2.63 Controlled group election. (1) SCOPE. Sec-

tion 71.255 (2m), Stats., allows a commonly controlled group of corporations to elect to include every member of the commonly controlled group in a single combined group for combined re- porting purposes. This section provides rules relating to making the election, continuity of the election, and limitations of the election. (2) MAKING THE ELECTION. Preapproval by the department is not required to make the election. The designated agent of the combined group shall make the election on behalf of the group as described in this subsection. Paragraph (c) provides rules relat- ing to identifying the designated agent in cases where a com- monly controlled group consists of corporations that previously filed as more than one combined group. (a) Time period for making election. The designated agent shall make the election on an original, timely filed combined re- turn which includes all members of the commonly controlled group. A return shall be considered timely if it is filed by the des- ignated agent on or before the due date of the return, including applicable extensions. If the return is timely filed without an ex- tension, the designated agent may make the election by filing an amended combined return on or before the end of the automatic 7-month extension period provided in s. 71.24 (7) or 71.44 (3), Stats. A return filed after the end of the automatic 7-month ex- tension period, whether an original or amended return, may not constitute a valid controlled group election for the taxable year to which the return applies, although an election may be filed for a subsequent taxable year subject to the limitation in sub. (3) (c). (b) Method of election and required documentation. 1. For the first year the designated agent makes the election, the desig- nated agent shall check a designated line of the combined return to indicate that a controlled group election is in effect. 2. For the first year the designated agent makes the election, the designated agent shall include a statement with the combined return which lists every corporation that is a member of the com- monly controlled group, and indicates that each corporation has agreed to be bound by the election and that the election shall ap- ply to any member that subsequently enters the group. (c) Multiple former combined groups. 1. If a commonly con- trolled group consists of corporations that previously filed as more than one combined group, the controlled group election creates a new combined group. For purposes of application of loss carryforwards and research credits under s. Tax 2.61, each former combined group included in the new combined group is a subgroup as described in s. Tax 2.61 (9) (e) 1. and the corpora- tions within each subgroup are eligible to share loss carryfor- wards and research credits from taxable years prior to the election with all the members of that subgroup, to the extent sharing would otherwise be allowed under s. Tax 2.61 (6) (c), (9), and (10). 2. A new combined group described in subd. 1. shall appoint the designated agent of one of the former combined groups to be the designated agent, and the provisions of s. Tax 2.65 apply to that designated agent. The corporation that files the first com- bined return under the election shall be deemed the appointed designated agent for the new combined group. (3) CONTINUITY OF ELECTION. (a) Ten-year period. The controlled group election is binding for and applicable to all members of the commonly controlled group for the taxable year for which the election is made and for the next nine taxable years. The election is also binding on any corporations that join the commonly controlled group during the period the election is in effect. Any corporation that departs the commonly controlled group is not bound by the election for the taxable years after its departure from the group, except if par. (b) applies or if the cor- poration rejoins the commonly controlled group. (b) Reorganizations. 1. When a merger or acquisition occurs between two combined groups where the acquiring group has not made the controlled group election but the target group has made the controlled group election, the controlled group election of the target group terminates on the date of the transaction. However, the designated agent of either the acquiring group or the target group may make the controlled group election with respect to all corporations that are in its commonly controlled group as deter- mined after considering the effect of the merger or acquisition, provided the requirements in sub. (2) are met and the election is not precluded by par. (c). 2. When a merger or acquisition occurs between two com- bined groups where the acquiring group has made the controlled group election but the target group has not made the controlled group election, all corporations in the commonly controlled group as determined after considering the effect of the merger or acquisition are bound by the acquirer[s controlled group election. 3. When a merger or acquisition occurs between two com- bined groups that have both made the controlled group election, the expiration date of the controlled group election for the entire commonly controlled group as determined after considering the effect of the merger or acquisition is the expiration date of the ac- quirer[s controlled group election. 4. When a commonly controlled group that has made the controlled group election divests stock of one or more subgroups of members so that the subgroups are no longer in the commonly controlled group, those subgroups are no longer bound by the controlled group election, except if both the book value of total assets of a subgroup and its total fair market value are greater than those of the divesting group, then the subgroup is bound by the controlled group election and the controlled group election of the divesting group terminates on the date of the transaction. (c) Renewal. 1. After the ten-year period described in par. (a), the designated agent may renew the election for another ten taxable years, without prior written approval from the depart- ment. The renewal shall be made on an original, timely filed re- turn for the first taxable year after completion of the ten-year pe- riod. Except as provided in subd. 3., the requirements for a re- newal of an election are the same as for making the original elec- tion as described in sub. (2). 2. If the election is not timely renewed as provided in subd. 1., the election is considered to be revoked by the designated agent. In the case of a controlled group election that is not timely Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. renewed, a new election may not be permitted in any of the next three taxable years. 3. The designated agent may renew the election on an amended return filed after the end of the automatic 7-month ex- tension period provided in s. 71.24 (7) or 71.44 (3), Stats., only if the original return was consistent with the controlled group elec- tion remaining in place and that the failure to comply with the re- quirements of sub. (2) was due to oversight or mistake. Note: Section Tax 2.63 interprets s. 71.255 (2m), Stats. History: EmR1001: emerg. cr. eff. 1-15-10; CR 09-064: cr. Register April 2010 No. 652, eff. 5-1-10; CR 12-011: r. (4) Register July 2012 No. 679, eff. 8-1-12; cor- rection in (3) (a), (b) 1. under s. 13.92 (4) (b) 7. Register July 2012 No. 679. Cross References: See s. Tax 2.60 for definitions that relate to this section. See s. Tax 2.61 (2) (b) for more information on the effect of the controlled group elec- tion. See s. Tax 2.65 for more information on the duties of the designated agent. See s. Tax 2.67 for more information on combined returns.