Common use of Lower tier subsidiaries Clause in Contracts

Lower tier subsidiaries. If a C cor- poration subsidiary (upper tier cor- poration) holds stock in another C cor- poration (lower tier subsidiary) meet- ing the requirements of section 1504(a)(2), the upper tier corporation’s gross receipts attributable to a divi- dend from the lower tier subsidiary are considered to be derived from the ac- tive conduct of a trade or business to the extent the lower tier subsidiary’s earnings and profits are attributable to the active conduct of a trade or busi- ness by the subsidiary under paragraph (b) (1), (3), (4), or (5) of this section. For purposes of this section, distributions by the lower tier subsidiary will be considered attributable to active earn- ings and profits according to the rule in paragraph (c) of this section. This paragraph (b)(2) does not apply to any member of a consolidated group (as de- fined in § 1.1502–1(h)).