Extension granted to make a late consolidated-return election

Plain-English summary

The IRS granted a parent company and related subsidiaries 45 days to make a late election to file a consolidated federal income tax return. The taxpayers showed that they reasonably relied on a qualified tax professional who failed to make or advise them to make the election, and the request was filed before the IRS discovered the omission. The relief was conditioned on the group qualifying substantively to file a consolidated return and on aggregate tax liability not being lower than it would have been if the election had been timely. The ruling did not decide whether the group substantively qualified or determine the taxpayers’ tax liability.

Ruling snapshot

• Question: Should the taxpayers receive additional time to make a late election to file a consolidated return?
• Outcome: Approved
• Key authorities: IRC §§ 1502, 6501, and 9100; Treas. Reg. §§ 1.1502-75(a)(1) and 301.9100-1 through 301.9100-3; 26 U.S.C. § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201025044 Third Party Communication: None
Release Date: 6/25/2010 Date of Communication: Not Applicable
Index Number: 1502.75-00, 9100.20-00
Person To Contact:
--------------------------------------------------------- ---------------------, ID No. -------------
------------------------ Telephone Number:
------------------------------------ ---------------------
----------------------------- Refer Reply To:
CC:CORP:B06
In Re: PLR-151815-09
-------------------------------- Date:
------------------------------------ February 26, 2010
-------------------------------------

LEGEND

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

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

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

Former Parent = -----------------------

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

Sub 1 = -----------------------

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

Sub 2 = -----------------------

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

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

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

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

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

Year 1 = -----------------------------------------------------------

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

Company
= ---------------------------------------------------------------------------------------
Official
------------------------

PLR-151815-09 -2-

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

Tax Professional =
----------------------------------------

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

    This letter responds to a letter dated November 20, 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. The extension is being requested for
Parent, Former Parent, Sub 1, and Sub 2 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, effective for the taxable year ended Date A (the
“Election”). The material information is summarized below.

  Prior to Date B, Former Parent was the common parent of an affiliated group (the

“Former Parent Group”) consisting of itself, Sub 1, and Sub 2, which filed consolidated
Federal income tax returns. On Date B, Parent acquired all of the stock of Former
Parent in a transaction not constituting a reverse acquisition within the meaning of
§ 1.1502-75(d)(3), and, because Parent is an includible corporation, terminating the
Former Parent Group. Nevertheless, the Former Parent Group filed a consolidated
Federal income tax return for Year 1. Parent filed a separate return for its Year 1.

   The Election was due no later than the last day prescribed by law (including

extensions of time) for the filing of Parent’s return, 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. The period of limitations on
assessment under § 6501(a) has not expired for Parent's, Former Parent's, Sub 1's, or
Sub 2's taxable years for which they want to make the Election, the taxable years in
which the Election should have been filed, or any taxable years that would have been
affected by the Election had it been timely filed.

    Section 1.1502-75(a)(1) provides that a group which did not file a consolidated

return for the immediately preceding taxable year may file a consolidated return in lieu
of separate returns for the taxable year, provided that each corporation which has been
a member of the group during any part of the taxable year for which the consolidated
return is to be filed consents to the regulations under § 1502. If a group wishes to
exercise its privilege of filing a consolidated return, such consolidated return must be
filed not later than the last day prescribed by law (including extensions of time) for filing
the common parent's return.

  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

PLR-151815-09 -3-

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(a)(1)). Therefore, the Commissioner has discretionary authority under
§ 301.9100-3 to grant an extension of time for Parent to file the Election, provided
Parent shows 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.

    Information, affidavits, and representations submitted by Parent, Company

Official, and Tax Professional explain the circumstances that resulted in the failure to
timely file a valid Election. The information establishes that Parent reasonably relied on
a qualified tax professional who failed to make, or advise Parent to make, the Election,
and that the request for relief was filed before the failure to make the Election was
discovered by the Internal Revenue Service. 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, provided Parent group qualifies
substantively to file a consolidated return for the applicable tax year, an extension of
time is granted under § 301.9100-3, until 45 days from the date on this letter, for Parent
to file the Election. Parent, having already filed its return, must, within 45 days from the
date on this letter, amend its return to reflect a consolidated return that includes
Parent’s activity for Year 1 and the activity of the Former Parent Group members for
Year 1 after Date B (including Forms 1122 and 851). Parent must attach a copy of this
letter to such return, or if Parent group files its return electronically, Parent group may
attach a statement to the return that provides the date and control number of this ruling
letter.

   The above extension of time is conditioned on Parent group's 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

PLR-151815-09 -4-

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 whether Parent group qualifies substantively to file a

consolidated return. In addition, we express no opinion as to the tax consequences of
filing the return or the Election late under the provisions of any other section of the Code
and regulations, or as to the tax treatment of any conditions existing at the time of, or
resulting from, filing the return and 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 taxpayers. 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.

   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)