BenefitsLink > Q&A Columns >

Who's the Employer?

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.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.