PLR 1028005: The IRS granted more time to waive a consolidated net operating loss carryback

Plain-English summary

The IRS granted a consolidated group 45 more days to file an election waiving the entire carryback period for a consolidated net operating loss. The group had missed the filing deadline after relying on a qualified tax professional, and it represented that it had not carried and would not carry the loss back to an earlier consolidated return year. The extension was conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely. The group had to file the election statement with its return or amended returns and attach a copy of the ruling.

Ruling snapshot

• Question: Could the consolidated group receive more time to waive the entire carryback period for its consolidated net operating loss?
• Outcome: approved
• Key authorities: IRC §§ 172 and 6501; Treas. Reg. §§ 1.1502-21(b)(3)(i), 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201028005 Third Party Communication: None
Release Date: 7/16/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 1502.21-00, 9100.22-00 --------------------, ID No. -------------
Telephone Number:
--------------------
---------------------------------------------------------- Refer Reply To:
------------------------------------- CC:CORP:B06
------------------------------ PLR-106887-10
----------------------- Date:
April 19, 2010

LEGEND

Taxpayer = -------------------------------------

Date 1 = --------------------------

Date 2 = ---------------------------

Date 3 = ---------------------

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

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

This letter responds to a letter dated February 1, 2010, requesting, on behalf of
Taxpayer, an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to file an election. The extension is being requested for Taxpayer to file an
election under § 1.1502-21(b)(3)(i) of the Income Tax Regulations to relinquish the
entire carryback period for the consolidated net operating loss (“CNOL”) of the
consolidated group of which Taxpayer is the common parent for the tax year ended
Date 1. Additional information was received in subsequent correspondence dated
March 17, 2010. The material information submitted for consideration is summarized
below.

Taxpayer is the common parent of a consolidated group. The consolidated group
incurred a CNOL for its year ended Date 1. An election to waive the entire carryback
PLR-106887-10 2

period for the CNOL was due on Date 2. However, for various reasons, a valid election
was not filed. On Date 3, it was discovered that a valid election was not filed.

Subsequently, this request was submitted, under § 301.9100-3, for an extension of time
to file a valid election. The period of limitations on assessment under § 6501(a) has not
expired for the taxable year for which the election should have been filed or for any
subsequent taxable years.

Taxpayer has represented that the consolidated group of which Taxpayer was the
common parent for the tax year ended Date 1 has not, and will not carry any portion of
the CNOL back to a prior consolidated return year of the group. Taxpayer has further
represented that no member of the consolidated group of which Taxpayer was the
common parent for the tax year ended Date 1 had a separate return year, within the
meaning of § 1.1502-1(e), at any time during the carryback period.

Section 1.1502-21(b)(3)(i) provides that a consolidated group may elect to relinquish the
entire carryback period with respect to a CNOL for any consolidated return year. The
election is made in a separate statement entitled “THIS IS AN ELECTION UNDER
SECTION 1.1502-21(b)(3)(i) TO WAIVE THE ENTIRE CARRYBACK PERIOD
PURSUANT TO SECTION 172(b)(3) FOR THE [insert consolidated return year] CNOLs
OF THE CONSOLIDATED GROUP OF WHICH [insert name and employer
identification number of common parent] IS THE COMMON PARENT.” Section 1.1502-
21(b)(3)(i) provides that the statement must be filed with the group’s income tax return
for the consolidated year in which the CNOL arises.

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.

Section 301.9100-1(b) defines the term “regulatory election” as including an election
whose due date is prescribed by a regulation, revenue ruling, revenue procedure,
notice, or announcement. 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. Section 301.9100-3 provides
extensions of time for making regulatory elections that do not meet the requirements of
§ 301.9100-2. 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.

In this case, the time for filing the election is fixed by the regulations (i.e.,§ 1.1502-
21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under
§ 301.9100-3 to grant an extension of time for Taxpayer to file the election, provided
PLR-106887-10 3

Taxpayer establishes 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 Taxpayer and Company
Official explain the circumstances that resulted in the failure to timely file a valid
election. The information establishes that Taxpayer reasonably relied on a qualified tax
professional who failed to make, or advise Taxpayer 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 that have
been made, we conclude that Taxpayer has established it acted reasonably and in good
faith in failing to timely file the election, the requirements of §§ 301.9100-1 and
301.9100-3 are satisfied, and granting relief will not prejudice the interests of the
government. Accordingly, we grant an extension of time under § 301.9100-3, until 45
days from the date on this letter, for Taxpayer to file the election with respect to the
relinquishment of the entire carryback period for the CNOL for the tax year ended Date
1, as described above.

The above extension of time is conditioned on Taxpayer’s consolidated group’s tax
liability, if any, not being lower, in the aggregate for all years to which the election
applies, than it would have been if the election had been made timely (taking into
account the time value of money). No opinion is expressed as to Taxpayer’s
consolidated group’s tax liability for the years involved. A determination thereof will be
made 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 Taxpayer’s
consolidated group’s liability is lower. Section 301.9100-3(c).

Taxpayer should file the election in accordance with § 1.1502-21(b)(3)(i). Taxpayer’s
consolidated group’s returns must be amended to attach the election statement required
by § 1.1502-21(b)(3)(i). A copy of this letter should be attached to the election
statement. Alternatively, if Taxpayer files its returns electronically, it may satisfy this
latter requirement by attaching a statement to its return that provides the date and
control number of this letter ruling.

No opinion is expressed as to the tax effects or consequences of filing 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 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, all of the essential facts must be verified.
In addition, notwithstanding that an extension is granted under § 301.9100-3 to file the
PLR-106887-10 4

election, penalties and interest that would otherwise be applicable, if any, continue to
apply.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

                                   Sincerely,


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

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