In tax filing practice, the compliance requirements for consolidated returns often confuse small business groups. Recently, a user sought professional advice on the following issue:

"I am filing a consolidated return for a small parent-subsidiary group (both are C corporations). Given that the group files a consolidated return, am I required to file Schedule O (Form 1120) along with Forms 851 and 1122? Schedule O involves consent plans and apportionment schedules, and this group has no such arrangements. The group is very small (sales of $15,000 and a net operating loss (NOL) of $7,000)."

In response to the above question, it is necessary to clarify the applicability of Schedule O (Form 1120). According to IRS regulations, Schedule O is primarily used to record consent plans (e.g., allocation of certain tax attributes) and apportionment arrangements (such as the apportionment of state or foreign tax credits) for the consolidated group. If the group does not have such items that require special recording or apportionment, Schedule O is not a mandatory filing form.

In this case, the group's sales are only $15,000, and it has a net operating loss (NOL) of $7,000. Since the group did not mention any consent plans or apportionment arrangements, and its size is extremely small, there are no substantive apportionment or consent matters to disclose. Therefore, when filing Form 851 (information form for the parent of a consolidated group) and Form 1122 (statement by a subsidiary consenting to join in a consolidated return), if the group has no content required by Schedule O, it is not mandatory to attach Schedule O.

However, it is recommended that taxpayers still carefully review the latest version of Form 1120 and its instructions from the IRS, because in some cases, even without apportionment or consent plans, Schedule O may still need to be filed to declare "not applicable." But based on the available information, this group does not appear to fall into such a situation. If there are still doubts, one may consult a tax professional or refer to official IRS guidance.

In summary, for a small parent-subsidiary group without special apportionment arrangements, Schedule O is not a required document for the consolidated return. The key is to accurately determine whether there are items that need to be recorded or apportioned, rather than mechanically filing all schedules.