be increased by
adopting such plan.
If there is less than one year
remaining in the statutory period, the
corporation must have entered into
an agreement with the IRS extending
the statutory period for the limited
purpose of assessing any deficiency
against that corporation for a tax year
affected by the adoption or the
amendment of an apportionment
plan. See Temporary Regulations
section 1.1561-3T(c)(2).
Line 6. Elections under section
1561. The component members of a
controlled group must determine their
additional tax liability as imposed by
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section 11(b)(1), for their tax years
that are subject to the same
December 31 testing date by
combining their taxable incomes for
such tax years and then apportioning
the additional tax among such
component members in the same
manner that the tax brackets were so
allocated. See Additional Tax Liability
Under Section 11(b)(1) on page 4.
If a corporation does not know the
combined taxable income of the
members of its group (for example,
because the members are on
substantially different tax years), it
can avoid underpayment of tax by
applying the maximum tax rate of
35% to the entire amount of its
taxable income. If the corporation
later determines its tax liability is less,
it may file a claim for refund of
overpayment.
A corporation choosing to compute
its tax liability by applying the
maximum 35% rate to the entire
amount of its taxable income should
check box 6a. Further, a corporation
checking box 6a does not have to
provide taxable income or tax
apportionment information with
respect to the other members of the
group. Instead, only provide the
identifying information (for example,
name, EIN, and ending date of the
tax year), for these other members.
Enter zero in the other columns for
these members.
The controlled group may elect to
apportion their additional tax liability
under the FIFO method, rather than
the proportionate method. To make
this election, each member of the
group must check box 6b. See The
FIFO method on page 6 and The
proportionate method on page 5.
If the members do not check box
6b, they will be required to apportion
their additional tax liability using the
proportionate method of allocation.

Part II. Taxable Income
Apportionment
Enter each member’s share of the
taxable income used from each tax
bracket, as is applicable. The
component members of a controlled
group, collectively, are entitled to one
$50,000, one $25,000 and one
$9,925,000 taxable income bracket
amount (in that order) for columns (c),
(d), and (e).
Column (c). Enter the lesser of the
corporation’s taxable income (as
shown on Form 1120, page 1, line 30,
or on the comparable line of the

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corporation’s income tax return) or
the corporation’s computed share of
the $50,000 bracket.
Column (d). Enter the lesser of the
corporation’s taxable income (as
shown on Form 1120, page 1, line 30,
or on the comparable line of the
corporation’s income tax return)
minus the amount entered for this
corporation in column (c), or the
corporation’s computed share of the
$25,000 bracket.
Column (e). Enter the lesser of the
corporation’s taxable income (as
shown on Form 1120, page 1, line 30,
or on the comparable line of the
corporation’s income tax return)
minus the amounts entered for this
corporation in columns (c) and (d), or
the corporation’s computed share of
the $9,925,000 bracket.
Column (f). Enter taxable income
(Form 1120, page 1, line 30, or the
comparable line of the corporation’s
income tax return) minus the amounts
entered for this corporation in
columns (c) through (e).
Column (g). Enter the total
allocated taxable income amounts of
each component member (add
columns (c) through (f)). Each total in
Part II, column (g), for each
component member must equal Form
1120, page 1, line 30, or the
comparable line of such component
member’s income tax return.
Note. If a corporation has a loss,
enter zero in columns (c) through (g).

Part III. Income Tax
Apportionment
Column (b). Multiply the taxable
income amount in Part II, column (c)
by 15% (0.15) and enter the result
here.
Column (c). Multiply the taxable
income amount in Part II, column (d)
by 25% (0.25) and enter the result
here.
Column (d). Multiply the taxable
income amount in Part II, column (e)
by 34% (0.34) and enter the result
here.
Column (e). Multiply the taxable
income amount in Part II, column (f)
by 35% (0.35) and enter the result
here.

Column (f) and (g). A corporation’s
share of any additional tax liability
under section 11(b)(1) is determined
as explained in Determining the
amount of the section 11(b)(1)
additional tax,on page 5.
Column (h). Enter here the total
apportioned income tax for each
component member. Combine all the
amounts of apportioned tax of each
member, as shown in columns (b)
through (g).

Part IV. Other
Apportionments
Brother-sister controlled group.
For purposes of apportioning the
amounts included in columns (b)
through (d), determine the members
of a brother-sister controlled group,
using only the 50% test as provided
in section 1563(a)(2). For purposes of
apportioning the amounts included in
columns (e) and (f), determine the
members of a brother-sister
controlled group using both the 50%
and 80% tests as provided in section
1563(f)(5). See Brother-sister group
on page 2.
Column (a). If a corporation
qualifies as a member of a
brother-sister controlled group, solely
because it satisfies just the 50%
ownership affiliation test, insert the
notation “(50)” after that corporation’s
name. If a corporation is a component
member of that group because it
satisfies both the 50% and 80%
ownership affiliation tests, then insert
the notation “(80)” after that
corporation’s name.
Column (b). The component
members of a controlled group may
allocate the $250,000 accumulated
earnings credit unequally if they
adopt an apportionment plan or have
an apportionment plan in effect.
Note. If any component member of
a controlled group is the type of
service corporation described in
section 535(c)(2)(B), the amount to
be apportioned among the
component members is $150,000
(rather than $250,000).
Column (c). The component
members of a controlled group may

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allocate the $40,000 AMT exemption
amount unequally if they adopt an
apportionment plan or have an
apportionment plan in effect.
Column (d). The component
members of a controlled group must
apportion the reduction to the AMT
exemption amount to the same
corporations, and in the same
proportions, as the AMT exemption
amount was apportioned in Column
(c). If the combined AMTI of the
members of the group is at least
$310,000, the corporation is not
required to complete columns (c) and
(d) of Part IV, since the exemption
amount phases out at $310,000. See
Allocation of AMT Exemption Amount
and the Reduction of the AMT
Exemption Amount on page 6.
Column (e). For purposes of
determining whether the component
members of a controlled group are
subject to penalty for failure to pay
the correct amount of estimated tax
under section 6655(g), those
component members of a controlled
group must combine their taxable
incomes for their tax years that were
subject to the same December 31
testing date. If that amount is at least
$1 million for any tax year during the
testing period (as defined in section
6655(g)(2)(B)(i)), those members
must then divide that $1 million
amount equally unless they have an
apportionment plan in effect.
Column (f). Enter each component
member’s share of any other tax
benefit items not included in columns
(b) through (e). Provide the applicable
Internal Revenue Code section
followed by the amount apportioned
to that member.
Note. Do not include on Schedule O
an apportionment among the
component members of any
deduction for certain depreciable
property for which a section 179
expense election has been made.
Report this apportionment as required
under section 179. See Regulations
section 1.179-2(b)(7).