§52 — Special rules

Statute Text — 26 U.S.C. §52

Treasury Regulations

• Treas. Reg. §1.52-1Trades or businesses that are under common control Show full text ▾ Collapse ▴

  (a) Apportionment of jobs credit among members of a group of trades or businesses that are under common control—(1) Targeted jobs credit. (i) In the case of a group of trades or businesses that are under common control (within the meaning of paragraph (b) of this section) at any time during the calendar year, the amount of the targeted jobs credit (computed under section 51 as if all the organizations that are under common control are one trade or business) under section 4-1B must be apportioned among the members of the group on the basis of each member's proportionate share of the wages giving rise to such credit. If the group of trades or businesses that are under common control have different taxable years, the credit shall be computed as if all the organizations have the same taxable year as the organization for which a determination of the proportionate share of the credit is being made. For taxable years beginning before January 1, 1982, the amount of the qualified first-year wages cannot exceed 30 percent of the aggregate unemployment insurance wages paid by the group of trades or businesses under common control during the calendar year ending in the taxable year of the organization for which a determination of the proportionate share of the credit is being made. The limitations in section 53 and the regulations thereunder apply to each organization individually (although, in applying these limitations, an affiliated group of corporations electing to make a consolidated return shall be treated as one organization).

  (ii) The application of the subparagraph may be illustrated by the following examples:

  (2) New jobs credit. In the case of a group of trades or businesses that are under common control at any time during the calendar year, the amount of the new jobs credit (computed under section 51 as if all the organizations that are under common control are one trade or business) under section 44B (as in effect prior to enactment of the Revenue Act of 1978) must be apportioned among the members of the group on the basis of each member's proportionate contribution to the increase in unemployment insurance wages for the entire group. The limitations in section 53 (as in effect prior to enactment of the Revenue Act of 1978) and the regulations thereunder apply to each organization individually (although, in applying these limitations, an affiliated group of corporations electing to make a consolidated return shall be treated as one organization). The application of this subparagraph may be illustrated by the following example:

  (b) Trades or businesses that are under common control. For purposes of this section, the term “trades or businesses that are under common control” means any group of trades or businesses that is either a “parent-subsidiary group under common control” as defined in paragraph (c) of this section, a “brother-sister group under common control” as defined in paragraph (d) of this section, or a “combined group under common control” as defined in paragraph (e) of this section. For purposes of this section and §§ 1.52-2 and 1.52-3, the term “organization” means a sole proprietorship, a partnership, a trust, an estate, or a corporation. An organization may be a member of only one group of trades or businesses under common control. If, without the application of this paragraph, an organization would be a member of more than one such group, that organization shall indicate in its timely filed return the group in which it is being included. If the organization does not so indicate, then the district director with audit jurisdiction of the organization's return will determine the group in which the organization is to be included.

  (c) Parent-subsidiary group under common control—(1) In general. The term “parent-subsidiary group under common control” means one or more chains of organizations conducting trades or businesses that are connected through ownership of a controlling interest with a common parent organization if—

  (i) A controlling interest in each of the organizations, except the common parent organization, is owned (directly and with the application of § 1.414(c)-4(b)(1), (2), and (3)) by one or more of the other organizations; and

  (ii) The common parent organization owns (directly and with the application of § 1.414(c)-4(b)(1), (2), and (3)) a controlling interest in at least one of the other organizations, excluding, in computing the controlling interest, any direct ownership interest by the other organizations.

  (2) Controlling interest defined. For purposes of this paragraph, the term “controlling interest” means:

  (i) In the case of a corporation, ownership of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote or more than 50 percent of the total value of the shares of all classes of stock of the corporation;

  (ii) In the case of a trust or estate, ownership of an actuarial interest (determined under paragraph (f) of this section) of more than 50 percent of the trust or estate;

  (iii) In the case of a partnership, ownership of more than 50 percent of the profit interest or capital interest of the partnership; and

  (iv) In the case of a sole proprietorship, ownership of the sole proprietorship.

  (d) Brother-sister group under common control—(1) In general. The term “brother-sister group under common control” means two or more organizations conducting trades or businesses if—

  (i) The same five or fewer persons who are individuals, estates, or trusts own (directly and with the application of § 1.414(c)-4), a controlling interest of each organization; and

  (ii) Taking into account the ownership of each person only to the extent that person's ownership is identical with respect to each organization, such persons are in effective control of each organization.

  The five or fewer persons whose ownership is considered for purposes of the controlling interest requirement for each organization must be the same persons whose ownership is considered for purposes of the effective control requirement.

  (2) Controlling interest defined. For purposes of this paragraph, the term “controlling interest” means:

  (i) In the case of a corporation, ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of the shares of all classes of stock of the corporation;

  (ii) In case of a trust or estate, ownership of an actuarial interest (determined under paragraph (f) of this section) of a least 80 percent of the trust or estate;

  (iii) In the case of a partnership, ownership of at least 80 percent of the profit interest or capital interest of the partnership; and

  (iv) In the case of a sole proprietorship, ownership of the sole proprietorship.

  (3) Effective control defined. For purposes of this paragraph “effective control” means:

  (i) In the case of a corporation, ownership of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote or more than 50 percent of the total value of the shares of all classes of stock of the corporation;

  (ii) In the case of a trust or estate, ownership of an actuarial interest (determined under paragraph (f) of this section) of more than 50 percent of the trust or estate;

  (iii) In the case of a partnership, ownership of more than 50 percent of the profit interest or capital interest of the partnership; and

  (iv) In the case of a sole proprietorship, ownership of the sole proprietorship.

  (e) Combined group under common control. The term “combined group under common control” means a group of three or more organizations, in which (1) each organization is a member of either a parent-subsidiary group under common control or brother-sister group under common control, and (2) at least one organization is the common parent organization of a parent-subsidiary group under common control and also a member of a brother-sister group under common control.

  (f) Actuarial interest. For purposes of this section, the actuarial interest of each beneficiary of a trust or estate shall be determined by assuming the maximum exercise of discretion by the fiduciary in favor of the beneficiary. The factors and method prescribed in § 20.2031-7 or, for certain prior periods, 20.2031-7A of this chapter (Estate Tax Regulations) for use in ascertaining the value of an interest in property for estate tax purposes will be used to determine a beneficiary's actuarial interest.

  (g) Exclusion of certain interests and stock in determining control. In determining control under this paragraph, the term “interest” and the term “stock” do not include an interest that is treated as not outstanding under § 1.414(c)-3. In addition, the term “stock” does not include treasury stock or nonvoting stock that is limited and preferred regarding dividends.

  (h) Transitional rule—(1) In general. Paragraph (d) of this section, as amended by T.D. 8179, applies to all taxable years to which section 52(b) applies.

  (2) Election. In the case of taxable years ending before March 2, 1988.

  (i) If, pursuant to paragraph (b) of this section, an organization indicated in a timely filed return that it chose to be a member of a brother-sister group under common control, and it is not a member of such group because of the amendments to paragraph (d) of this section made by T.D. 8179 such organization may make the choice described in paragraph (b) of this section by filing an amended return on or before September 2, 1988 if such organization would otherwise still be a member of more than one group of trades or businesses under common control, and

  (ii) If an organization—

  (A) Is a member of a brother-sister group of trades or businesses under common control under § 1.52-1(d)(1) as in effect before amendment by T.D. 8179 (“old group”), for such taxable year, and

  (B) Is not such a member for such taxable year because of the amendments made by such Treasury decision,

  such organization (whether or not a corporation) nevertheless will be treated as a member of such old group if all the organizations (whether or not corporations) that are members of the old group meet all the requirements of § 1.1563-1(d)(3) with respect to such taxable year.

  (i) Applicability date. This section applies to taxable years beginning on or after January 1, 2025. See 26 CFR 1.52-1, as revised April 1, 2024, for taxable years beginning before January 1, 2025.

• Treas. Reg. §1.52-1(a)Apportionment of jobs credit among members of a group of trades or businesses that are under common control—(1) Targeted jobs credit. Show full text ▾ Collapse ▴

  Apportionment of jobs credit among members of a group of trades or businesses that are under common control—(1) Targeted jobs credit. (i) In the case of a group of trades or businesses that are under common control (within the meaning of paragraph (b) of this section) at any time during the calendar year, the amount of the targeted jobs credit (computed under section 51 as if all the organizations that are under common control are one trade or business) under section 4-1B must be apportioned among the members of the group on the basis of each member's proportionate share of the wages giving rise to such credit. If the group of trades or businesses that are under common control have different taxable years, the credit shall be computed as if all the organizations have the same taxable year as the organization for which a determination of the proportionate share of the credit is being made. For taxable years beginning before January 1, 1982, the amount of the qualified first-year wages cannot exceed 30 percent of the aggregate unemployment insurance wages paid by the group of trades or businesses under common control during the calendar year ending in the taxable year of the organization for which a determination of the proportionate share of the credit is being made. The limitations in section 53 and the regulations thereunder apply to each organization individually (although, in applying these limitations, an affiliated group of corporations electing to make a consolidated return shall be treated as one organization).

  (ii) The application of the subparagraph may be illustrated by the following examples:

  (2) New jobs credit. In the case of a group of trades or businesses that are under common control at any time during the calendar year, the amount of the new jobs credit (computed under section 51 as if all the organizations that are under common control are one trade or business) under section 44B (as in effect prior to enactment of the Revenue Act of 1978) must be apportioned among the members of the group on the basis of each member's proportionate contribution to the increase in unemployment insurance wages for the entire group. The limitations in section 53 (as in effect prior to enactment of the Revenue Act of 1978) and the regulations thereunder apply to each organization individually (although, in applying these limitations, an affiliated group of corporations electing to make a consolidated return shall be treated as one organization). The application of this subparagraph may be illustrated by the following example:

• Treas. Reg. §1.52-1(b)Trades or businesses that are under common control. Show full text ▾ Collapse ▴

  Trades or businesses that are under common control. For purposes of this section, the term “trades or businesses that are under common control” means any group of trades or businesses that is either a “parent-subsidiary group under common control” as defined in paragraph (c) of this section, a “brother-sister group under common control” as defined in paragraph (d) of this section, or a “combined group under common control” as defined in paragraph (e) of this section. For purposes of this section and §§ 1.52-2 and 1.52-3, the term “organization” means a sole proprietorship, a partnership, a trust, an estate, or a corporation. An organization may be a member of only one group of trades or businesses under common control. If, without the application of this paragraph, an organization would be a member of more than one such group, that organization shall indicate in its timely filed return the group in which it is being included. If the organization does not so indicate, then the district director with audit jurisdiction of the organization's return will determine the group in which the organization is to be included.

• Treas. Reg. §1.52-1(c)Parent-subsidiary group under common control—(1) In general. Show full text ▾ Collapse ▴

  Parent-subsidiary group under common control—(1) In general. The term “parent-subsidiary group under common control” means one or more chains of organizations conducting trades or businesses that are connected through ownership of a controlling interest with a common parent organization if—

• Treas. Reg. §1.52-1(d)Brother-sister group under common control—(1) In general. Show full text ▾ Collapse ▴

  Brother-sister group under common control—(1) In general. The term “brother-sister group under common control” means two or more organizations conducting trades or businesses if—

• Treas. Reg. §1.52-1(e)Combined group under common control. Show full text ▾ Collapse ▴

  Combined group under common control. The term “combined group under common control” means a group of three or more organizations, in which (1) each organization is a member of either a parent-subsidiary group under common control or brother-sister group under common control, and (2) at least one organization is the common parent organization of a parent-subsidiary group under common control and also a member of a brother-sister group under common control.

• Treas. Reg. §1.52-1(f)Actuarial interest. Show full text ▾ Collapse ▴

  Actuarial interest. For purposes of this section, the actuarial interest of each beneficiary of a trust or estate shall be determined by assuming the maximum exercise of discretion by the fiduciary in favor of the beneficiary. The factors and method prescribed in § 20.2031-7 or, for certain prior periods, 20.2031-7A of this chapter (Estate Tax Regulations) for use in ascertaining the value of an interest in property for estate tax purposes will be used to determine a beneficiary's actuarial interest.

• Treas. Reg. §1.52-1(g)Exclusion of certain interests and stock in determining control. Show full text ▾ Collapse ▴

  Exclusion of certain interests and stock in determining control. In determining control under this paragraph, the term “interest” and the term “stock” do not include an interest that is treated as not outstanding under § 1.414(c)-3. In addition, the term “stock” does not include treasury stock or nonvoting stock that is limited and preferred regarding dividends.

• Treas. Reg. §1.52-1(h)Transitional rule—(1) In general. Show full text ▾ Collapse ▴

  Transitional rule—(1) In general. Paragraph (d) of this section, as amended by T.D. 8179, applies to all taxable years to which section 52(b) applies.

  (2) Election. In the case of taxable years ending before March 2, 1988.

• Treas. Reg. §1.52-1(i)Applicability date. Show full text ▾ Collapse ▴

  Applicability date. This section applies to taxable years beginning on or after January 1, 2025. See 26 CFR 1.52-1, as revised April 1, 2024, for taxable years beginning before January 1, 2025.

• Treas. Reg. §1.52-2Adjustments for acquisitions and dispositions Show full text ▾ Collapse ▴

  (a) General rule. The provisions in this section only apply to the computation of the new jobs credit. If, after December 31, 1975, an employer acquires the major portion of a trade or business or the major portion of a separate unit of a trade or business, then, for purposes of computing the new jobs credit for any calendar year ending after the acquisition, both the amount of unemployment insurance wages and the amount of total wages considered to have been paid by the acquiring employer, for both the year in which the acquisition occurred and the preceding year, must be increased, respectively, by the amount of unemployment insurance wages and the amount of total wages paid by the predecessor employer that are attributable to the acquired portion of the trade or business or separate unit. If the predecessor employer informs the acquiring employer in writing of the amount of unemployment insurance wages and the amount of total wages attributable to the acquired portion of the trade or business that have been paid during the periods preceding the acquisition, then, for purposes of computing the credit for any calendar year ending after the acquisition the amount of unemployment insurance wages and the amount of total wages considered paid by the predecessor employer shall be decreased by those amounts. Regardless of whether the predecessor employer so informs the acquiring employer, the predecessor employer shall not be allowed a credit for the amount of any increase in the employment insurance wages or the total wages in the calendar year of the acquisition attributable to the acquired portion of the trade or business over the amount of such wages in the calendar year preceding the acquisition.

  (b) Meaning of terms—(1) Acquisition. (i) For the purposes of this section, the term “acquisition” includes a lease agreement if the effect of the lease is to transfer the major portion of the trade or business or of a separate unit of the trade or business for the period of the lease. For instance, if one company leases a factory (including equipment) to another company for a 2-year period, the employees are retained by the second company, and the factory is used for the same general purposes as before, then for purposes of this section the lessee has acquired the lessor's trade or business for the period of the lease.

  (ii) Neither the major portion of a trade or business nor the major portion of a separate unit of a trade or business is acquired merely by acquiring physical assets. The acquisition must transfer a viable trade or business.

  (iii) Subdivision (ii) of this subparagraph may be illustrated by the following examples:

  (2) Separate unit. (i) A separate unit is a segment of a trade or business capable of operating as a self-sustaining enterprise with minor adjustments. The allocation of a portion of the goodwill of a trade or business to one of its segments is a strong indication that that segment is a separate unit.

  (ii) The following examples are illustrations of the acquisition of a separate unit of a trade or business:

  (3) Major portion. All the facts and circumstances surrounding the transaction shall be taken into account in determining what constitutes a major portion of a trade or business (or separate unit). Factors to be considered include:

  (i) The fair market value of the assets in the portion relative to the fair market value of the other assets of the trade or business (or separate unit);

  (ii) The proportion of goodwill attributable to the portion of the trade or business (or separate unit);

  (iii) The proportion of the number of employees of the trade or business (or separate unit) attributable to the portion in the periods immediately preceding the transaction; and

  (iv) The proportion of the sales or gross receipts, net income, and budget of the trade or business (or separate unit) attributable to the portion.

• Treas. Reg. §1.52-2(a)General rule. Show full text ▾ Collapse ▴

  General rule. The provisions in this section only apply to the computation of the new jobs credit. If, after December 31, 1975, an employer acquires the major portion of a trade or business or the major portion of a separate unit of a trade or business, then, for purposes of computing the new jobs credit for any calendar year ending after the acquisition, both the amount of unemployment insurance wages and the amount of total wages considered to have been paid by the acquiring employer, for both the year in which the acquisition occurred and the preceding year, must be increased, respectively, by the amount of unemployment insurance wages and the amount of total wages paid by the predecessor employer that are attributable to the acquired portion of the trade or business or separate unit. If the predecessor employer informs the acquiring employer in writing of the amount of unemployment insurance wages and the amount of total wages attributable to the acquired portion of the trade or business that have been paid during the periods preceding the acquisition, then, for purposes of computing the credit for any calendar year ending after the acquisition the amount of unemployment insurance wages and the amount of total wages considered paid by the predecessor employer shall be decreased by those amounts. Regardless of whether the predecessor employer so informs the acquiring employer, the predecessor employer shall not be allowed a credit for the amount of any increase in the employment insurance wages or the total wages in the calendar year of the acquisition attributable to the acquired portion of the trade or business over the amount of such wages in the calendar year preceding the acquisition.

• Treas. Reg. §1.52-2(b)Meaning of terms—(1) Acquisition. Show full text ▾ Collapse ▴

  Meaning of terms—(1) Acquisition. (i) For the purposes of this section, the term “acquisition” includes a lease agreement if the effect of the lease is to transfer the major portion of the trade or business or of a separate unit of the trade or business for the period of the lease. For instance, if one company leases a factory (including equipment) to another company for a 2-year period, the employees are retained by the second company, and the factory is used for the same general purposes as before, then for purposes of this section the lessee has acquired the lessor's trade or business for the period of the lease.

  (ii) Neither the major portion of a trade or business nor the major portion of a separate unit of a trade or business is acquired merely by acquiring physical assets. The acquisition must transfer a viable trade or business.

  (iii) Subdivision (ii) of this subparagraph may be illustrated by the following examples:

  (2) Separate unit. (i) A separate unit is a segment of a trade or business capable of operating as a self-sustaining enterprise with minor adjustments. The allocation of a portion of the goodwill of a trade or business to one of its segments is a strong indication that that segment is a separate unit.

  (ii) The following examples are illustrations of the acquisition of a separate unit of a trade or business:

  (3) Major portion. All the facts and circumstances surrounding the transaction shall be taken into account in determining what constitutes a major portion of a trade or business (or separate unit). Factors to be considered include:

• Treas. Reg. §1.52-2(i)§1.52-2(i) Show full text ▾ Collapse ▴

  The fair market value of the assets in the portion relative to the fair market value of the other assets of the trade or business (or separate unit);

  (ii) The proportion of goodwill attributable to the portion of the trade or business (or separate unit);

  (iii) The proportion of the number of employees of the trade or business (or separate unit) attributable to the portion in the periods immediately preceding the transaction; and

  (iv) The proportion of the sales or gross receipts, net income, and budget of the trade or business (or separate unit) attributable to the portion.

• Treas. Reg. §1.52-3Limitations with respect to certain persons Show full text ▾ Collapse ▴

  (a) Mutual savings institutions. In the case of an organization to which section 593 applies (that is, a mutual savings bank, a cooperative bank or a domestic building and loan association), the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable under section 44B shall be 50 percent of the amount otherwise determined under section 51, or, in the case of an organization under common control, under § 1.52-1 (a) and (b).

  (b) Regulated investment companies and real estate investment trusts. In the case of a regulated investment company or a real estate investment trust subject to taxation under subchapter M, chapter 1 of the Code, the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable under section 44B shall be reduced to the company's or trust's ratable share of the credit. The ratable share shall be determined in accordance with rules similar to the rules provided in section 46(e)(2)(B) and the regulations thereunder. For purposes of computing the ratable share, the reduction of the deduction for wage or salary expenses under § 1.280C-1 shall not be taken into account.

  (c) Cooperatives—(1) Taxable years ending after October 31, 1978. For taxable years ending after October 31, 1978, in the case of a cooperative organization described in section 1381(a), rules similar to rules provided in section 46(h) and the regulations thereunder shall apply in determining the distribution of the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable to the cooperative organization and its patrons under section 44B.

  (2) Taxable years ending before November 1, 1978. For taxable years ending before November 1, 1978, in the case of a cooperative organization described in section 1381(a), the amount of new jobs credit allowable under section 44B shall be reduced to the cooperative's ratable share of the credit. The ratable share shall be the ratio which the taxable income of the cooperative for the taxable year bears to its taxable income increased by the amount of the deductions allowed under section 1382 (b) and (c). For purposes of computing the ratable share, the reduction of the deduction for wage or salary expenses under § 1.280C-1 shall not be taken into account.

• Treas. Reg. §1.52-3(a)Mutual savings institutions. Show full text ▾ Collapse ▴

  Mutual savings institutions. In the case of an organization to which section 593 applies (that is, a mutual savings bank, a cooperative bank or a domestic building and loan association), the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable under section 44B shall be 50 percent of the amount otherwise determined under section 51, or, in the case of an organization under common control, under § 1.52-1 (a) and (b).

• Treas. Reg. §1.52-3(b)Regulated investment companies and real estate investment trusts. Show full text ▾ Collapse ▴

  Regulated investment companies and real estate investment trusts. In the case of a regulated investment company or a real estate investment trust subject to taxation under subchapter M, chapter 1 of the Code, the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable under section 44B shall be reduced to the company's or trust's ratable share of the credit. The ratable share shall be determined in accordance with rules similar to the rules provided in section 46(e)(2)(B) and the regulations thereunder. For purposes of computing the ratable share, the reduction of the deduction for wage or salary expenses under § 1.280C-1 shall not be taken into account.

• Treas. Reg. §1.52-3(c)Cooperatives—(1) Taxable years ending after October 31, 1978. Show full text ▾ Collapse ▴

  Cooperatives—(1) Taxable years ending after October 31, 1978. For taxable years ending after October 31, 1978, in the case of a cooperative organization described in section 1381(a), rules similar to rules provided in section 46(h) and the regulations thereunder shall apply in determining the distribution of the amount of the targeted jobs credit (new jobs credit in the case of wages paid before 1979) allowable to the cooperative organization and its patrons under section 44B.

  (2) Taxable years ending before November 1, 1978. For taxable years ending before November 1, 1978, in the case of a cooperative organization described in section 1381(a), the amount of new jobs credit allowable under section 44B shall be reduced to the cooperative's ratable share of the credit. The ratable share shall be the ratio which the taxable income of the cooperative for the taxable year bears to its taxable income increased by the amount of the deductions allowed under section 1382 (b) and (c). For purposes of computing the ratable share, the reduction of the deduction for wage or salary expenses under § 1.280C-1 shall not be taken into account.