Consolidated group may waive CNOL carryback late

Plain-English summary

A consolidated group intended to make an irrevocable election to give up the entire carryback period for a consolidated net operating loss but failed to file a valid election with its return. The parent represented that the loss had not been and would not be carried back and that no relevant member had a separate return year during the carryback period. The IRS found reasonable reliance on a qualified tax professional and granted 60 days to file the election. The group must amend its returns to attach the required election statement and include the ruling information. Relief is conditioned on aggregate tax liability not being lower than it would have been with a timely election, taking the time value of money into account. Any otherwise applicable penalties and interest remain in effect.

Ruling snapshot

• Question: May the consolidated group file late its election to relinquish the entire CNOL carryback period?
• Outcome: Approved
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201444015 Third Party Communication: None
Release Date: 10/31/2014 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00
Person To Contact:
-------------------- ----------------------------, ID No. --------------
----------------------------- ----------------
------------------------ Telephone Number:
----------------------------------- --------------------
------------------------------------ Refer Reply To:
CC:CORP:04
PLR-109269-14
Date:
July 24, 2014

Legend

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

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

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

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

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

   This is in response to a letter dated March 5, 2014, submitted on behalf of

Parent, requesting an extension of time under §§ 301.9100-1 through 301.9100-3 of the
Procedure and Administration Regulation to file an election. Parent is requesting an
extension 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”)
of the consolidated group of which Parent is the common parent for the tax year ended
Date 1. The information submitted in that request and subsequent submissions is
summarized below.

    Parent is the common parent of a consolidated group (“Parent Group”) which

incurred a CNOL for the tax year ended Date 1 (“Date 1 CNOL”). Parent intended to
elect to relinquish the carryback period for the Date 1 CNOL. The Election was required
to be filed by the due date of Parent Group’s consolidated return for the tax year ended

PLR-109269-14 2

Date 1, but for various reasons a valid election was not filed. Parent then submitted this
request for an extension of time to file a valid election.

   Parent has represented that the consolidated group of which Parent is the

common parent for the tax year ended Date 1 has not carried back, and will not carry
back, any portion of the CNOL to a prior consolidated return year of the consolidated
group and that no member of the consolidated group of which Parent was the common
parent for the tax year ending Date 1 had a separate return year, within the meaning of
§1.1502-1(e), at any time during the carryback period.

   Furthermore, Parent has represented that Parent Group is not seeking to alter a

return position for which an accuracy related penalty has been or could be imposed
under § 6662 of the Internal Revenue Code (“Code”) at the time Parent requested relief
(taking into account any qualified amended return filed within the meaning of § 1.6664-
2(c)(3)) and for which the new return position requires or permits a regulatory election
for which relief is requested.

   Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an

irrevocable election to relinquish the entire 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 §1.1502-21(b)(3)(i) TO WAIVE THE 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) also provides that the statement must be filed with the
group's income tax return for the consolidated return year in which the loss 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.

    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 filling the election is fixed by the regulations (i.e.,

§ 1.1502-21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under
§ 301.9100-1 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

PLR-109269-14 3

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, and Tax Professional explain the circumstances that resulted in the failure to
timely file the election. The information establishes that Parent reasonably relied upon 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 that

have been 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, we grant an
extension of time under § 301.9100-3, until 60 days from the date on this letter, for
Parent to file the election with respect to the relinquishment of the entire carryback
period for the Date 1 CNOL, as described above.

   The above extension of time is conditioned on Parent 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 Parent Group’s tax liability for the years involved.
A determination thereof will be made upon audit of the Federal income tax returns
involved.

    Parent should file the election in accordance with § 1.1502-21(b)(3)(i). Parent

Group’s returns 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 Parent files its returns electronically, it may satisfy this latter requirement
by attaching a statement to its return that provides the date and control number of this
letter ruling.

     Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any item discussed or referenced in this letter. In
particular, we express no opinion 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 effects 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 Parent, Company Official, and Tax
Professional. However, the Director should verify all essential facts. Moreover,
notwithstanding that an extension is granted under § 301.9100-3 to file the election, any
penalties and interest that would otherwise be applicable continue to apply.

PLR-109269-14 4

    In accordance with the Power of Attorney on file with this office, a copy of this

letter has been sent to your authorized representative.

                                   Sincerely,



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

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