PLR 200907020: A corporate group received extra time to elect consolidated filing

Plain-English summary

A parent corporation and its includible subsidiaries intended to elect to file a consolidated federal income tax return but failed to make a valid election on time. The parent requested discretionary relief after discovering the omission and before the IRS discovered it. The submitted information showed that the parent had acted reasonably and in good faith by relying on a qualified tax professional who failed to make or advise it to make the election. The IRS granted the group 60 days from the ruling letter's date to file a consolidated return with the required Forms 1122. Relief was conditioned on the group's aggregate tax liability for all affected years being no lower than it would have been with a timely election.

Ruling snapshot

• Question: Could the parent and its subsidiaries receive extra time to elect consolidated federal income tax return treatment?
• Outcome: Approved: the group received 60 days to file the consolidated return election, subject to a tax-liability condition.
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, 301.9100-2, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200907020
Third Party Communication: None
Release Date: 2/13/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.20-00, 1502.75-00
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Telephone Number:
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Refer Reply To:
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CC:CORP
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PLR-138035-08
------------------------------------------------ Date:
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November 6, 2008
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Legend

Parent = -----------------------------------
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LLC = -----------------------------------------------

Subsidiary 1 = --------------------------------------------------------------------
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Subsidiary 2 = ----------------------------------------
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Subsidiary 3 = -----------------------------------------------------------------
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Subsidiary 4 = ----------------------------------
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Subsidiary 5 = ---------------------------------
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Subsidiary 6 = ------------------------------
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Subsidiary 7 = -------------------------------
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PLR-138035-08
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Date A = -----------------------

Date B = ------------------

Date C = -----------------------

Date D = --------------------

Date E = -----------------------

Date F = --------------------------

x = ---

Company Official = -----------------------------
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Dear ----------------:

This letter responds to a letter dated August 27, 2008, submitted on behalf of Parent, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an Election. Parent is requesting an extension for it and its includible subsidiaries to make an election to file a consolidated Federal income tax return, with Parent as the common parent, under § 1.1502-75(a)(1) of the Income Tax Regulations (the “Election”), for the taxable year ended Date F. Additional information was received in letters dated October 8 and October 23, 2008. The material information is summarized below.

Parent was formed on Date A by LLC, an entity taxable as a partnership for Federal income tax purposes. On Date B and Date C, Parent formed Subsidiary 6 and Subsidiary 7, respectively, as wholly owned subsidiaries, to acquire the stock of Subsidiaries 1, 2, 3, 4, and 5. Subsidiaries 1, 2, 3, and 4 were acquired by Subsidiar-y 6 on Date D in exchange for cash and approximately x% of the outstanding stock of Parent. Subsidiary 5 was acquired by Subsidiary 7 on Date E in exchange for cash, a note, debt assumption, and a small amount of stock of Parent.

Parent intended to file the Election, but for various reasons a valid Election was not filed. After the due date for the Election, it was discovered that the Election had not been filed. Subsequently, this request was submitted, under § 301.9100-3, for an extension of time to file the Election.
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Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for making certain elections. Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by the regulations (i.e., § 1.1502-75). Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an extension of time for Parent and its includible subsidiaries to file the Election, provided Parent acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government.

Information, affidavits, and representations submitted by Parent and Company Official explain the circumstances that resulted in the failure to timely file a valid Election. The information establishes that the request for relief was filed before the failure to make the Election was discovered by the Internal Revenue Service and that Parent reasonably relied on a qualified tax professional who failed to make, or advise Parent to make, the Election. See §§ 301.9100-3(b)(1)(i) and (v).

Based on the facts and information submitted, including the representations made, we conclude that Parent has shown it acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Accordingly, an extension of time is granted under § 301.9100-3, until 60 days from the date on this letter, for Parent and its includible subsidiaries to file the Election (by filing a consolidated return, with Parent as the common parent, and attaching a Form 1122 for each of the includible subsidiaries) for the taxable year ended Date F.

The above extension of time is conditioned on the taxpayers’ (Parent’s and its subsidiaries) tax liability (if any) being not lower, in the aggregate, for all years to which the Election applies, than it would have been if the Election had been timely made (taking into account the time value of money). No opinion is expressed as to the taxpayers’ tax liability for the years involved. A determination thereof will be made by the applicable Director’s office upon audit of the Federal income tax returns involved. Further, no opinion is expressed as to the Federal income tax effect, if any, if it is determined that the taxpayers’ tax liability is lower. Section 301.9100-3(c).
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We express no opinion as to the tax consequences of filing the Election late under the provisions of any other section of the Code or regulations, or as to the tax treatment of any conditions existing at the time of, or resulting from, filing the Election late that are not specifically set forth in the above ruling. For purposes of granting relief under § 301.9100-3, we relied on certain statements and representations made by the taxpayer. However, the Director should verify all essential facts. In addition, notwithstanding that an extension is granted under § 301.9100-3 to file the Election, penalties and interest that would otherwise be applicable, if any, continue to apply.

This letter is directed only to the taxpayer(s) who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling.

Pursuant to the power of attorney on file in this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

Ken Cohen
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel (Corporate)

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