# Prop. Treas. Reg. § 1.1502-56A: Corporate alternative minimum tax. Proposed regulation, not in force. REG-112129-23, 89 FR 75062, published 2024-09-13 . Interprets 26 U.S.C. § 1502. Par. 16. Section 1.1502-56A is added to read as follows. (a) Overview —(1) Scope. This section provides rules for applying the corporate alternative minimum tax (CAMT) under sections 55, 56A, and 59(k) and (l) of the Internal Revenue Code (Code) to tax consolidated groups. Paragraph (b) of this section provides definitions that apply for purposes of this section. Paragraph (c) of this section provides rules for calculating the FSI of a tax consolidated group. Paragraph (d) of this section provides rules regarding the disposition of stock of a tax consolidated group member by another member. Paragraph (e) of this section provides rules regarding tax items relating to intercompany transactions (as defined in § 1.1502-13(b)(1)(i)). Paragraph (f) of this section provides rules regarding the use of financial statement net operating loss (FSNOL) carryovers. Paragraph (g) of this section provides a cross-reference to § 1.56A-23 for rules regarding the use of attributes from separate return years. Paragraph (h) of this section provides rules regarding the use of CFC adjustment carryovers. Paragraph (i) of this section provides rules regarding the use of consolidated unused CFC taxes. Paragraph (j) of this section provides rules regarding the allocation of the tentative minimum tax under section 55(b)(2)(A). Paragraph (k) of this section provides rules regarding the allocation of adjusted financial statement income (AFSI) when a corporation ceases to be a member of a tax consolidated group. Paragraph (l) of this section provides the applicability date of this section. (2) General rule. Except as otherwise provided in this section, for purposes of determining the AFSI of the tax consolidated group, the tentative minimum tax under section 55(b)(2)(A), and status as an applicable corporation under section 59(k), members of a tax consolidated group are treated as a single CAMT entity solely during the period in which those members are members of that tax consolidated group. (b) Definitions. The following definitions apply for purposes of this section: (1) AFS. The term AFS has the meaning given the term applicable financial statement (AFS) in § 1.56A-2(b). For special rules regarding the AFS of a tax consolidated group, see §§ 1.56A-1(c)(2)(i) and 1.56A-2(g). (2) AFSI. The term AFSI has the meaning given the term adjusted statement financial income (AFSI) in § 1.56A-1(b)(1). (3) CAMT entity. The term CAMT entity has the meaning given the term in § 1.56A-1(b)(8). (4) CFC adjustment carryover. The term CFC adjustment carryover has the meaning given the term in § 1.56A-6(b). (5) Chapter 1; Code —(i) Chapter 1. The term chapter 1 means chapter 1 of subtitle A of the Code. (ii) Code. The term Code means the Internal Revenue Code. (6) Consolidated FSNOL. The term consolidated FSNOL means the portion of an FSNOL that is attributable to a tax consolidated group, as determined under paragraph (f) of this section. (7) FSI. The term FSI has the meaning given the term financial statement income (FSI) in § 1.56A-1(b)(20). (8) FSNOL. The term FSNOL has the meaning given the term financial statement net operating loss (FSNOL) in § 1.56A-23(b). (9) Section 56A regulations. The term section 56A regulations means §§ 1.56A-1 through 1.56A-27 and this section. (10) Tax consolidated group. The term tax consolidated group has the meaning given the term consolidated group in § 1.1502-1(h). (11) Tax consolidated group AFS. The term tax consolidated group AFS means the AFS of a tax consolidated group and all its members, as determined under §§ 1.56A-1(c)(2)(i) and 1.56A-2(g). A tax consolidated group AFS may include one or more CAMT entities that are not members of the tax consolidated group. (c) Calculation of FSI of a tax consolidated group. A tax consolidated group determines the group's FSI for a taxable year based on the tax consolidated group AFS in the following manner: (1) AFS comprising solely tax consolidated group members. If the financial statement group (including tax consolidated group members described in § 1.56A-1(c)(2)(i)) for which the tax consolidated group AFS for a taxable year is prepared includes only members of the tax consolidated group, the FSI of the tax consolidated group for the taxable year equals the consolidated FSI reflected on that AFS. See § 1.56A-1(c). (2) AFS comprising members and non-members. If the financial statement group (including tax consolidated group members described in § 1.56A-1(c)(2)(i)) for which the tax consolidated group AFS for a taxable year is prepared includes one or more CAMT entities that are not members of the tax consolidated group, the tax consolidated group's FSI for the taxable year is determined from that AFS under § 1.56A-1(c)(3) by treating all members of the tax consolidated group as a single CAMT entity. Accordingly, for example, the FSI of the tax consolidated group is determined by: (i) Disregarding each AFS consolidation entry regarding— (A) A transaction between a member and a non-member; (B) A member's investment in a non-member; and (C) A non-member's investment in a member. (ii) Taking into account each AFS consolidation entry regarding— (A) A transaction between members; and (B) A member's investment in another member. (3) Operating rules regarding AFS consolidation entries. For purposes of determining the AFSI of a tax consolidated group for a taxable year: (i) Conditions for taking into account AFS consolidation entries. The tax consolidated group takes into account each AFS consolidation entry that eliminates the effect of a transaction between or among members of the group, provided that— (A) Each member that was a party to the transaction, that continued to exist after the transaction, and that had effects from that transaction (or the member's successor in a section 381(a) transaction) continues to be a member of that tax consolidated group at the end of the group's taxable year; and (B) All property that is the subject of the transaction continues to be held by the tax consolidated group at the end of the group's taxable year. (ii) Conditions for disregarding AFS consolidation entries and applying section 56A regulations. Except as provided in paragraph (c)(3)(ii)(C) of this section, to the extent that any requirement in paragraph (c)(3)(i) of this section is not satisfied at any time during the taxable year of the tax consolidated group, then on the earliest date on which that requirement is not satisfied certain AFS consolidation entries described in paragraph (c)(2)(i) of this section cease to be taken into account as provided in paragraphs (c)(3)(ii)(A) through (D) of this section, immediately before the earliest date that any requirement of paragraph (c)(3)(i) of this section is not satisfied. (A) Property ceases to be held by group. If one or more pieces of property that were the subject of the transaction cease to be held by the tax consolidated group during the group's taxable year, any AFS consolidation entry described in paragraph (c)(2)(i) of this section that pertains to that property ceases to be taken into account immediately before that earliest date. (B) Party to the transaction ceases to be a member of group. If a party to the transaction (or a successor to that member in a section 381(a) transaction) ceases to be a member of the tax consolidated group during the group's taxable year, then all AFS consolidation entries with regard to that party cease to be taken into account immediately before that earliest date. (C) Whole-group exception. Paragraphs (c)(3)(ii)(A) and (B) of this section do not apply to the extent that § 1.1502-13(j)(5) applies to an acquisition of the tax consolidated group. Therefore, AFS consolidation entries continue to be taken into account. (D) Determination of CAMT consequences based on section 56A regulations. If an AFS consolidation entry of a tax consolidated group ceases to be taken into account under paragraph (c)(3)(ii)(A) through (C) of this section, the CAMT consequences of the transaction(s) to which to that AFS consolidation entry pertains are determined by applying the section 56A regulations. See generally § 1.56A-1. (iii) Example. The rules of this paragraph (c)(3) are illustrated by the following example. (A) Facts. P is the common parent of a tax consolidated group that uses the calendar year as its taxable year, of which S1, S2, and S3 are members (P group). S2 owns all of the stock of S3. On February 1, 2023, S3 merges into S1 in a transaction that qualifies as a reorganization under section 368(a)(1)(A) of the Code (Merger). In the Merger, S2 receives both S1 voting stock and cash. On December 31, 2024, P sells S1 to X, a corporation unrelated to P or any member of P's tax consolidated group. (B) Analysis. The Merger is a covered nonrecognition transaction. At the end of the P group's 2023 taxable year, S1 remains a member of the group, and no property transferred in the Merger has left the P group. As a result, under paragraph (c)(3)(i) of this section, any AFS consolidating entries related to the Merger continue to be given effect and the section 56A regulations do not apply to the Merger. At the end of the P group's 2024 taxable year, S1 is no longer a member of the P group. As a result, under paragraph (c)(3)(ii)(B) of this section, all AFS consolidating entries relating to the Merger cease to be taken into account immediately before S1 ceases to be a member of the P group, and, under paragraph (c)(3)(ii)(D) of this section, the CAMT consequences of the Merger are determined under the section 56A regulations. See generally § 1.56A-19(c) (providing the CAMT consequences of acquisitive reorganizations). (4) Captive partnership. Treating a tax consolidated group as a single CAMT entity for purposes of this section does not change the Federal tax classification of an entity classified as a partnership owned solely by members of the group. (5) Examples. The following examples illustrate the application of the rules in this paragraph (c). For purposes of these examples: each of P, S, B, and Z is a domestic corporation that uses the calendar year as its taxable year and has only one class of stock outstanding, and S and B are the sole subsidiary members of the P tax consolidated group (P Group). (i) Example 1: Tax consolidated group AFS that includes corporations other than tax consolidated group members —(A) Facts. P owns 60 percent of the stock of Z. The remaining stock of Z is held by unrelated persons. The financial results of corporations P, B, S, and Z are reported on a tax consolidated group AFS (PBSZ Consolidated AFS) for all relevant financial reporting periods. P, B, S, and Z are the only taxpayers whose financial results are reported on the PBSZ Consolidated AFS. Under § 1.56A-2(g), the PBSZ Consolidated AFS is the AFS of P, B, S, and Z. In 2024, B sells Asset N to S for $10x. Books and records used to prepare the PBSZ Consolidated AFS, including trial balances, show that B has gain of $2x ($10x−$8x) on the sale of Asset N. The $2x of gain is eliminated from consolidated FSI through AFS consolidation entries made in preparing the PBSZ Consolidated AFS. In 2025, S sells Asset N to Z for $13x. Books and records used to prepare the PBSZ Consolidated AFS, including trial balances, show that S has gain of $3x ($13x−$10x) on the sale of Asset N. The gain is eliminated from consolidated FSI through AFS consolidation entries made in preparing the PBSZ Consolidated AFS. (B) Analysis: In general. The PBSZ Consolidated AFS includes items of Z, an entity that is not a member of the P Group. Therefore, the FSI of the P Group is determined under paragraph (c)(2) of this section. Under paragraph (c)(2) of this section, the P Group's FSI is determined from the PBSZ Consolidated AFS by treating the P Group as a single CAMT entity. Accordingly, AFS consolidation entries eliminating transactions between Z and a member of the P Group (that is, P, S, or B) are disregarded in determining the FSI of the P Group, (that is, such consolidation entries are reversed) but AFS consolidation entries eliminating transactions between P, S, and B are taken into account. (C) Analysis: 2024. In 2024, because the AFS consolidation entries eliminate a transaction between S and B (that is, a transaction between members of the P Group), those consolidation entries are taken into account. See paragraph (c)(2)(ii)(A) of this section. Therefore, B's $2x gain on the sale of Asset N to S is not included in the P Group's FSI in 2024. (D) Analysis: 2025. In 2025, because the AFS consolidation entries eliminate a transaction between S (a member of the P Group) and Z (a CAMT entity that is not a member of the P Group), these AFS consolidation entries are disregarded (that is, these consolidation entries are reversed). In addition, because Asset N leaves the P Group in 2025, immediately before the sale of Asset N to Z, the consolidating entries between S and B are disregarded with regard to their transaction with regard to Asset N. See paragraph (c)(3) of this section. Therefore, the P Group's FSI in 2025 includes $5x of gain on the sale of Asset N—$2x of gain to B, and $3x of gain to S. (ii) Example 2: Tax consolidated group AFS that includes solely tax consolidated group members; buying member leaves the group —(A) Facts. The financial results of the members of the P Group are reported on the tax consolidated group AFS of the P Group (P Group AFS) for all relevant financial reporting periods. P, S, and B are the only entities whose financial results are reported on the P Group AFS. Under § 1.56A-2(g), the P Group AFS is the AFS of P, S, and B. Z is unrelated to the P Group. In 2024, S sells Asset N to B for $10x. Books and records used to prepare the P Group AFS, including trial balances, show that S has gain of $2x on the sale of Asset N. The gain is eliminated from consolidated FSI through AFS consolidation entries made in preparing the P Group AFS. In 2025, P sells all the stock of B to Z, and B joins the Z consolidated AFS. At the time of the sale of its stock, B continues to hold Asset N, which has a value of $13x. (B) Analysis: In general. The P Group AFS includes items solely of members of the P Group. Therefore, the FSI of the P Group is determined under paragraph (c)(1) of this section to be the FSI reflected on the group's AFS for the taxable year. Under paragraph (a)(2) of this section, P, S, and B are treated as a single CAMT entity for purposes of computing the P Group's AFSI and liability for the tentative minimum tax under section 55(b)(2)(A). (C) Analysis: 2024. In 2024, because the AFS consolidation entries eliminate a transaction between S and B (that is, a transaction between members of the P Group), those consolidation entries are taken into account. Therefore, S's $2x of gain on the sale of Asset N is not included in the P Group's FSI in 2024. (D) Analysis: 2025. In 2025, upon P's sale of all of the B stock to Z, B ceases to be a member of the P Group, and B's FSI ceases to be reflected in the P Group AFS. Because B ceases to be a member of the P Group, the AFS consolidation entries eliminating the sale of Asset N from S to B are disregarded (that is, these consolidation entries are reversed). See paragraph (c)(3) of this section. As a result, immediately before the sale of the B stock, S takes into account its $2x of gain on its sale of Asset N to B. B carries Asset N into the Z consolidated AFS with a basis of $10x, reflecting the reversal of the consolidating entries on the sale of Asset N. Compare § 1.56A-18(c)(3) (disregarding purchase accounting and push down accounting adjustments to AFS basis in assets resulting from stock acquisitions). (iii) Example 3: Tax consolidated group AFS that includes solely tax consolidated group members; selling member leaves the group. The facts are the same as in paragraph (c)(5)(ii)(A) of this section ( Example 2 ), except that, in 2025, P sells all the stock of S (rather than B) to Z. Consistent with the results described in paragraph (c)(5)(ii)(D) of this section, immediately before S leaves the P group, the consolidating entries relating to the sale of Asset N from S to B are disregarded (that is, the consolidating entries are reversed). Therefore, S's $2x of gain is taken into account in determining the FSI of the P Group for 2025. B's CAMT basis in Asset N equals $10x. (d) Gain or loss on disposition of member stock by another member —(1) In general. Notwithstanding paragraph (a)(2) of this section, the AFSI of a tax consolidated group for a taxable year includes gain or loss from one member's sale or exchange of stock of another member, as determined under this paragraph (d). For rules regarding the timing of the inclusion of the gain or loss, see paragraph (c) of this section. (2) Computation of gain or loss. A tax consolidated group computes AFSI resulting from the sale or exchange of stock of one member by another member by— (i) Applying the rules that otherwise apply to the sale or exchange under the section 56A regulations; and (ii) Using the CAMT basis (as determined under paragraph (d)(3) of this section). (3) CAMT basis of member stock —(i) Stock held by group members on the first day of the first taxable year beginning after December 31, 2019. The CAMT basis in a share of stock of a subsidiary member held by another member of a tax consolidated group (shareholder member) equals the sum of: (A) The regular tax basis of the subsidiary member stock in the hands of the shareholder member on the first day of the shareholder member's first taxable year beginning after December 31, 2019 ( see § 1.56A-18(c)(6)); (B) Any adjustments described in § 1.56A-18(c)(2); and (C) Any adjustments described in paragraph (d)(3)(iii) of this section. (ii) Stock acquired by group members after the first day of the first taxable year beginning after December 31, 2019. The CAMT basis in a share of stock of a subsidiary member acquired by a shareholder member from a taxpayer that is not a member of the same tax consolidated group equals the sum of: (A) The CAMT basis of the subsidiary member stock immediately after the acquisition of that stock; (B) Any adjustments described in § 1.56A-18(c)(2); and (C) Any adjustments described in paragraph (d)(3)(iii) of this section. (iii) Adjustment to basis during consolidation —(A) In general. CAMT stock basis is adjusted under this paragraph (d)(3)(iii) to take into account adjustments to the AFS basis of the member stock for the period during which the member was a member of a tax consolidated group (including adjustments to reflect all other adjustments to FSI in determining AFSI under the section 56A regulations). (B) Negative basis adjustments. For purposes of this paragraph (d)(3)(iii), the CAMT basis of stock includes negative adjustments for expenses or losses of a member only to the extent that those items are absorbed by a member of the tax consolidated group under the section 56A regulations. (e) Tax items relating to intercompany transactions —(1) In general. Certain AFSI adjustments under the section 56A regulations disregard items reflected in a CAMT entity's FSI and replace those items with items that are taken into account for regular tax purposes (regular tax items) (for example, under §§ 1.56A-15 and 1.56A-16). This paragraph (e) applies if the regular tax item relates to an intercompany transaction, in order to ensure that the regular tax item reflects the treatment of members of a tax consolidated group as divisions of a single corporation (single entity treatment) within the meaning of § 1.1502-13(a)(2). See also paragraph (a)(2) of this section. (2) Disregarding impact of intercompany transaction. Except as provided in paragraph (e)(3) of this section, any increase or decrease in the amount of a regular tax item described in paragraph (e)(1) of this section that results from an intercompany transaction is disregarded for purposes of inclusion of the item in AFSI. (3) Acceleration of impact of intercompany transaction. This paragraph (e)(3) applies if, pursuant to paragraph (c)(3)(ii) of this section, AFS consolidation entries related to an item described in paragraph (e)(1) of this section become disregarded. Under this paragraph (e)(3), immediately before the AFS consolidation entries become disregarded, AFSI of the tax consolidated group is increased or decreased by the regular tax items that previously were disregarded under paragraph (e)(2) of this section. (4) Examples. The following examples illustrate the application of the rules in this paragraph (e). For purposes of these examples, S and B are members of the P consolidated group (P Group), which uses the calendar year as its taxable year. (i) Example 1: Intercompany sale —(A) Facts. On January 1, 2024, S buys section 168 property (as defined in § 1.56A-15(b)(6)) for $100x (Asset A) and depreciates it using the straight-line method and a 10-year recovery period for regular tax purposes. For AFS purposes, S depreciates Asset A over 20 years using the straight-line method. On January 1, 2026, S sells Asset A to B for $130x and S recognizes a $40x net gain for AFS purposes ($130x consideration-$90x AFS basis ($100x cost-$10x accumulated book depreciation)). However, the P Group's AFS includes AFS consolidating entries that eliminate the effect of the sale of Asset A to B. For regular tax purposes, under section 168(i)(7) of the Code, B is treated as S to the extent B's $130x basis does not exceed S's adjusted basis at the time of the sale. Accordingly, B takes a $80x carryover basis (S's $100x cost-S's $20x accumulated tax depreciation) in Asset A and continues to depreciate the $80x basis using S's depreciation methods. B has additional basis of $50x in Asset A ($130x consideration-$80x section 168(i)(7) basis) which B treats as new 10-year recovery section 168 property and depreciates using the straight-line method. (To simplify the example, the half-year convention is disregarded by both S and B for AFS and regular tax purposes, and any depreciation on Asset A is not subject to capitalization under any other Code provision.) (B) Analysis. Under § 1.56A-15(d)(1)(iii), covered book depreciation expense (as defined in § 1.56A-15(b)(3)) taken into account in FSI by S or B with respect to Asset A is disregarded in computing AFSI and replaced with deductible tax depreciation (as defined in § 1.56A-15(b)(5)). In each of 2024 and 2025, the P Group's AFSI therefore reflects S's $10x of deductible tax depreciation from Asset A ($100x cost/10 years). In 2026, for regular tax purposes, B takes into account $15x of deductible tax depreciation from Asset A ($10x under section 168(i)(7) + $5x (($130x-$80x)/10 years) relating to B's additional depreciable basis in Asset A). However, pursuant to paragraph (e)(2) of this section, the P Group's AFSI disregards the $5x increase resulting from the intercompany transaction between S and B. Thus, the P Group's AFSI in 2026 reflects only $10x of deductible tax depreciation from Asset A. Pursuant to paragraph (c)(2)(i) of this section, the P Group's AFSI for 2026 takes into account the AFS consolidation entries that eliminate the effect of the sale of Asset A to B and, pursuant to § 1.56A-15(e)(7), the P Group does not adjust AFSI for 2026 for S's AFSI adjustment determined under § 1.56A-15(e)(1) of $10x (S's redetermined gain or loss from the sale of Asset A on January 1, 2026 of $50x ($130x consideration-$80x CAMT basis ($90x AFS basis + $10x covered book depreciation expense-$20x deductible tax depreciation) minus the $40x net gain included in S's FSI prior to elimination). Accordingly, the P Group's AFSI in 2026 does not reflect any gain from the intercompany sale. (ii) Example 2: Sale of property to a non-member —(A) Facts. The facts are the same as in paragraph (e)(4)(i)(A) of this section ( Example 1 ), except that, on January 1, 2028, B sells Asset A to non-member X for $110x. As of January 1, 2028, B's accumulated book depreciation for Asset A is $13x (computed using a recovery period of 20 years and the straight-line method), and B has an AFS basis in Asset A of $117x ($130x consideration-$13x accumulated book depreciation). B's net loss included in FSI from the sale of Asset A to non-member X is $7x ($110x consideration-$117x AFS basis). For regular tax purposes, as of January 1, 2028, B's accumulated deductible tax depreciation for Asset A is $30x ($20x under section 168(i)(7) + $10x from B's additional depreciable basis in Asset A). (B) Analysis. Under paragraph (c)(3)(ii) of this section, immediately before Asset A leaves the P Group, the AFS consolidating entries relating to the intercompany sale of Asset A on January 1, 2026, become disregarded for purposes of computing the P Group's AFSI for 2028. Therefore, S takes into account its $40x net gain in FSI for 2028 and B takes into account its increased $40x of basis in Asset A for AFS purposes from that intercompany sale immediately before Asset A leaves the P Group. Due to the $40x net gain being included in FSI for 2028, pursuant to § 1.56A-15(e)(7), S redetermines its gain taken into account in FSI for 2028, and the P Group adjusts AFSI for 2028 for the difference between the net gain included in FSI and the redetermined gain or loss (computed as of January 1, 2026) under § 1.56A-15(e). Accordingly, the P Group's AFSI adjustment under § 1.56A-15(e) for 2028 is a positive adjustment of $10x, which equals S's $50x redetermined gain ($130x consideration−$80x CAMT basis ($90x AFS basis + $10x covered book depreciation expense−$20x deductible tax depreciation)) minus the $40x net gain in FSI. Additionally, under paragraph (e)(3) of this section, immediately before Asset A leaves the P Group, B takes into account in AFSI for 2028 the $10x of deductible tax depreciation that was disregarded in 2026 and 2027 under paragraph (e)(2) of this section ($5x + $5x). Under § 1.56A-15(e)(1) and (7), the P Group also adjusts AFSI for 2028 by a positive adjustment of $17x, which equals B's redetermined gain of $10x ($110x consideration−$100x CAMT basis ($117x AFS basis + $13x accumulated covered book depreciation expense−$30x deductible tax depreciation)) minus the $7x net loss in FSI. (iii) Example 3: Buying member leaves the group —(A) Facts. The facts are the same as in paragraph (e)(4)(ii)(A) of this section ( Example 2 ), except that, instead of selling Asset A, on January 1, 2028, all the stock of B is sold to non-member X, causing B to leave the P Group. (B) Analysis. Under paragraph (c)(3)(ii) of this section, immediately before B leaves the P Group, the AFS consolidating entries relating to the intercompany sale of Asset A become disregarded for purposes of computing the P Group's AFSI. Therefore, S takes into account its $40x net gain attributable to the sale of Asset A on January 1, 2026 in FSI for 2028 and B takes into account its increased $40x of basis in Asset A for AFS purposes from that intercompany sale immediately before B leaves the P Group. Due to the $40x net gain included in FSI for 2028, pursuant to § 1.56A-15(e)(7), S redetermines its gain taken into account in FSI with respect to Asset A, and the P Group adjusts AFSI for the difference between the net gain in FSI and the redetermined gain or loss (computed as of January 1, 2026) under § 1.56A-15(e). Accordingly, the P Group's AFSI adjustment under § 1.56A-15(e) for 2028 is a positive adjustment of $10x, which equals S's $50x redetermined gain ($130x consideration−$80x CAMT basis ($90x AFS basis + $10x covered book depreciation expense−$20x deductible tax depreciation)) minus the $40x net gain in FSI. Additionally, under paragraph (e)(3) of this section, immediately before B leaves the P Group, B takes into account in AFSI for 2028 the $10x of deductible tax depreciation that was disregarded in 2026 and 2027 under paragraph (e)(2) of this section ($5x + $5x). (f) Use of FSNOL carryovers —(1) Amount of consolidated AFSI reduced. Subject to the limitations under § 1.56A-23 and this paragraph (f), the amount of consolidated FSNOL carryovers of a tax consolidated group that can be used to reduce the AFSI of the group for any consolidated return year is the aggregate of the group's consolidated FSNOL carryovers to that year. (2) Composition of consolidated FSNOL carryovers. The consolidated FSNOL carryovers described in paragraph (f)(1) of this section consist of— (i) Any consolidated FSNOL of the tax consolidated group; and (ii) Any FSNOLs of the members of the group arising in the respective separate return years (as defined in § 1.1502-1(e)) of those members (to the extent available for use under § 1.56A-23 and this section). (3) Application of 80-percent limitation —(i) Group application. With regard to a consolidated return year of a tax consolidated group, the 80-percent limitation under section 56A(d)(1) applies to the consolidated AFSI of the group for that year. (ii) Group limitation. The amount of FSNOL that a tax consolidated group can use to reduce the AFSI of the group for a consolidated return year equals the lesser of— (A) The aggregate amount of FSNOLs carried to that consolidated return year; or (B) The amount determined by multiplying 80 percent by the consolidated AFSI for the group for that year, computed without regard to the FSNOL deduction allowable under section 56A(d). (4) General ordering rules for use of FSNOLs —(i) Taxable year in which FSNOL arose. Except as provided in paragraph (f)(4)(ii) of this section, FSNOLs permitted to be used by a tax consolidated group to reduce the AFSI of the group in its consolidated return year are used to reduce the group's AFSI in the order of the taxable years in which the FSNOLs arose. (ii) FSNOLs carried from same taxable year. Except as otherwise provided in paragraph (f)(5) of this section, FSNOLs carried from taxable years ending on the same date, and that are available to reduce the AFSI of the tax consolidated group for the consolidated return year, are used to reduce the group's AFSI on a pro rata basis. (iii) Apportionment of consolidated FSNOL. Except as otherwise provided in paragraph (f)(5) of this section, the amount of any consolidated FSNOL absorbed by a tax consolidated group in any year is apportioned among members based on the percentage of the FSNOL eligible for carryover that is attributable to each member and is available for absorption. The percentage of the consolidated FSNOL attributable to a member is determined pursuant to paragraph (f)(5)(iv) of this section. (iv) Certain adjustments to CAMT basis of member stock. For rules regarding adjustments to the CAMT basis of member stock resulting from the absorption of loss, see paragraph (d)(3)(ii) of this section. (5) Carryovers of FSNOLs to separate return years —(i) In general. If any consolidated FSNOL that is attributable to a member may be carried to a separate return year of the member, the amount of the FSNOL that is attributable to the member is apportioned to the member and carried to the separate return year. If carried over to a separate return year of the member, the apportioned loss may not be carried over to an equivalent, or later, consolidated return year of the group. (ii) Special rules —(A) Year of departure from group. If a corporation ceases to be a member of a group during a consolidated return year of the group, consolidated FSNOL carryovers attributable to the corporation are first carried to the consolidated return year. Only the amount of consolidated FSNOL carryover that is not absorbed by the group in that year may be carried to the corporation's first separate return year. (B) Equivalent years. Taxable years are equivalent if they bear the same numerical relationship to the consolidated return year in which a consolidated FSNOL arises, counting forward or backward from the year in which the FSNOL arose. (C) Short years in connection with transactions to which section 381(a) of the Code applies. If a member distributes or transfers assets to a corporation that is a member immediately after the distribution or transfer in a transaction to which section 381(a) applies, the transaction does not cause the distributor or transferor to have a short year within the consolidated return year of the group in which the transaction occurred that is counted as a separate year for purposes of determining the years to which a consolidated FSNOL may be carried. (iii) Amount of FSNOL attributable to a member. The amount of a consolidated FSNOL of a tax consolidated group that is attributable to a member equals the product obtained by multiplying the consolidated FSNOL and the percentage of the FSNOL attributable to the member. (iv) Percentage of FSNOL attributable to a member —(A) In general. Except as provided in paragraph (f)(5)(iv)(C) of this section, the percentage of the consolidated FSNOL for the consolidated return year attributable to a member equals the separate FSNOL of the member for the consolidated return year divided by the sum of the separate FSNOLs for that year of all members having FSNOLs for that year. (B) Separate FSNOL. For purposes of paragraph (f)(5)(iv)(A) of this section, the separate FSNOL of a member is determined by computing the FSNOL by reference to only the member's items of income, expense, gain, and loss, including the member's losses and expenses actually absorbed by the group in the consolidated return year (whether or not absorbed by the member). (C) Recomputed percentage. If, for any reason, a member's portion of a consolidated FSNOL is absorbed or reduced on a non-pro rata basis, the percentage of the consolidated FSNOL attributable to each member is recomputed as provided in paragraph (f)(5)(iv)(D) of this section. In addition, if a member with a separate FSNOL ceases to be a member, or if a member that ceases to be a member is allocated and apportioned FSNOL of the group under this paragraph (f)(5), the percentage of the consolidated FSNOL attributable to each remaining member is recomputed. For purposes of this paragraph (f)(5)(iv), an FSNOL that is permanently disallowed, eliminated, or reduced under § 1.56A-21(c)(5) and (6) is treated as absorbed. (D) Recomputation. The recomputed percentage of the consolidated FSNOL attributable to each member equals the remaining FSNOL attributable to the member at the time of the recomputation divided by the sum of the remaining FSNOL attributable to all of the remaining members at the time of the recomputation. (6) Example. The following example illustrates the application of the rules in this paragraph (f). (i) Facts. P, M1, M2, and M3 are members of the P tax consolidated group (P Group), which uses the calendar year as its taxable year. P, M1, M2, and M3 report their financial results on a tax consolidated group AFS. In 2026, the P Group generates an FSNOL of $55x, computed by the P Group as a single CAMT entity. See paragraph (a)(2) of this section. In that year, P has a separate FSNOL of $40x, M1 has separate AFSI of $10x, M2 has a separate FSNOL of $20x, and M3 has a separate FSNOL of $5x. On December 31, 2026, M2 ceases to be a member of the P group, but M2's FSI continues to be reported on P's consolidated AFS. (ii) Analysis: Allocation and apportionment of FSNOL. Under paragraph (f)(5) of this section, a portion of the P Group's $55x FSNOL is apportioned to M2 because M2 ceases to be a member of the P Group. Specifically, $16.9x of FSNOL is apportioned to M2 (($20x/($20x + $40x + $5x)) × $55x) = $16.9x). See paragraphs (f)(5)(iii) and (f)(5)(iv)(A) and (B) of this section. The remaining $38.1x of FSNOL remains with the P Group. (iii) Analysis: Year of departure from group. Under paragraph (f)(5)(iv)(C) of this section, the percentages of the remaining FSNOL attributable to P and to M3 are recomputed when M2 ceases to be a member of the P Group. The recomputed percentage attributable to P is 89% ($40x/($40x + $5x) = 89%), and the recomputed percentage attributable to M3 is 11% ($5x/($40x + $5x) = 11%). The result would be the same if M2's FSI had ceased to be reported on P's consolidated AFS in 2027. (g) Limitation on the use of attributes from separate return years. For the use of FSNOLs, built-in losses, and other attributes generated in separate return years, see § 1.56A-23(e) through (g) and paragraphs (h) and (i) of this section. (h) Use of CFC adjustment carryovers of a tax consolidated group —(1) Amount of consolidated § 1.56A-6(b)(1) adjustment reduced. Subject to the limitations under § 1.56A-6 and this paragraph (h), the amount of CFC adjustment carryovers of a tax consolidated group that can be used to reduce the group's adjustment to AFSI under § 1.56A-6(b)(1) is the aggregate of the group's consolidated CFC adjustment carryovers to that year. (2) Composition of consolidated CFC adjustment carryovers. The consolidated CFC adjustment carryovers described in paragraph (h)(1) of this section consist of— (i) Any consolidated CFC adjustment carryovers of the tax consolidated group; and (ii) Any CFC adjustment carryovers of the members of the group arising in the respective separate return years (as defined in § 1.1502-1(e)) of those members to the extent available for use under § 1.56A-6 and this section. (3) Limitation on use of CFC adjustment carryovers. In any consolidated return year, the aggregate amount of CFC adjustment carryovers from all separate return years of a member of a tax consolidated group that can be used to reduce the group's adjustment to AFSI under § 1.56A-6(b)(1) cannot exceed the adjustment to AFSI under § 1.56A-6(b)(1) generated by the member. (4) General ordering rules for use of CFC adjustment carryovers —(i) Taxable year in which CFC adjustment carryover arose. Except as provided in paragraph (h)(4)(ii) of this section, CFC adjustment carryovers permitted to be used by a tax consolidated group to reduce the group's adjustment to AFSI under § 1.56A-6(b)(1) in its consolidated return year are used in the order of the taxable years in which the CFC adjustment carryovers arose. (ii) CFC adjustment carryovers carried from same taxable year. Except as otherwise provided in paragraph (h)(5) of this section, CFC adjustment carryovers carried from taxable years ending on the same date, and that are available to reduce the tax consolidated group's adjustment to AFSI under § 1.56A-6(b)(1) for the consolidated return year, are used to reduce the group's adjustment to AFSI under § 1.56A-6(b)(1) on a pro rata basis. (iii) Apportionment of consolidated CFC adjustment carryovers. Except as otherwise provided in paragraph (h)(5) of this section, the amount of any consolidated CFC adjustment carryover absorbed by a tax consolidated group in any year is apportioned among members based on the percentage of the consolidated CFC adjustment carryover that is attributable to each member as of the beginning of the year. The percentage of the consolidated CFC adjustment carryover attributable to a member is determined applying the principles of paragraph (f)(5)(iv) of this section. (5) Carryover of CFC adjustment carryovers to separate return years. If any consolidated CFC adjustment carryover that is attributable to a member may be carried to a separate return year of the member, the amount of the CFC adjustment carryover that is attributable to the member is apportioned to the member and carried to the separate return year of the member, and the amount of the CFC adjustment carryover attributable to each remaining member is recomputed applying the principles of paragraph (f)(5) of this section. (6) Example. The following example illustrates the application of the rules in this paragraph (h). (i) Facts —(A) General. P, M1, M2 and M3 are members of the P consolidated group (P group), which uses the calendar year as its taxable year. Each of P, M1, M2 and M3 is a United States shareholder of controlled foreign corporations. Prior to 2025, the P group had not generated a CFC adjustment carryover for any taxable year. (B) 2025 taxable year. In 2025, the P group generates a CFC adjustment carryover of $60x, computed by the P group as a single corporation. In that year, P's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$10x, M1's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$20x, M2's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$10x, and M3's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$20x. (C) 2026 taxable year. In 2026, the P group generates a CFC adjustment carryover of $40x, computed by the P group as a single corporation. In that year, P's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is $10x, M1's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$10x, M2's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$20x, and M3's pro rata share of the adjusted net income or loss of the controlled foreign corporations of which it was a United States shareholder is −$20x. On December 31, 2026, M2 ceases to be a member of the P group. (ii) Analysis —(A) Allocation and apportionment of 2025 CFC adjustment carryover. Under the principles of paragraph (f)(5) of this section, a portion of the P group's CFC adjustment carryover from 2025 ($60x) is apportioned to M2 because M2 ceases to be a member of the P group. Specifically, $10x of the CFC adjustment carryover from 2025 is apportioned to M2 (($10x/($10x + $20x + $10x + $20x) × $60x) = $10x). The remaining $50x of the CFC adjustment carryover from 2025 remains with the P group. The percentages of the remaining CFC adjustment carryover from 2025 attributable to P, M1 and M3 are recomputed when M2 ceases to be a member of the P group. The recomputed percentage attributable to P is 20% ($10x/($10x + $20x + $20x) = 20%), the recomputed percentage attributable to M1 is 40% ($20x/($10x + $20x + $20x) = 40%), and the recomputed percentage attributable to M3 is 40% ($20x/($10x + $20x + $20x) = 40%). (B) Allocation and apportionment of 2026 CFC adjustment carryover. Under the principles of paragraph (f)(5) of this section, a portion of the P group's CFC adjustment carryover from 2026 ($40x) is apportioned to M2 because M2 ceases to be a member of the P group. Specifically, $16x of the CFC adjustment carryover from 2026 is apportioned to M2 (($20x/($10x + $20x + $20x) × $40x) = $16x). The remaining $24x of the CFC adjustment carryover from 2026 remains with the P group. The percentages of the remaining CFC adjustment carryover from 2026 attributable to M1 and M3 are recomputed when M2 ceases to be a member of the P group. The recomputed percentage attributable to M1 is 33.3% ($10x/($10x + $20x) = 33.3%), and the recomputed percentage attributable to M3 is 66.7% ($20x/($10x + $20x) = 66.7%). (i) Use of consolidated unused CFC taxes —(1) Determination of consolidated tentative minimum tax. Subject to the limitations under § 1.59-4 and this paragraph (i), the amount of consolidated unused CFC taxes that can be used to determine the consolidated tentative minimum tax under section 55(b)(2)(A) of the group for any consolidated return year is the aggregate of the group's consolidated unused CFC taxes for that year. (2) Composition of consolidated unused CFC taxes. The consolidated unused CFC taxes described in paragraph (i)(1) of this section consist of— (i) Any unused CFC taxes of the tax consolidated group to the extent available for use under § 1.59-4(e); and (ii) Any unused CFC taxes of members of the group arising in the respective separate return years (as defined in § 1.1502-1(e)) of those members (or predecessors of those members within the meaning of § 1.1502-1(f)(4)) to the extent available for use under § 1.59-4(e). (3) Limitation on use of unused CFC taxes. In any consolidated return year, the aggregate amount of unused CFC taxes from all separate return years of a member (or predecessor of the member within the meaning of § 1.1502-1(f)(4)) of a tax consolidated group that can be used cannot exceed the excess (if any) of— (i) The product of the § 1.56A-6(b)(1) adjustment generated by the member and the percentage specified in section 55(b)(2)(A)(i) for the consolidated return year; over (ii) The aggregate of the member's pro rata shares of taxes of controlled foreign corporations with regard to which it is a United States shareholder, as determined under § 1.59-4(d), for the consolidated return year. (4) Amount of unused CFC taxes that can be used in a consolidated return year —(i) In general. For purposes of § 1.59-4(e), and except as provided in paragraph (i)(4)(ii) of this section, the amount of unused CFC taxes that can be used in any consolidated return year is determined by applying all unused CFC taxes that may be carried to the consolidated return year in the order of the taxable years (whether a consolidated return year or a separate return year) in which those unused CFC taxes arose, beginning with the taxable year that ends earliest. (ii) Unused CFC taxes carried from same taxable year. Except as otherwise provided in paragraph (i)(5) of this section, unused CFC taxes carried from taxable years ending on the same date, and that are available to determine the consolidated tentative minimum tax of the group for the consolidated return year, are used to determine the group's consolidated tentative minimum tax on a pro rata basis. (5) Carryover of consolidated unused CFC taxes to separate return years —(i) Unused CFC taxes attributable to a departing member. If a corporation ceases to be a member of a tax consolidated group during a consolidated return year, the consolidated unused CFC taxes that are attributable to the departing member consist of— (A) All unused CFC taxes of the departing member arising in all separate return years of the departing member that have not been absorbed by the tax consolidated group; and (B) The portion of the consolidated unused CFC taxes for each consolidated return year of which the departing member was a member of the group that have not been absorbed by the group multiplied by a fraction, the numerator of which is the amount of CFC taxes described in § 1.59-4(c)(1)(i) of the member for the year, and the denominator of which is the amount of CFC taxes described in § 1.59-4(c)(1)(i) of the group for the year. (ii) Year of departure from group. If a corporation ceases to be a member of a tax consolidated group during a consolidated return year of the group, consolidated unused CFC taxes attributable to the corporation are first carried to the consolidated return year. (iii) Carryover to first separate return year. The amount of consolidated unused CFC taxes attributable to the corporation that is not absorbed by the group in the year of departure from the group is carried to the corporation's first separate return year and is not carried to any consolidated return year of the group. (iv) Short years in connection with transactions to which section 381(a) of the Code applies. If a member distributes or transfers assets to a corporation that is a member immediately after the distribution or transfer in a transaction to which section 381(a) applies, the transaction does not cause the distributor or transferor to have a short year within the consolidated return year of the group in which the transaction occurred that is counted as a separate year for purposes of determining the years to which a consolidated unused CFC tax may be carried. (v) Example. The following example illustrates the application of the rules in this paragraph (i)(5). (A) Facts. P, S, and T are members of the P tax consolidated group (P Group), which uses the calendar year as its taxable year. P, S, and T report their financial results on a tax consolidated group AFS. For 2024, the P Group has $1000x of CFC taxes described in § 1.59-4(c)(1)(i), of which $200x are attributable to T. After determining its consolidated tentative minimum tax under section 55(b)(2)(A) for 2024, P Group has $300x of unused CFC taxes for the year. P Group has no unused CFC taxes for any other taxable year. On December 31, 2024, T is acquired by an unrelated party and ceases to be a member of the P Group. (B) Analysis. Under paragraph (i)(5)(i) of this section, $60x of the P Group's 2024 unused CFC taxes are attributable to T ($300x × ($200x/$1000x)). Under paragraph (i)(5)(iii) of this section, the $60x of unused CFC taxes attributable to T is carried to T's first separate return year and is not carried to any consolidated return year of the P Group. (j) CAMT liability —(1) Allocation. Liability for the tentative minimum tax under section 55(b)(2)(A) for a consolidated return year is apportioned among members of the tax consolidated group based on the percentage of AFSI that is attributable to each member for the year, as determined under paragraph (j)(2) of this section. (2) Percentage of AFSI attributable to a member. The percentage of AFSI for the consolidated return year attributable to a member equals the separate positive AFSI of the member for the consolidated return year divided by the sum of the AFSI for that year of all members having separate positive AFSI for that year. For this purpose, the separate AFSI of a member is determined by computing AFSI by reference to only the member's items of income, expense, gain, and loss. (3) Example. The following example illustrates the application of the rules in paragraphs (j)(1) and (2) of this section. (i) Facts. P, S, and T are members of the P tax consolidated group (P Group), which uses the calendar year as its taxable year. P, S, and T report their financial results on a tax consolidated group AFS. For 2024, if AFSI were computed by reference to only each member's items of income, expense, gain, and loss, P would have separate AFSI of $1,000x, S would have a separate FSNOL of $100x, and T would have separate AFSI of $200x. The P Group has no regular tax liability, no liability for tax on base erosion payments under section 59A of the Code, and no CAMT foreign tax credit for 2024. Thus, the P Group's AFSI for 2024 is $1,100x, and the P Group's liability for the tentative minimum tax under section 55(b)(2)(A) is $165x ($1,100x × 15% = $165x). (ii) Analysis. Under paragraphs (j)(1) and (2) of this section, $137.5x of the P Group's 2024 liability for the tentative minimum tax under section 55(b)(2)(A) is apportioned to P (($1,000x/($1,000x + $200x)) × $165x = $137.5x), and $27.5x is apportioned to T (($200x/($200x + $1,000x)) × $165x) = $27.5x). (4) Cross-reference. See § 1.1502-53 for rules regarding the allocation of any consolidated MTC attributable to a separate return year of a member. (k) Allocation of AFSI when members leave the group —(1) Treatment of departing member. When a member leaves a tax consolidated group (departing member), the group allocates to the departing member the member's AFSI (for purposes of applying the average annual AFSI test under § 1.59-2(c)) for each taxable year (or portion thereof) in which the departing member was a member of the tax consolidated group (for taxable years relevant under § 1.59-2(c)(1)(i) and (c)(2)(i)). The amount of AFSI allocated to the departing member under this paragraph (k)(1) is determined as if the member had been a separate CAMT entity during the period in which it was a member of the tax consolidated group. (2) Treatment of group. The AFSI allocated to the departing member is not subtracted from the AFSI of the tax consolidated group of which the departing member ceased to be a member. See § 1.59-2(f). (l) Applicability date. This section applies to consolidated return years for which the due date of the income tax return (without extensions) is after [DATE OF PUBLICATION OF FINAL RULE IN THE FEDERAL REGISTER ].