PLR 200945028: Extension granted for a late consolidated-return election

Plain-English summary

The IRS granted a parent corporation and its includible subsidiaries an extension to make a consolidated federal income tax return election. The election had not been timely filed after a change in the affiliated group, and the taxpayers reasonably relied on a qualified tax professional. The taxpayers may file the election within 60 days after the ruling letter date by filing a consolidated return with the parent as common parent and attaching Form 1122 for each includible subsidiary. The relief is conditioned on the taxpayers' aggregate tax liability not being lower for the affected years than it would have been if the election were timely, taking the time value of money into account.

Ruling snapshot

• Question: May the affiliated group receive an extension to file a late consolidated-return election?
• Outcome: Approved
• Key authorities: IRC §§ 1502, 1504, and 9100; Treas. Reg. §§ 1.1502-75 and 301.9100-1 through 301.9100-3; Form 1122

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200945028
Third Party Communication: None
Release Date: 11/6/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.20-00, 1502.75-00
----------------------, ID No. -----------------
Telephone Number:
---------------------
-----------------
Refer Reply To:
-------------------
CC:CORP:B03
-----------------------
PLR-124633-09
---------------------------------------
Date:
----------------------------------
August 05, 2009

Legend

Parent = ------------------------
------------------------------------------------------------

Old Parent = ------------------------------------------
------------------------------------------------------------

Date A = -----------------

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

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

Tax Professionals = ---------------------------
----------------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------

-----------------------
---------------------------------------------------------------
----------------------------------------------------------------
---------------------------------------------------------------------------------------------------
----------------------------------------------------------------------

Dear -------------:

This letter responds to a letter dated May 12, 2009, 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
PLR-124633-09
2

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 C. Additional information was received in a letter dated July 22, 2009. The material information is summarized below.

Parent was incorporated on Date A. Prior to Date A, Old Parent was the common parent of an affiliated group filing a consolidated return. On Date B, Old Parent became affiliated (within the meaning of § 1504(a)) with Parent in a transaction which did not qualify as a “reverse acquisition” under § 1.1502-75(d)(3).

An election for the Parent affiliated group to file a consolidated return for the year ending Date C was due no later then the last day prescribed by law (including extensions of time) for filing Parent’s return for the year ending Date C, 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.

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 Tax Professionals 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).
PLR-124633-09
3

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 C.

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).

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 and its representatives. 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.
PLR-124633-09
4

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

Sincerely,

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

cc: