![]() ![]() Next, according to the IRS, “ brother-sister controlled group of corporations, generally, is two or more corporations where: (1) five or fewer persons who are individuals, estates, or trusts own at least 80 percent of the total combined voting power of all classes of stock entitled to vote, or the total value of shares of all classes of stock of each corporation and (2) the same five or fewer persons, taking into account ownership only to the extent that it is identical with respect to each corporation, own more than 50 percent of the total voting power of all classes of stock entitled to vote, or total value of shares of all classes of stock of each corporation.”3 More simply, it is generally the case that a brother-sister relationship exists when 5 or fewer persons own 80% (or more) of each entity in the group with at least 50% voting power.First, the IRS has clarified that a parent-subsidiary controlled group of corporations is generally described “as one or more chains of corporations where the common parent corporation owns more than 50 percent of the total combined voting power of all classes of stock entitled to vote, or more than 50 percent of the value of all classes of stock of each corporation.”2 In other words, a single entity owns 50% or more of all of the entities.There are three categories of aggregated companies that may be classified as controlled groups: Specifically, the IRS states: “An Eligible Employer, for purposes of the Employee Retention Credit, includes all members of an aggregated group that are treated as a single employer in accordance with the provisions of section 2301(d) of the CARES Act.”1 In other words, if multiple businesses are controlled by common ownership, then all of the entities in the group are deemed a single employer and aggregated for some ERC purposes, including: (a) whether the employer has a significant decline in gross receipts, (b) the number of average employees, and (c) the calculation of qualified wages. Moreover, an ERC-eligible employer is determined on a controlled group basis. ![]() The basic definition of “eligible employer” is one who experiences either: (1) fully or partially suspended business operations for any 2020 or 2021 calendar as a result of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or (2) a significant decline in gross receipts during a calendar quarter in 2020 or 2021. ![]()
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