PLR 1039007: IRS granted more time to file a consolidated return election

Plain-English summary

An affiliated group asked for more time to make a regulatory election to file a consolidated federal income tax return for a prior tax year. The IRS found that the group reasonably relied on a qualified tax professional, acted in good faith, and sought relief before the IRS discovered the missed election. It granted an extension until the redacted date, subject to the group substantively qualifying to file a consolidated return and filing the required forms. The ruling did not decide the group's substantive eligibility or its tax liability.

Ruling snapshot

• Question: Could the affiliated group receive an extension to make its consolidated-return election?
• Outcome: Approved
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75(a)(1) and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201039007 Third Party Communication: None
Release Date: 10/1/2010 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:01
PLR-107794-10
Date:
June 28, 2010

Legend

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

Subsidiary = --------------------------------------------------------------------------------

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

Date 2 = -------

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

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

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

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

This letter responds to a letter dated February 16, 2010, submitted on behalf of
Taxpayer, requesting 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
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requested for Taxpayer to file an election under § 1.1502-75(a)(1) of the Income Tax
Regulations to file a consolidated Federal income tax return with its includible subsidiary
(the “Election”) for the Date 2 tax year. Additional information was received in letters
dated April 6, 2010 and April 9, 2010. The material information submitted for
consideration is summarized below.

On Date 1, Taxpayer became the common parent of an affiliated group (“Taxpayer
Group”), with Taxpayer directly owning Subsidiary. An election to file a consolidated
return for the Date 2 tax year was due no later than the last day prescribed by law
(including extensions of time) for the filing of Taxpayer's return for the Date 2 tax year.
However, for various reasons, a valid election was not made. 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 any
member of Taxpayer Group for the Date 2 tax year or any subsequent year.

Section 1.1502-75(a)(1) provides that a group which did not file a consolidated return for
the immediately preceding tax year may file a consolidated return in lieu of separate
returns for the tax year, provided that each corporation which has been a member of the
group during any part of the tax 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
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.

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. 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 to file the election, provided it is established that Taxpayer
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.
PLR-107794-10 3

Information, affidavits, and representations submitted by or on behalf of Taxpayer,
Company Official, and Tax Professional explain the circumstances that resulted in the
failure to timely file the 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. Sections 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 it has been established that
Taxpayer 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, provided Taxpayer Group
qualifies substantively to file a consolidated return for the applicable tax year, we grant
an extension of time under § 301.9100-3, until Date 3, for Taxpayer Group to file the
Election by filing a consolidated return for the Date 2 tax year and including the required
Forms 1122.

The above extension of time is conditioned on Taxpayer 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 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 Group's liability is lower. Section 301.9100-3(c).

We express no opinion with respect to whether Taxpayer Group qualifies substantively
to file a consolidated return. In addition, no opinion is expressed as to the tax effects or
consequences of filing the Election or any tax return 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 or on behalf of Taxpayer
and/or its representatives. 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 ruling letter is directed only to the taxpayer 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, if Taxpayer Group files its return electronically, Taxpayer Group may
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satisfy this requirement by attaching a statement to the return that provides the date and
control number of this letter ruling.

Pursuant to a 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)