Entity Considerations for Schedule M-3

For purposes of Schedule M-3, references to the classification of an entity (for example, as a corporation, a partnership, or a trust) are references to the treatment of the entity for U.S. income tax purposes. An entity that generally is disregarded as separate from its owner for U.S. income tax purposes (disregarded entity) mustn't be separately reported on Schedule M-3 except, if required, on Part I, line 7a, 7b, or 7c. On Schedule M-3, Parts II and III, any item of income, gain, loss, deduction, or credit of a disregarded entity must be reported as an item of its owner. In particular, the income or loss of a disregarded entity mustn't be reported on Part II, line 7, 8, or 9 as from a separate partnership or other pass-through. The financial statement income or loss of a disregarded entity other than a qualified subchapter S subsidiary (QSub) is included on Part I, line 7b, if and only if its financial statement income or loss is included on Part I, line 11, but not on Part I, line 4a. The financial statement income or loss of a QSub is included on Part I, line 7c, if and only if its financial statement income or loss is included on Part I, line 11, but not on Part I, line 4a.

Qualified Subchapter S Subsidiaries (QSubs). Because a QSub is a disregarded entity, for purposes of Schedule M-3, Schedule L, and the tax return in general, the subsidiary is deemed to have liquidated into the parent S corporation. As such, all QSubs are treated as divisions of the S corporation parent and they mustn't be separately reported on Schedule M-3 except, if required, on Part I, line 7c.

Reportable Entity Partner Reporting Responsibilities A reportable entity partner to a partnership filing Form 1065, U.S. Return of Partnership Income, is an entity that:

• Owns or is deemed to own, directly or indirectly, under these instructions, a 50% or greater interest in the income, loss, or capital of the partnership on any day of the tax year; and

• Was required to file Schedule M-3 on its most recently filed U.S. federal income tax return or return of income filed prior to that day.

For the purposes of these instructions:

1. The parent corporation of a consolidated tax group is deemed to own all corporate and partnership

provided, any statement required to support a line item must be attached and provide the information required for that line item.

Any corporation filing Schedule M-3 must check the box on Form 1120-S, item C, indicating that Schedule M-3 is attached (whether required or voluntary).