Cite as: 532 U. S. 822 (2001)
Opinion of the Court
consolidated tax returns for the years 1983 through 1986. In each of these years, AMCA reported CNOL (the lowest being $85 million and the highest, $140 million) that exceeded the aggregate of its 26 individual members' PLEs ($3.5 million to $6.5 million). This case focuses on the PLEs of five of AMCA's member companies, which, together, generated roughly $205,000 in PLEs in 1983, $1.6 million in 1984, $1.3 million in 1985, and $250,000 in 1986. No one disputes these amounts or their characterization as PLEs. See 208 F. 3d 452, 453 (CA4 2000) ("The parties agree" with respect to the amount of "the product liability expenses incurred by the five group members in the relevant years"). Rather, the sole question here is whether the AMCA affiliated group may include these amounts on its consolidated return, in determining its PLL for 10-year carryback. The question arises because of the further undisputed fact that in each of the relevant tax years, each of the five companies in question (with minor exceptions not relevant here), reported a positive STI.
AMCA answered this question by following what commentators have called a "single-entity" approach 4 to calculating its "consolidated" PLL. For each tax year, AMCA (1) calculated its CNOL pursuant to Treas. Reg. § 1.1502- 11(a), and (2) aggregated its individual members' PLEs. Because, as noted above, for each tax year AMCA's CNOL was greater than the sum of its members' PLEs, AMCA treated the full amount of the PLEs as consolidated PLL eligible for 10-year carryback. In AMCA's view, the fact that several member companies throwing off large PLEs also, when considered separately, generated positive taxable income was of no significance.
From the Government's perspective, however, the fact that the several affiliated members with PLEs also gen-4 Axelrod & Blank, The Supreme Court, Consolidated Returns, and 10-Year Carrybacks, 90 Tax Notes, No. 10, p. 1383 (Mar. 5, 2001) (hereinafter Axelrod & Blank).
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