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Per the IRS instructions for Schedule M-3 (Form 1120):

Who Must File

Generally the following apply.

  • A domestic corporation or group of corporations required to file Form 1120, U.S. Corporation Income Tax Return, that reports on Form 1120, Schedule L, Balance Sheets per Books, total assets at the end of the corporation's tax year that equal or exceed $10 million must file Schedule M-3 instead of
    Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return.

  • A corporation filing a non-consolidated Form 1120 that reports on Schedule L total assets that equal or exceed $10 million must complete and file Schedule M-3 and must check box (1) Non-consolidated return, at the top of page 1 of Schedule M-3.

  • Any U.S. consolidated tax group consisting of a U.S. parent corporation and additional includible corporations listed on Form 851, Affiliations Schedule, required to file Form 1120, that reports on Schedule L total consolidated assets at the end of the tax year that equal or exceed $10 million must file Schedule M-3 and must check box (2) Consolidated return (Form 1120 only), or box (3) Mixed 1120/L/PC group, as applicable, at the top of page 1 of Schedule M-3.

  • A corporation filing Form 1120 (or Form 1120-C) that is not required to file Schedule M-3 may voluntarily file Schedule M-3.

  • If a corporation was required to file Schedule M-3 for the preceding tax year, but reports on Form 1120, page 1, Item D, and on Form 1120, Schedule L, total consolidated assets at the end of the current tax year of less than $10 million, the corporation is not required to file Schedule M-3 for the current tax year.

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