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Foreign parent of controlled group
(Posted May 3, 1999)
Question 25: Three domestic corporations are each 100% owned subsidiaries of a
foreign corporation. Do the domestic corporations comprise members of a controlled group under IRC 414(b)?
Answer: Yes. That is true both for normal income tax purposes and for qualified plan purposes.
For plan purposes, the foreign parent is also part of the controlled group. So, you have a parent-subsidiary controlled group of 4 corporations. Of course, nonresident aliens without US source income can be excluded, but they are nontheless employees who must be considered and dealt with.
Incidentally, for regular income tax purposes, a foreign corporation cannot be a component member of a controlled group. However, since the component member rules (See chapter 9 of my book Who's the Employer?) do not apply for qualified plan purposes, all four are included in the group for pension purposes.
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