PLR 201347011: IRS grants a 45-day extension for a late consolidated-return election

Plain-English summary

A corporate parent and three subsidiaries missed the deadline to elect to file a consolidated federal income tax return. The parent asked the IRS for relief under the regulations that allow extra time for a late regulatory election when the taxpayer acted reasonably and in good faith and the government is not prejudiced. The IRS found that the parent reasonably relied on a qualified tax professional and granted 45 days to make the election by filing a consolidated return and the required subsidiary forms. The relief is conditioned on the group being substantively eligible and not having a lower aggregate tax liability than it would have had if the election were timely.

Ruling snapshot

• Question: May the affiliated group receive more time under Treas. Reg. § 301.9100-3 to elect consolidated-return filing under IRC § 1502?
• Outcome: Approved, 45-day extension granted
• Key authorities: IRC § 1502; Treas. Reg. §§ 301.9100-1 through 301.9100-3 and § 1.1502-75(a)(1); IRC §§ 6501(a) and 6662

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201347011
Third Party Communication: None
Release Date: 11/22/2013
Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
Person To Contact:
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Telephone Number:
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------------------------------------------------- Refer Reply To:
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CC:CORP:B05
PLR-118126-13
Date:
August 30, 2013

Legend

Parent = -----------------------------
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Subsidiary 1 = ------------------------------------------------------

Subsidiary 2 = ----------------------------------------------

Subsidiary 3 = ---------------------------------------------------------------
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Company Official 1 = --------------------------------------------------------------
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Company Official 2 = ------------------------------------
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Tax Professional = ---------------------------------
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Date 1 = ---------------------------

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

This letter responds to a letter dated April 16, 2013, submitted on behalf of Parent, requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to file an election. The extension is being requested for Parent, Subsidiary 1, Subsidiary 2, and Subsidiary 3 to make an election to file a consolidated Federal income tax return, with Parent as the common parent, under

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§ 1.1502-75(a)(1) of the Income Tax Regulations (hereinafter referred to as the “Election”), effective for the taxable year ending on Date 1. The material information provided is summarized below.

For the taxable year ending Date 1, Parent was the common parent of an affiliated group of corporations comprised of Parent, Subsidiary 1, Subsidiary 2, and Subsidiary 3 (the “Parent Group”). An election for the Parent Group to file a consolidated income tax return, with Parent as the common parent, for the taxable year ending on Date 1 was due on 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 the Parent Group’s taxable year for which they want to make the election or any subsequent taxable year. Parent has represented that it does not seek to alter a return position for which an accuracy-related penalty has been or could be imposed under
§ 6662 at the time of the requested relief.

Section 1.1502-75(a)(1) of the Income Tax Regulations provides, in part, that an affiliated group of corporations 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, in accordance with § 1.1502-75(b), 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 the filing of 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 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 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. 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

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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 1, Company Official 2, and Tax Professional explain the circumstances that resulted in the failure to timely file the 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 that the 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 (by filing a consolidated return, with Parent as the common parent, and attaching a Form 1122 for each of Subsidiary 1, Subsidiary 2, and Subsidiary 3) for its taxable year ending on Date 1. The Parent Group must attach a copy of this ruling letter to such return, or if the Parent Group files the return electronically, a statement must be attached to the return that provides the date and the control number of this ruling letter.

The above extension of time is conditioned on the 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 Parent 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, in fact, the Parent 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 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 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 Parent, Company Official 1, Company Official 2, and Tax Professional. 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.

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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.

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