Some Mexican companies can no longer be included in US consolidated tax returns | Norton Rose Fulbright
Section 1504(d) of the US tax code lets US corporations treat some subsidiaries in Canada and Mexico as part of their consolidated tax returns as if the subsidiaries were in the United States. This is true of any subsidiary that is “organized under the laws of a contiguous foreign country [and is] maintained solely for the purpose of complying with the laws of such country as to title and operation of property.”
The IRS confirmed in 1970 that a US parent can consolidate a Mexican subsidiary that owns real estate. That’s because Mexican law required local ownership of land. However, Mexico dropped the ban against foreign ownership of land on December 25, 1996. As a result, US companies can no longer consolidate Mexican subsidiaries that were formed to own land, the IRS said in August. It said consolidation has not been allowed since the law changed in Mexico in 1996. The announcement is in Revenue Procedure 2001-39.