Court Opinion

ID: 2969363
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:47:22.137518+00
Date Added: 2024-06-11T13:14:50.805931
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206
        ELECTRONIC CITATION: 2000 FED App. 0140P (6th Cir.)
                    File Name: 00a0140p.06

UNITED STATES COURT OF APPEALS
                  FOR THE SIXTH CIRCUIT
                    _________________

                              ;
                               
 INTERMET CORPORATION &
                               
 SUBSIDIARIES,
                               
         Petitioner-Appellant,
                               
                                   No. 99-1046

                               
          v.                    >
                               
                               
                               
 COMMISSIONER OF INTERNAL

        Respondent-Appellee. 
 REVENUE,
                               
                              1
     On Appeal from the United States Tax Court.
   No. 8246-97—Thomas B. Wells, Tax Court Judge.
                  Argued: December 6, 1999
               Decided and Filed: April 20, 2000
  Before: RYAN and SUHRHEINRICH,      Circuit Judges;
               BELL, District Judge.*

    *
     The Honorable Robert Holmes Bell, United States District Judge for
the Western District of Michigan, sitting by designation.

                                  1
2    Intermet Corp. v. Commissioner               No. 99-1046

                    _________________
                         COUNSEL
ARGUED: Eric R. Fox, IVINS, PHILLIPS & BARKER,
Washington, D.C., for Appellant. Edward T. Perelmuter,
U.S. DEPARTMENT OF JUSTICE, APPELLATE SECTION
TAX DIVISION, Washington, D.C., for Appellee.
ON BRIEF: Eric R. Fox, IVINS, PHILLIPS & BARKER,
Washington, D.C., for Appellant. Edward T. Perelmuter,
Richard Farber, U.S. DEPARTMENT OF JUSTICE,
APPELLATE SECTION TAX DIVISION, Washington, D.C.,
for Appellee.
                    _________________
                        OPINION
                    _________________
  RYAN, Circuit Judge. This case requires us to decide
whether an affiliated group of corporations filing a
consolidated federal income tax return is entitled to a 10-year
carryback for certain “specified liability” expenses incurred
by a member corporation with positive separate taxable
income. We conclude that the 10-year carryback is applicable
under this scenario. Therefore, we will REVERSE the
judgment of the United States Tax Court and REMAND to
that court for further proceedings consistent with this opinion.
                               I.
  The relevant facts are undisputed. Intermet Corporation is
the common parent of an affiliated group of corporations that
manufactures precision iron castings for automotive and
industrial equipment producers. The group filed consolidated
federal income tax returns for calendar years 1984 through
1992. The group’s members used the accrual method of
accounting for both financial accounting and federal income
tax purposes during this time period.
14   Intermet Corp. v. Commissioner             No. 99-1046      No. 99-1046            Intermet Corp. v. Commissioner        3

   In closing, we note the lack of any controlling judicial         Intermet claimed that in 1992 it incurred certain “specified
authority on the issue we decide here. Apart from the Fourth     liability” (SL) expenses attributable to several member
Circuit’s recent opinion in United Dominion, which we have       corporations. At issue in this appeal are certain claimed SL
already discussed, the parties and the Tax Court identified      expenses incurred by Lynchburg Foundry Co., a member of
two published opinions addressing arguably analogous issues:     the group between 1984 and 1992. Lynchburg’s claimed SL
Amtel, Inc. v. United States, 31 Fed. Cl. 598 (1994), aff’d,     expenses in 1992 consisted of: (1) $717,617 (plus
1995 WL 364366 (Fed. Cir. June 19, 1995) (unpublished            $299,412.63 in interest) to cover its Michigan Single Business
disposition), and Norwest Corp. and Subsidiaries v.              Tax liability for 1986, 1987, and 1988; and (2) interest on its
Commissioner, 111 T.C. 105 (1998). We find these cases to        1987 federal income tax liability in the amount of $2,175.60.
be distinguishable, however. Explicit statutory or regulatory
provisions supported the separate member approach that the         In 1992, Lynchburg had a positive “separate taxable
courts adopted in Amtel and Norwest, rendering inapplicable      income” (STI), as defined under the Treasury Regulations, of
the default rule in Treas. Reg. § 1.1502-80(a) that guides our   $3,940,085. The STI was positive because Lynchburg’s gross
analysis here. In summary, we conclude that the IRS’s            income exceeded its deductions. Lynchburg deducted its
interpretation of the SLL carryback, in conjunction with the     claimed SL expenses in calculating its 1992 STI. On the
consolidated return regulations, is unreasonable. Intermet is    other hand, Intermet had a $25,701,038 “consolidated net
entitled to the SLL carryback for Lynchburg’s claimed SL         operating loss” (CNOL) under the Treasury Regulations in
expenses provided that those expenses qualify as a specified     1992, far exceeding Lynchburg’s claimed SL expenses.
liability loss under I.R.C. § 172(f)(1)(B).
                                                                   In 1994, Intermet filed an amended income tax return to
                             IV.                                 carry back to 1984 the claimed SL expenses incurred by
                                                                 Lynchburg during 1992. Intermet claimed this carryback on
  For the foregoing reasons, we REVERSE the judgment of          the ground that the expenses qualified for the 10-year
the United States Tax Court and REMAND to that court for         carryback provision for “specified liability loss” (SLL)
further proceedings consistent with this opinion.                deductions under the Internal Revenue Code. On March 14,
                                                                 1997, the IRS issued a notice of deficiency for calendar year
                                                                 1984, disallowing the carryback. Intermet filed a petition in
                                                                 the United States Tax Court contesting the deficiency
                                                                 determination.
                                                                    The case was submitted to the Tax Court on a fully
                                                                 stipulated record, presenting the following issues: (1)
                                                                 whether the claimed SL expenses fit the statutory definition
                                                                 of a SLL under I.R.C. § 172(f)(1)(B) (1994) (amended in
                                                                 1998); and (2) whether Intermet could take advantage of the
                                                                 SLL 10-year carryback where the group had a CNOL but the
                                                                 member that incurred the SL expenses had a positive STI.
                                                                 The Tax Court held in favor of the IRS on issue two, and did
                                                                 not reach the first issue. Intermet Corp. & Subsidiaries v.
                                                                 Commissioner, 111 T.C. 294 (1998).
4    Intermet Corp. v. Commissioner               No. 99-1046      No. 99-1046            Intermet Corp. v. Commissioner        13

  The Tax Court reasoned that Lynchburg’s SL expenses did          do not exclude such application, actually supports its position.
not qualify for the SLL carryback because they were not            Tech. Adv. Mem. 9715002. The IRS reasoned that the
“taken into account” in computing Intermet’s net operating         Code’s SLL provision applies on a separate member basis,
loss (NOL) for 1992, as required by the Internal Revenue           rather than a consolidated basis, because the provision refers
Code. Id. at 304-05. The court first noted that Lynchburg had      to “the taxpayer,” and such language generally means
no separate or individual NOL in 1992 because its gross            individual members in the consolidated return context. Id. In
income exceeded allowable deductions. Id. at 300. The Tax          contrast, the IRS in the instant cases ignores the section
Court then proceeded to determine whether Lynchburg’s SL           1.1502-80 default rule. More importantly, the IRS has
expenses were “taken into account” in computing Intermet’s         consistently and correctly referred to Intermet—not
CNOL. Relying on the Treasury Regulations, the court               Lynchburg—as the “taxpayer” in this appeal.
concluded that they were not. Id. at 301-03.
                                                                      We recognize that a Technical Advice Memorandum is not
  The court correctly noted that the consolidated return           binding upon either the IRS or this court. See I.R.C.
regulations do not treat members’ SL expenses on a                 § 6110(j)(3) (1994). But the Memorandum illustrates the
consolidated basis for purposes of calculating a group’s           IRS’s application of the SLL carryback in the consolidated
CNOL. Instead, SL expenses are netted against a member’s           return context—history that we may consider in determining
income in computing a member’s STI, which is then used to          whether the IRS’s current position is reasonable. See Wolpaw
calculate the group’s CNOL. Based upon these regulations,          v. Commissioner, 47 F.3d 787, 792 (6th Cir. 1995). We also
the Tax Court reasoned an SL expense is “absorbed” by a            understand that the IRS’s basic position—that a consolidated
group member’s current income in computing the member’s            group cannot invoke the SLL carryback if the SL expenses are
positive STI, and the “exhausted” expenses cannot be used by       incurred by a member with a positive STI—has remained
the group or parent for purposes of the 10-year SLL                unchanged. However, the IRS’s shifting and incongruous
carryback. Id. at 302.                                             reasoning in reaching this result highlights the fundamental
                                                                   flaw: its position does not comport with the current purpose
  Intermet timely appealed the Tax Court’s judgment,               and language of the Code and regulations. It is trying to fit a
maintaining that it satisfied the statutory requirements for the   square peg into a round hole.
SLL carryback.        Specifically, Intermet contends that
Lynchburg’s SL expenses were “taken into account” in                  We also reject the IRS’s contention that Intermet will reap
calculating Intermet’s CNOL because the expenses were used         a “double tax benefit” if it uses SL expenses both to offset
in calculating Lynchburg’s STI which, in turn, was used to         Lynchburg’s positive STI and to extend the carryback period
calculate Intermet’s CNOL. It makes no difference, Intermet        from three years to 10 years. Again, the IRS errs by
agrees, whether Lynchburg’s STI was positive or negative           attributing independent significance to the STI that does not
because Lynchburg’s SL expenses would have a direct,               exist. By offsetting part of Lynchburg’s positive STI, the SL
dollar-for-dollar impact on both Lynchburg’s STI and               expenses produced no tax benefit whatsoever. Intermet—not
Intermet’s CNOL in either event.                                   Lynchburg—was the taxpayer for 1992. Intermet derived no
                                                                   tax benefit from the SL expenses in 1992 because Intermet
                              II.                                  had a CNOL exceeding $25 million and incurred no tax
                                                                   liability whatsoever in that year. Thus, the SL expense
  Since the facts are undisputed and this case presents a pure     deductions produced only a single tax benefit—the ability to
question of law, we review the Tax Court’s judgment de             carry back those expenses to prior tax years.
novo. Estate of Mueller v. Commissioner, 153 F.3d 302, 304
12    Intermet Corp. v. Commissioner               No. 99-1046      No. 99-1046            Intermet Corp. v. Commissioner          5

method may also apply in cases such as this one that involve        (6th Cir. 1998), cert. denied, 525 U.S. 1140 (1999). Statutory
carrybacks to a consolidated return year, pointing out that         “provisions granting a [tax] deduction . . . are matters of
section 1.1502-79(a)(3) does not explicitly limit its               legislative ‘grace’ and are construed strictly (in favor of the
application to separate return years. Tech. Adv. Mem.               government).” Weingarden v. Commissioner, 825 F.2d 1027,
9715002.                                                            1029 (6th Cir. 1987). The taxpayer bears the burden of
                                                                    pointing to a clear provision entitling it to a claimed
   The IRS’s interpretation ignores a “fundamental rule of          deduction. Indopco, Inc. v. Commissioner, 503 U.S. 79, 84
statutory construction that statutory language is to be read in     (1992).
pertinent context rather than in isolation.” Oates v. Oates,
866 F.2d 203, 206 (6th Cir. 1989). When reading section                Where an agency regulation interprets an ambiguous
1.1502-79A(a) as a whole, there is no question that it applies      statutory provision, we limit our review to whether the
only to the separate return scenario. Section 1.1502-79A is         regulation is a reasonable, but not necessarily the best,
entitled “separate return years”; subsection (a) is entitled        interpretation. Atlantic Mut. Ins. Co. v. Commissioner, 523
“carryover and carryback of consolidated net operating losses       U.S. 382, ___, 118 S. Ct. 1413, 1418 (1998). An agency’s
to separate return years”; and subsection (a), including its        interpretation of its own ambiguous regulation also deserves
illustrative examples, addresses only situations involving          substantial deference if the interpretation is reasonable insofar
separate return years. Indeed, the IRS has recognized in the        as it “‘sensibly conforms to the purpose and wording of the
past that “although the [CNOL] is apportioned to individual         regulations.’” Martin v. Occupational Safety and Health
members for purposes of carry backs to separate return years,       Review Comm’n, 499 U.S. 144, 151 (1991) (quoting Northern
the apportioned amounts are not separate NOLs of each               Indiana Pub. Serv. Co. v. Porter Cty. Chapter of Izaak
member.” 49 Fed. Reg. 30528, 30530 (1984) (preamble to              Walton League of Am., Inc., 423 U.S. 12, 15 (1975)). See
Prop. Treas. Reg. § 1.1502-21(g)). We note that the Fourth          also Martin v. American Cyanamid Co., 5 F.3d 140, 144 (6th
Circuit recently held that a consolidated taxpayer is entitled to   Cir. 1993).
a “product liability loss” carryback—comparable to the SLL
carryback—for that portion of an individual member’s                                              III.
product liability expenses that does not exceed the member’s
“separate net operating loss” as calculated under section             This case presents a straightforward issue, but one that
1.1502-79A(a)(3). United Dominion Indus., Inc. v. United            arises in the context of a complex regulatory framework. We
States, __F.3d __, 2000 WL 305134, at *8-9 (4th Cir. March          therefore proceed to summarize that framework as it existed
24, 2000). The court offered no analysis to support its             in 1992, the relevant year here.
conclusion that Treas. Reg. § 1.1502-79A(a)(3) dictates a
method for calculating a member’s “separate net operating             The Internal Revenue Code permits a taxpayer to carry an
loss” outside of the separate return context. Id. at *8, n.17.      NOL forward to future taxable years or back to preceding
For the reasons outlined above, we are unpersuaded by the           taxable years to offset taxable income generated in those
Fourth Circuit’s approach.                                          years, yielding a tax refund. I.R.C. § 172(b) (1994). This
                                                                    provision “‘permit[s] a taxpayer to set off its lean years
  A second inconsistency also arises out of the 1997                against its lush years, and to strike something like an average
Technical Advice Memorandum. The IRS maintained in the              taxable income computed over a period longer than one
Memorandum that Treas. Reg. § 1.1502-80, which applies the          year.’” Six Seam Co. v. United States, 524 F.2d 347, 351 (6th
Code provisions to the group to the extent that the regulations     Cir. 1975) (quoting Libson Shops, Inc. v. Koehler, 353 U.S.
382, 386 (1957)). In 1992, the general carryback period was
6      Intermet Corp. v. Commissioner                No. 99-1046    No. 99-1046            Intermet Corp. v. Commissioner       11

three years preceding the year in which the NOL was                 a positive STI but remain when the member has a negative
incurred. I.R.C. § 172(b)(1)(A)(i) (1994) (amended in 1997).        STI, we find that the IRS’s interpretation is unreasonable.
In 1997, the three-year carryback was reduced to two years.
                                                                       Our conclusion is fortified by the IRS’s history of adopting
   The Code extends the carryback period to 10 years for            or applying differing interpretations of the SLL carryback in
certain “specified liability losses.” Id. § 172(b)(1)(C) (1994).    the consolidated return context. Such inconsistency, while
A transition rule enacted in 1990 prohibits the SLL carryback       not determinative, is a factor we consider in assessing
to years preceding 1984. Omnibus Budget Reconciliation Act          whether an agency interpretation of its regulations is
of 1990, Pub. L. No. 101-508, § 11811(b)(2)(B), 104 Stat.           “reasonable.” See Martin, 499 U.S. at 157-58; Martin, 5 F.3d
1388 (1990).                                                        at 146. We have identified at least two inconsistencies that
                                                                    undermine the IRS’s analysis.
    As of 1992, the Code defined SLL as follows:
                                                                       First, in a 1997 Technical Advice Memorandum, the IRS
      (1) In general.—The term “specified liability loss”           adopted an interpretation of the consolidated return
    means the sum of the following amounts to the extent            regulations that differs from its analysis in this case. Tech.
    taken into account in computing the net operating loss for      Adv. Mem. 9715002 (Apr. 11 1997). The Memorandum
    the taxable year:                                               addressed the precise issue presented here—i.e., “[w]hether
                                                                    specified liability expenses incurred by a member of a
      ....                                                          consolidated group may be carried back when that member
                                                                    has positive taxable income for the year in which the
        (B) Any amount . . . allowable as a deduction under         expenses are incurred.” Id. While the IRS answered that
      this chapter with respect to a liability which arises         question in the negative, as it does in this case, it offered
      under a Federal or State law . . . if –                       different reasoning. Specifically, the IRS reasoned that a
                                                                    group is entitled to the SLL carryback only to the extent that
           (i) In the case of a liability arising out of a          the SL expenses do not exceed the “portion of the [CNOL]
        Federal or State law, the act (or failure to act) giving    attributable to a member” that incurred the SL expenses. Id.
        rise to such liability occurs at least 3 years before the   According to the IRS, the “portion of the [CNOL] attributable
        beginning of the taxable year . . . .                       to a member” must be calculated under the formula prescribed
    A liability shall not be taken into account under               by Treas. Reg. § 1.1502-79(a)(3) (as amended in 1996). Id.
    subparagraph (B) unless the taxpayer used an accrual               Even if we assume the Memorandum is reconcilable with
    method of accounting throughout the period or periods           the IRS’s position in this case because a portion of the CNOL
    during which the acts or failures to act giving rise to such    cannot be attributed to a member with a positive STI under
    liability occurred.                                             Treas. Reg. § 1.1502-79(a)(3), the Memorandum’s reliance on
      (2) Limitation.—The amount of the specified liability         this regulation is entirely misplaced. Section 1.1502-79(a)
    loss for any taxable year shall not exceed the amount of        (redesignated as Treas. Reg. § 1.1502-79A(a) by T.D. 8677)
    the net operating loss for such taxable year.                   establishes a method for allocating CNOL to an individual
                                                                    member if a member seeks to carry back a loss to a “separate
I.R.C. § 172(f) (1994) (amended in 1998). Thus, a taxpayer          return year,” i.e., a year in which the member was not part of
is entitled to the SLL carryback if, among other things: (1) SL     the consolidated group. The IRS contends that this allocation
10   Intermet Corp. v. Commissioner             No. 99-1046      No. 99-1046            Intermet Corp. v. Commissioner           7

preclude Intermet from taking advantage of the SLL               expenses as defined under section 172(f)(1)(B) exist; (2) the
carryback. Like the Tax Court, the IRS points out that the       taxpayer has an NOL for the year; (3) the SL expenses are
regulations require group members to deduct SL expenses in       “taken into account” in calculating the NOL; and (4) the SLL
calculating their STI, since SL expenses do not appear on the    carryback does not exceed the NOL for the year.
list of “consolidated” items for purposes of calculating the
group’s taxable income. According to the IRS, in a case             The Code permits an affiliated group of corporations to file
where the member incurring SL expenses also has a positive       a consolidated return in lieu of separate income tax returns.
STI, the SL expenses “cannot give rise to any [CNOL] for the     It does not address whether, or how, the SLL carryback
consolidated group, since those [expenses] are entirely          provision applies in the consolidated return context. Rather,
absorbed by the income of the member before any                  the Code delegates to the Secretary of the Treasury broad
consolidated item for the group is even computed.” In other      authority to prescribe regulations
words, the IRS takes the position that Lynchburg’s SL
expenses were not “taken into account” in calculating              as he may deem necessary in order that the tax liability of
Intermet’s CNOL because Lynchburg’s positive STI                   any affiliated group of corporations . . . may be returned,
“eliminated” the SL expenses. On the other hand, the IRS           determined, computed, assessed, collected, and adjusted,
asserts that a member’s SL expenses are taken into account in      in such manner as clearly to reflect the income-tax
a CNOL if the member has a negative STI because the                liability and the various factors necessary for the
expenses are “not entirely absorbed at the member level.”          determination of such liability, and in order to prevent
                                                                   avoidance of such tax liability.
  While we agree with the IRS’s overall description of the
consolidated return regulations, we reject its analysis. A       Id. § 1502. To file a consolidated return, all member
member’s STI is simply a step along the way to calculating       organizations must agree to comply with the consolidated
the group’s taxable income or CNOL. An STI has no other          return regulations. Id. § 1501. Among the advantages of
purpose. More to the point, the regulations prescribing the      consolidated returns are the ability to offset gains and losses
calculation of STI and CNOL do not govern the determination      of group members and “greater utilization of NOL . . .
of CNOL carrybacks. That issue is governed by Treas. Reg.        carryovers.” Wolter Constr. Co. v. Commissioner, 634 F.2d
§ 1.1502-21A(b), which applies the carryback principles of       1029, 1031 n.1 (6th Cir. 1980).
section 172 to the consolidated NOL of the group, rather than
separate member “NOLs” or STIs, in situations such as this         The Treasury Regulations comprise “the bulk of the ‘law’”
one, which do not involve separate return years. In addition,    addressing consolidated returns. Id. at 1032. Unfortunately,
the IRS and the Tax Court perceive a distinction between         the regulations do not specifically address the application of
positive and negative STI that is unsupported by the             the SLL carryback. They do establish a default rule that
regulations. An STI’s character as positive or negative has no   “[t]he Internal Revenue Code, or other law, shall be
independent significance—either for purposes of calculating      applicable to the group to the extent the regulations do not
CNOL or otherwise. A member’s SL expenses affect the             exclude its application.” Treas. Reg. § 1.1502-80(a) (as
group’s CNOL dollar-for-dollar, and it makes no difference       amended in 1997).
whether the member has a positive or negative STI. Because
neither the purpose nor the language of the consolidated           To determine the tax liability of an affiliated group under
return regulations provide a basis for concluding that the       the regulations, it is first necessary to determine the
member’s SL expenses are “exhausted” when the member has         consolidated taxable income for the group. Id. § 1.1502-2(a)
                                                                 (as amended in 1996). Consolidated taxable income is
8        Intermet Corp. v. Commissioner           No. 99-1046     No. 99-1046            Intermet Corp. v. Commissioner        9

determined under Treas. Reg. § 1.1502-11(a) (as amended in          To assess Intermet’s position, the consolidated return
1997) by taking into account the following items:                 regulations direct us first to determine whether the group, as
                                                                  opposed to its individual members, satisfies the Code’s
    1.    The STI of each group member; and                       requirements for the SLL carryback. See Treas. Reg.
                                                                  § 1.1502-80(a). We find that Intermet does satisfy these
    2. The following “consolidated” items:             (a) the    requirements. First, for purposes of this appeal, we will
    consolidated net operating loss deduction; (b) consolidated   assume that Lynchburg’s claimed expenses satisfy the
    capital gain net income; (c) consolidated section 1231 net    definition of SL expenses under I.R.C. § 172(f)(1)(B) since
    loss; (d) consolidated charitable contributions deduction;    the Tax Court did not decide this issue. Second, there is no
    (e) consolidated section 922 deduction; (f) consolidated      dispute that the “taxpayer”—Intermet—had a CNOL in 1992.
    dividends received deduction; and (g) consolidated section    Third, Lynchburg’s SL expenses were “taken into account” in
    247 deduction.                                                calculating Intermet’s CNOL because they directly affected
                                                                  Lynchburg’s STI which, in turn, affected Intermet’s CNOL.
A member’s STI—which encompasses cases in which                   Indeed, Lynchburg’s SL expenses reduced Lynchburg’s STI
deductions exceed gross income (negative STI) and vice versa      and increased Intermet’s CNOL dollar-for-dollar. Finally,
(positive STI)—is calculated pursuant to Treas. Reg.              Intermet was entitled to carry back the full amount of
§ 1.1502-12 (as amended in 1996). Each member computes            Lynchburg’s SL expenses because those expenses did not
its STI in a manner similar to a separate corporation             exceed Intermet’s CNOL for the year.
computing taxable income, but with a number of
modifications. For example, a member does not take into             The IRS argues that Intermet does not satisfy the Code’s
account the consolidated items specified in Treas. Reg.           requirements because it is improper to equate the Code’s
§ 1.1501-11. Id. § 1.1502-12(h)-(n).                              references to “net operating loss” with Intermet’s CNOL. We
                                                                  disagree. It is true that a group’s CNOL is calculated
  Section 1.1502-21A defines the CNOL deduction, one of           somewhat differently than an individual corporation’s NOL.
the consolidated items to be taken into account in calculating    But this is not dispositive. The consolidated return
taxable income, as the aggregate of the CNOL carryovers and       regulations tell us to apply the IRC provisions to “the group,”
carrybacks to the taxable year. Id. § 1.1502-21A(a) (as           and the CNOL represents the group’s version of NOL.
redesignated and amended by T.D. 8677, 1996-30 I.R.B. 7,          Moreover, the IRS has consistently taken the position—both
1996-2 C.B. 119). The aggregate carryovers and carrybacks         in this case and otherwise—that the CNOL does have
consist of the group’s CNOLs that may be carried back or          significance in applying the SLL carryback in the
over to the taxable year pursuant to I.R.C. § 172(b). Id.         consolidated return context because only a group with a
§ 1.1502-21A(b)(1). The group’s CNOL is calculated in a           CNOL may take advantage of the carryback. See Tech. Adv.
manner analogous to computing consolidated taxable income,        Mem. 9715002 (Apr. 11, 1997).
taking into account: (1) the STI of each group member; (2)
consolidated capital gain net income; (3) consolidated section      Having concluded that Intermet satisfies the statutory
1231 net loss; (4) consolidated charitable contributions          requirements for the SLL carryback, we next consider
deduction; (5) consolidated dividends received deduction; and     whether the consolidated return regulations somehow alter
(6) consolidated section 247 deduction. Id. § 1.1502-21A(f).      this result. See Treas. Reg. § 1.1502-80(a). Although the
                                                                  regulations do not explicitly address the SLL carryback, the
                                                                  IRS insists that the overall structure of those regulations