- means a group of entities controlled directly or indirectly by the same entity or group of entities within the meaning of this paragraph (e).
(1) Direct control.
The determination of direct control is made on the basis of all the relevant facts and circumstances. One entity or group of entities (the CONTROLLING ENTITY) generally controls another entity or group of entities (the CONTROLLED ENTITY) for purposes of this paragraph if the controlling entity possesses either of the following rights or powers and the rights or powers are discretionary and non-ministerial --
(i) The right or power both to approve and to remove without cause a controlling portion of the governing body of the controlled entity; or
(ii) The right or power to require the use of funds or assets of the controlled entity for any purpose of the controlling entity.
(2) Indirect control.
If a controlling entity controls a controlled entity under the test in paragraph (e)(1) of this section, then the controlling entity also controls all entities controlled, directly or indirectly, by the controlled entity or entities.
(3) Exception for general purpose governmental entities.
An entity is not a controlled entity under this paragraph (e) if the entity possesses substantial taxing, eminent domain, and police powers. For example, a city possessing substantial amounts of each of these sovereign powers is not a controlled entity of the state.
[T.D. 8394, 57 FR 3526-35, Jan. 30, 1992, corrected by 57 FR 13027, Apr. 15, 1992, as amended by T.D. 8418, 57 FR 20971-21033, May 18, 1992; revised by T.D. 8476, 58 FR 33510-33553, June 18, 1993, as corrected by 58 FR 44451-44454, Aug. 23, 1993; amended by T.D. 8538, 59 FR 24039-24046, May 10, 1994; T.D. 8712, 62 FR 2275-2305, Jan. 16, 1997; T.D. 8718, 62 FR 25502-25514, May 9, 1997.]