PLR 201128004: IRS grants extra time to file a consolidated return election

Plain-English summary

A new affiliated group asked for more time to elect to file a consolidated federal income tax return after a reverse acquisition changed its group structure. The group had not timely filed the election for the specified tax year. The IRS found that the parent acted reasonably and in good faith, and that granting relief would not prejudice the government. It granted 45 days from the ruling date to file the consolidated return election, provided the new group otherwise qualified and attached the required forms and ruling copy. The extension was conditioned on the group's aggregate tax liability not being lower than it would have been with a timely election.

Ruling snapshot

• Question: Could the new affiliated group receive extra time to make its consolidated-return election?
• Outcome: approved
• Key authorities: IRC §§ 1502 and 6110(k)(3); 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: 201128004
Third Party Communication: None
Release Date: 7/15/2011
Date of Communication: Not Applicable
Person To Contact:
Index Number: 1502.75-00, 9100.20-00
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Telephone Number:
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---------------------------------------------------- Refer Reply To:
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CC:CORP:B06
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PLR-105078-11
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April 11, 2011

LEGEND

Foreign Parent = --------------------------
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Parent = --------------------------------------
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Sub 1 = ----------------------------------------------------
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Sub 2 = -----------------------------------------------
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Sub 3 = ------------------------------------------------
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Date 1 = ----------------------

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

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

Company Official = --------------------------------------------------------------
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a% = ------

Dear -------------

This letter responds to a letter dated January 25, 2011, 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, Sub 1, Sub 2 and Sub 3 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 (hereinafter referred to as “Election”), effective for the taxable year ending Date 3. Additional information was submitted in correspondence dated March 23, 2011. The material information submitted is summarized below.

Prior to Date 1, Foreign Parent owned all the stock of Parent and a% of the stock of Sub

3. Prior to Date 1, Parent filed a consolidated return and owned all the stock of Sub 1
   and Sub 2 (the Parent Consolidated Group).

On Date 1, Foreign Parent contributed its a% interest in Sub 3 to Parent in a transaction represented to qualify as a reverse acquisition pursuant to Treas. Reg. § 1.1502- 75(d)(3)(i). As a result of the reverse acquisition on Date 1, the Parent Consolidated Group went out of existence and a new affiliated group (the New Group) that included Parent, Sub 1, Sub 2 and Sub 3 came into existence with Parent as the common parent. No consolidated return was filed for the initial year of the New Group ending on Date 2.

An election to file a consolidated return for the tax year ending Date 3 was due by the due date of Parent’s return, but for various reasons a valid Election was not filed. The period of limitations on assessment under § 6501(a) has not expired for Parent’s, Sub 1’s, Sub 2’s or Sub 3’s taxable year ending Date 3 or any subsequent taxable year.

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
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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 that Commissioner will use to determine whether to grant an extension of time to make a regulatory election.
§ 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, to the satisfaction of the Commissioner, that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. 301.9100-3(a).

Information and representations submitted by Parent and Company Official 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. See § 301.9100-3(b)(1)(i).

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 New 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 (by filing a consolidated return, with Parent as the common parent, and attaching a Form 1122 for each of Sub 1, Sub 2 and Sub 3) for the taxable year ending Date 3. The New Group must attach a copy of this letter to such return, or if the New Group files the return electronically, a statement may be attached to the return that provides the date and control number of this ruling.

The above extension of time is conditioned on New 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 New Group’s tax liability for the year involved. A determination thereof will be made by the applicable Director’s office upon audit of the Federal income tax returns involved.

We express no opinion with respect to whether New Group qualifies substantively to file a consolidated return. In addition, we express no opinion as to the tax effects or consequences of filing the return or 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 effects resulting from, filing the return or 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
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Election, penalties and interest that would otherwise be applicable, if any, continue to apply.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code 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,

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

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