PLR 1038011: IRS granted more time to file an election relinquishing a consolidated loss carryback

Plain-English summary

A corporate group failed to timely file an election to relinquish the carryback period for a consolidated net operating loss. The taxpayer said it relied on a qualified tax professional and discovered the missing election after the return was filed. The IRS granted an extension of 45 days from the ruling date to file the election, subject to conditions concerning the group's aggregate tax liability and other requirements. The ruling applied the standards for reasonable reliance, good faith, and avoiding prejudice to the government.

Ruling snapshot

• Question: Could the taxpayer receive additional time to file an election relinquishing the carryback period for a consolidated net operating loss?
• Outcome: Approved
• Key authorities: IRC §§ 172(b)(3), 6501(a), and 6110(k)(3); Treas. Reg. §§ 1.1502-21 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201038011 Third Party Communication: None
Release Date: 9/24/2010 Date of Communication: Not Applicable
Index Number: 1502.21-00, 9100.22-00
Person To Contact:
----------------------------- ----------, ID No. -----------------
------------------------------------------------------------ Telephone Number:
--------- ---------------------
----------------------------------- Refer Reply To:
---------------------------- CC:CORP:B02
--------------------------- PLR-111610-10
Date:
June 24, 2010

Legend

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

Subsidiaries = --------------------------

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

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

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

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

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

This responds to a letter dated March 12, 2010, requesting on behalf of Taxpayer an
extension of time under §§ 301.9100-1 through 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")

PLR-111610-10 2

of the consolidated group of which Taxpayer was the common parent for the tax year
ended Date 1. Additional information was submitted June 8, 2010. The material
information submitted for consideration is summarized below.

Taxpayer was the common parent of a consolidated group, consisting of Taxpayer and
Subsidiaries, which sustained a CNOL in the tax year ended Date 1. Taxpayer has
represented that Taxpayer’s consolidated group has not, and will not, carry any portion
of the CNOL to a prior consolidated return year of the group. Taxpayer has also
represented that no corporation which was a member of Taxpayer's consolidated group
at any time during 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.

The election to relinquish the carryback period was required to be filed by Date 2.
Taxpayer's return was timely filed for the tax year ended Date 1, consistent with a valid
election having been filed. However, for various reasons, an election to relinquish the
carryback period was not timely filed. Subsequent to Date 2, the date the return was
timely filed, it was discovered that a valid election had not been filed. Thereafter, 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) of the Internal
Revenue Code has not expired for the taxable year for which the election should have
been filed or for any subsequent taxable year(s).

Section 1.1502-21(b)(3)(i) provides that a consolidated group may elect to relinquish the
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
return 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
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

PLR-111610-10 3

§ 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. Section 301.9100-
3(a).

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
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, Tax Professional,
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 affidavits submitted and the
representations that have been made, we conclude that Taxpayer has established that
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 year 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
return 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 amended return electronically, Taxpayer may satisfy

PLR-111610-10 4

this requirement by attaching a statement to its return that provides the date and the
control number of the 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 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,
we relied on certain statements and representations made by Taxpayer, Tax
Professional, and Company Official. However, all essential facts must be verified. 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 who requested it. Section 6110(k)(3) provides
that that it may not be used or cited as precedent.

Pursuant to a 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)

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