Sec. 1.1502-5 Estimated tax.
(a) General rule.
(1) Consolidated estimated tax. If a group files a consolidated return for two consecutive taxable years, it must make payments of estimated tax on a consolidated basis for each subsequent taxable year, until such time as separate returns are properly filed. Until such time, the group is treated as a single corporation for purposes of section 6154 (relating to payment of estimated tax by corporations). If separate returns are filed by the members for a taxable year, the amount of any estimated tax payments made with respect to a consolidated payment of estimated tax for such year shall be credited against the separate tax liabilities of the members in any manner designated by the common parent which is satisfactory to the Commissioner. The consolidated payments of estimated tax shall be deposited with the authorized financial institution with which the common parent deposits its estimated tax payments. A statement should be attached to the payment setting forth the name, address, employer identification number, and internal revenue service center of each member.
(2) First two consolidated return years. For the first 2 years for which a group files a consolidated return, it may make payments of estimated tax on either a consolidated or separate basis. If a consolidated return is filed for such year, the amount of any estimated tax payments made for such year by any member shall be credited against the tax liability of the group.
(3) Effective date. This section applies to taxable years for which the due date (without extensions) for filing returns is after August 6, 1979. For prior taxable years see 26 CFR 1.1502-5 (Revised as of April 1, 1978).
(b) Addition to tax for failure to pay estimated tax under section 6655.
(1) Consolidated return filed. For the first two taxable years for which a group files a consolidated return, the group may compute the amount of the penalty (if any) under section 6655 on a consolidated basis or separate member basis, regardless of the method of payment. Thereafter, for a taxable year for which the group files a consolidated return, the group must compute the penalty on a consolidated basis.
(2) Computation of penalty on consolidated basis.
(i) This paragraph (b)(2) gives the rules for computing the penalty under section 6655 on a consolidated basis.
(ii) The tax and facts shown on the return for the preceding taxable year referred to in section 6655(d)(1) and (2) are, if a consolidated return was filed for that preceding year, such items shown on the consolidated return for that preceding year or, if one was not filed for that preceding year, the aggregate taxes and the facts shown on the separate returns of the common parent and any other corporation that was a member of the same affiliated group as the common parent for that preceding year.
(iii) If estimated tax was not paid on a consolidated basis, then the amount of the group's payments of estimated tax for the taxable year is the aggregate of the payments made by all members for the year.
(iv) Section 6655(d)(1) applies only if the common parent's consolidated return, or each member's separate return, for the preceding taxable year (as the case may be) was a taxable year of 12 months.
(3) Computation of penalty on separate member basis. To compute any penalty under section 6655 on a separate member basis, for purposes of section 6655(b)(1), the "tax shown on the return for the taxable year" is the portion of the tax shown on the consolidated return allocable to the member under paragraph (b)(5) of this section. If the member was included in the consolidated return filed by the group for the preceding taxable year then:
(i) For purposes of section 6655(d)(1), the "tax shown on the return" for any member shall be the portion of the tax shown on the consolidated return for the preceding year allocable to the member under paragraph (b)(5) of this section.
(ii) For purposes of section 6655(d)(2), the "facts shown on the return" shall be the facts shown on the consolidated return for the preceding year and the tax computed under that section shall be allocated under the rules of paragraph (b)(5) of this section.
(4) Consolidated payments if separate returns filed. If the group does not file a consolidated return for the taxable year, but makes payments of estimated tax on a consolidated basis, for purposes of section 6655(b)(2), the "amount, if any of the installment paid" by any member is an amount apportioned to the member in a manner designated by the common parent that is satisfactory to the Commissioner. If the member was included in the consolidated return filed by the group for the preceding taxable year, the amount of a member's penalty under section 6655 is computed on the separate member basis described in paragraph (b)(3) (i) and (ii) of this section.
(5) Rules for allocation of consolidated tax liability. For purposes of subparagraphs (1) and (2) of this paragraph, the tax shown on a consolidated return shall be allocated to the members of the group under the method which the group has elected pursuant to section 1552 and section 1.1502-33(d)(2).
(c) Examples. The provisions of this section may be illustrated by the following examples:
Example 1. Corporations P and S-1 file a consolidated return for the first time for calendar year 1978. P and S-1 also file consolidated returns for 1979 and 1980. For 1978 and 1979, P and S-1 may make payments of estimated tax on either a separate or consolidated basis. For 1980, however, the group must pay its estimated tax on a consolidated basis. In determining whether P and S-1 come within the exception provided in section 6655(d)(1) for 1980, the "tax shown on the return" is the tax shown on the consolidated return for 1979.
Example 2. Assume the same facts as in example (1). Assume further that corporation S-2 was a member of the group during 1979, and joins in the filing of the consolidated return for such year but ceases to be a member of the group on September 15, 1980. In determining whether the group (which no longer includes S-2) comes within the exception provided in section 6655(d)(1) for 1980, the "tax shown on the return" is the tax shown on the consolidated return for 1979.
Example 3. Assume the same facts as in example (1). Assume further that corporation S-2 becomes a member of the group on July 1, 1980, and joins in the filing of the consolidated return for 1968. In determining whether the group (which now includes S-2) comes within the exception provided in section 6655(d)(1) for 1980, the "tax shown on the return" is the tax shown on the consolidated return for 1979. Any tax of S-2 for any separate return year is not included as a part of the "tax shown on the return" for purposes of applying section 6655(d)(1).
Example 4. Corporations X and Y filed consolidated returns for the calendar years 1977 and 1978 and separate returns for 1979. In determining whether X and Y comes within the exception provided in section 6655(d)(1) for 1979, the "tax shown on the return" is the amount of tax shown on the consolidated return for 1978 allocable to X and Y in accordance with paragraph (b)(5) of this section.
(d) Cross reference. For provisions relating to quick refunds of corporate estimated tax payments, see section 1.1502-78, and sections 1.6425-1 through 1.6425-3.
[T.D. 6894, 31 FR 11794, Sept. 8, 1966, as amended by T.D. 7059, 35 FR 14549, Sept. 17, 1970; T.D. 7637, 44 FR 46840, Aug. 9, 1979; corrected at 62 FR 23657, May 1, 1997; amended by T.D. 8952, 66 FR 33830-33832, June 26, 2001.]
