United Dominion Industries, Inc. v. United States, 532 U.S. 822, 5 (2001)

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826

UNITED DOMINION INDUSTRIES, INC. v. UNITED STATES

Opinion of the Court

Instead of requiring each member company of "[a]n affiliated group of corporations" to file a separate tax return, the Code permits the group to file a single consolidated return, 26 U. S. C. § 1501, and leaves it to the Secretary of the Treasury to work out the details by promulgating regulations governing such returns, § 1502. Under Treas. Regs. §§ 1.1502-11(a) and 1.1502-21(f),3 an affiliated group's "consolidated taxable income" (CTI), or, alternatively, its "consolidated net operating loss" (CNOL), is determined by "taking into account" several items. The first is the "sepa-rate taxable income" (STI) of each group member. A member's STI (whether positive or negative) is computed as though the member were a separate corporation (i. e., by netting income and expenses), but subject to several important "modifications." Treas. Reg. § 1.1502-12. These modifications require a group member calculating its STI to disregard, among other items, its capital gains and losses, charitable-contribution deductions, and dividends-received deductions. Ibid. These excluded items are accounted for on a consolidated basis, that is, they are combined at the level of the group filing the single return, where deductions otherwise attributable to one member (say, for a charitable contribution) can offset income received by another (from a capital gain, for example). Treas. Regs. §§ 1.1502-11(a)(3) to (8); 1.1502-21(f)(2) to (6). A consolidated group's CTI or CNOL, therefore, is the sum of each member's STI, plus or minus a handful of items considered on a consolidated basis.

II

Petitioner United Dominion's predecessor in interest, AMCA International Corporation, was the parent of an affiliated group of corporations that properly elected to file

3 Unless otherwise noted, Treasury Regulation references are to the regulations in effect between 1983 and 1986, 26 CFR § 1.1502-11 et seq. (1982-1986).

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