### Question
Can you define what affiliated service group means?


### Answer
**Affiliated service group** is defined as the following in *26 U.S.C. § 414*:

> a group consisting of a service organization (hereinafter in this paragraph referred to as the "first organization") and one or more of the following:



(A) any service organization which—



(i) is a shareholder or partner in the first organization, and



(ii) regularly performs services for the first organization or is regularly associated with the first organization in performing services for third persons, and


  


(B) any other organization if—



(i) a significant portion of the business of such organization is the performance of services (for the first organization, for organizations described in subparagraph (A), or for both) of a type historically performed in such service field by employees, and



(ii) 10 percent or more of the interests in such organization is held by persons who are highly compensated employees (within the meaning of section 414(q)) of the first organization or an organization described in subparagraph (A)

#### Citation:
  - *26 U.S.C. § 414*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter D-Deferred Compensation, Etc. > PART I-PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC. > Subpart B-Special Rules**

