Other Form 1120 Schedules Affected by Schedule M-3 Requirements

Schedule B Generally, a corporation or group of corporations that files a Form 1120 and is required to file Schedule M-3, must also file Schedule B (Form 1120), Additional Information for Schedule M-3 Filers. In the case of a consolidated group, a parent corporation files one Schedule B (Form 1120) for the entire consolidated group.

Certain corporations or groups of corporations filing Form 1120 that (a) are required to file Schedule M-3 and have less than $50 million in total assets at the end of the tax year, or (b) are not required to file Schedule M-3 and voluntarily file Schedule M-3, are not required to file Schedule B (Form 1120). See the instructions for Schedule B (Form 1120).

Schedule L If a non-tax-basis income statement and related non-tax-basis balance sheet are prepared for any purpose for a period ending with or within the tax year, the Schedule L balance sheet must be prepared showing non-tax-basis amounts. See the instructions for Part I, line 1, for the discussion of non-tax-basis income statements and related non-tax-basis balance sheets prepared for any purpose and the impact on the selection of the income statement used for Schedule M-3 and the related non-tax-basis balance sheet amounts that must be used for Schedule L.

Total assets shown on Schedule L, line 15, column (d) (or, for some consolidated mixed groups with a Form 1120 parent and an insurance subsidiary, the assets reported on Form 1120, page 1, item D), must equal the total assets of the corporation (or, for a U.S. consolidated tax group, the total assets of all members of the group listed on Form 851) as of the last day of the tax year, and must be the same total assets reported by the corporation (or by each member of the U.S. consolidated tax group) in the non-tax-basis financial statements, if any, used for Schedule M-3. If the corporation prepares non-tax-basis financial statements, Schedule L must equal the sum of the financial statement total assets for each corporation listed on Form 851 and included in the consolidated U.S. income tax return (includible corporation) net of eliminations for intercompany transactions between includible corporations. If the corporation does not prepare non-tax-basis financial statements, Schedule L must be based on the corporation's books and records. The Schedule L balance sheet can show tax-basis balance sheet amounts if the corporation is allowed to use books and records for Schedule M-3 and the corporation's books and records reflect only tax-basis amounts.

Generally, total assets at the beginning of the year (Schedule L, line 15, column (b)) must equal total assets at the close of the prior year (Schedule L, line 15, column (d)). For each Schedule L balance sheet item reported for which there is a difference between the current opening balance sheet amount and the prior closing balance sheet amount, attach a statement that reports the balance sheet item, the prior closing amount, the current opening amount, and a short explanation of the change. Reasons for these differences include mergers and acquisitions.

For purposes of measuring total assets at the end of the year, the corporation's assets may not be netted or reduced by the corporation's liabilities. In addition, total assets may not be reported as a negative amount. If Schedule L is prepared on a non-tax-basis method, an investment in a partnership may be shown as appropriate under the corporation's non-tax-basis method of accounting, including, if required by the corporation's reporting methodology, the equity method of accounting for investments. If Schedule L is prepared on a tax basis, an investment by the corporation in a partnership must be shown as an asset and measured by the corporation's adjusted basis in its partnership interest. Any liabilities contributing to such adjusted basis must be shown on Schedule L as corporate liabilities.

Schedule M-2 The amount shown on Schedule M-2, line 2, Net income (loss) per books, must equal the amount shown on Schedule M-3, Part I, line 11. Schedule M-2 must reflect activity only of corporations included in the consolidated U.S. income tax return.

Instructions for Schedule M-3 (Form 1120) (Rev. 6-2025) 3

Consolidated Return (Form 1120, Page 1) Report on Form 1120, page 1, each item of income, gain, loss, expense, or deduction net of elimination entries for intercompany transactions between includible corporations. The corporation must not report as dividends on Form 1120, Schedule C, any amounts received from an includible corporation. In general, dividends received from an includible corporation must be eliminated in consolidation rather than offset by the dividends-received deduction.