Parent receives extra time to make a consolidated-return election

Plain-English summary

A corporate parent and its subsidiaries missed the deadline to elect consolidated federal income tax return treatment. The parent said it had reasonably relied on a qualified tax professional who failed to make or advise it to make the election. The IRS found that the parent acted reasonably and in good faith, that the request was timely, and that granting relief would not prejudice the government. It therefore granted an extension of 45 days from the ruling letter date, subject to the group qualifying substantively and meeting the stated tax-liability condition.

Ruling snapshot

• Question: Could the parent group receive extra time to file a consolidated-return election?
• Outcome: Approved, subject to the ruling's conditions.
• Key authorities: IRC §§ 1502, 6501, and 6662; Treas. Reg. §§ 1.1502-75 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201407012 Third Party Communication: None
Release Date: 2/14/2014 Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
Person To Contact:
----------------------------- --------------, ID No. ----------------
------------------------- Telephone Number:
------------ --------------------
------------------------- Refer Reply To:
CC:CORP:B03
------------------------- PLR-143323-13
---------------------------------------------- Date:
November 14, 2013

Legend

Parent = ------------------------------

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

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

Company Officials = -------------------

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PLR-143323-13 2

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Tax Professionals = ----------------

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

This letter ruling responds to a letter from your authorized representative, dated October
18, 2013, 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, an entity taxable as a corporation for Federal tax purposes, and
Subsidiaries 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 "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 and Subsidiaries (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, the taxable year in which the
Election should have been filed, 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.

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
PLR-143323-13 3

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
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 Officials, and
Tax Professionals 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 Subsidiaries 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.
   PLR-143323-13 4

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
years 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 Officials, and Tax Professionals. 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.

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, 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)