CFR > Title 26 - Internal Revenue > CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY > SUBCHAPTER A—INCOME TAX (Parts 1–19) > PART 1—INCOME TAXES > 1.41-6T—Aggregation of expenditures (temporary).

1.41-6T—Aggregation of expenditures (temporary).

(a) [Reserved] For further guidance, see § 1.41-6(a).
(b) Computation of the group credit— (1) In general. All members of a controlled group are treated as a single taxpayer for purposes of computing the research credit. The group credit is computed by applying all of the section 41 computational rules on an aggregate basis. All members of a controlled group must use the same method of computation, either the method described in section 41(a)(1), the alternative incremental credit (AIRC) method described in section 41(c)(4), or the alternative simplified credit (ASC) method described in section 41(c)(5), in computing the group credit for a credit year.
(2) [Reserved] For further guidance, see § 1.41-6(b)(2).
(c) Allocation of the group credit. (1) [Reserved] For further guidance, see § 1.41-6(c)(1).
(2) Stand-alone entity credit. The term stand-alone entity credit means the research credit (if any) that would be allowable to a member of a controlled group if the credit were computed as if section 41(f)(1) did not apply, except that the member must apply the rules provided in § 1.41-6(d)(1) (relating to consolidated groups) and § 1.41-6(i) (relating to intra-group transactions). Each member's stand-alone entity credit for any credit year must be computed under whichever method (the method described in section 41(a), the method described in section 41(c)(4), or the method described in section 41(c)(5)) results in the greatest stand-alone entity credit for that member, without regard to the method used to compute the group credit.
(d) [Reserved] For further guidance see § 1.41-6(d).
(e) Example— Group alternative simplified credit. The following example illustrates a group computation in a year for which the ASC method under section 41(c)(5) is in effect. No members of the controlled group are members of a consolidated group and no member of the group made any basic research payments or paid or incurred any amounts to an energy research consortium.

Code of Federal Regulations

Example. (i) Facts. Q, R, and S, all of which are calendar-year taxpayers, are members of a controlled group. The research credit under section 41(a)(1) is not allowable to the group for the 2008 taxable year (the credit year) because the group's aggregate QREs for the credit year are less than the group's base amount. The group does not use the AIRC method of section 41(c)(4) because its aggregate QREs for the credit year do not exceed 1 percent of the average annual gross receipts for the four years preceding the credit year. The group credit is computed using the ASC rules of section 41(c)(5). Assume that each member of the group had QREs in each of the three years preceding the credit year. For purposes of computing the group credit for the credit year, Q, R, and S had the following:
Q R S Group aggregate
Credit Year QREs $0x $20x $30x $50x
Average QREs for 3 Years Preceding the Credit Year 10x 20x 10x 40x
(ii) Computation of the group credit. The research credit allowable to the group is computed as if Q, R, and S are one taxpayer. The group credit is equal to 12 percent of so much of the QREs for the credit year as exceeds 50 percent of the average QREs for the three taxable years preceding the credit year. The group credit is 0.12 x ($50x−(0.5 x $40x)), which equals $3.6x. (iii) Allocation of the group credit. Under paragraph (c)(2) of this section, the stand-alone entity credit for each member of the group must be computed using the method that results in the greatest stand-alone entity credit for that member. The stand-alone entity credit for Q is zero under all three methods. Assume that the stand-alone entity credit for each of R ($1.2x) and S ($3x) is greatest using the ASC method. Therefore, the stand-alone entity credits for each of R and S must be computed using the ASC method. The sum of the stand-alone entity credits of the members of the group is $4.2x. Because the group credit of $3.6x is less than the sum of the stand-alone entity credits of all the members of the group ($4.2x), the group credit is allocated among the members of the group based on the ratio that each member's stand-alone entity credit bears to the sum of the stand-alone entity credits of all the members of the group. The $3.6x group credit is allocated as follows:
Code of Federal Regulations 147
Q R S Total
Stand-Alone Entity Credit $0x $1.2x $3x $4.2x
Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) 0/4.2 1.2/4.2 3/4.2
Multiplied by: Group Credit $3.6x $3.6x $3.6x
Equals: Credit Allocated to Member $0x $1.03x $2.57x $3.6x
(f) through (i) [Reserved] For further guidance see § 1.41-6(f) through (i).
(j) Effective/applicability dates. This section is applicable for taxable years ending after December 31, 2006. For taxable years ending on or before December 31, 2006, see § 1.41-6.
(k) Expiration date. The applicability of this section will expire on or before June 13, 2011.

Code of Federal Regulations

[T.D. 9401, 73 FR 34188, June 17, 2008]