Current through Register Vol. XLI, No. 38, September 20, 2024
15C.1. In general. - For purposes of
subparagraph 15.2.2.4 of these regulations, a member of a controlled group of
corporations shall be considered to be a franchised corporation for a taxable
year if each of the following conditions is satisfied for one-half (1/2) (or
more) of the number of days preceding the December 31 included within such
taxable year (or, if such taxable year does not include a December 31, for
one-half (1/2) or more of the number of days in such taxable year preceding the
last day of such year):
15C.1.1.Such member
is franchised to sell the products of another member, or the common owner, of
such controlled group.
15C.1.2.More
than fifty percent (50%) (determined on the basis of cost) of all the goods
held by such member primarily for sale to its customers are acquired from
members or the common owner of the controlled group, or both.
15C.1.3.The stock of such member is to be
sold to an employee (or employees) of such member pursuant to a bona fide plan
designed to eliminate the stock ownership of the parent corporation (as defined
in Section
110-13C-15A.2.1 of
these regulations) or of the common owner (as defined in Section
110-13C-15A.2.3 of
these regulations) in such member.
15C.1.4.Such employee owns (or such employees
in the aggregate own) directly more than twenty percent (20%) of the total
value of shares of all classes of stock of such member. For purposes of this
subsection, the determination of whether an employee (or employees) owns the
requisite percentage of the total value of the stock of the member shall be
made without regard to Section
110-13C-15B.2
of these regulations, relating to certain stock treated as excluded stock.
Furthermore, if the corporation has more than one (1) class of stock
outstanding, the relative voting rights as between each such class of stock
shall be disregarded in making such determination.
15C.2. Plan for elimination of stock
ownership.
15C.2.1.A plan referred to in
paragraph 15C.1.3 of this section must:
15C.2.1.1.Provide a reasonable selling price
for the stock of the member, and
15C.2.1.2.Require that a portion of the
employee's compensation or dividends, or both, from such member be applied to
the purchase of such stock (or to the purchase of notes, bonds, debentures, or
similar evidences of indebtedness of such member held by the parent corporation
or the common owner).
It is not necessary, in order to satisfy the requirements of
subparagraph 15C.2.1.2 of this section, that the plan require that a percentage
of every dollar of the compensation and dividends be applied to the purchase of
the stock (or the indebtedness). The requirements of such subsection are
satisfied if an otherwise qualified plan provides that under certain specified
conditions (such as a requirement that the member earn a specified profit) no
portion of the compensation and/or dividends need be applied to the purchase of
the stock (or indebtedness), provided such conditions are
reasonable.
15C.2.2.A plan for the elimination of the
stock ownership of the parent corporation or of the common owner will satisfy
the requirements of paragraphs 15C.1.3 and 15C.2.1 of this section even though
it does not require that the stock of the member be sold to an employee (or
employees) if it provides for the redemption of the stock of the member held by
the parent or common owner and under the plan the amount of such stock to be
redeemed during any period is calculated by reference to the profits of such
member during such period.
