Consolidated group may late-elect to waive CNOL carryback
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This page covers one taxpayer's ruling from 2014, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.
Plain-English summary
A consolidated group incurred a consolidated net operating loss but failed to timely elect to relinquish the entire carryback period. The parent represented that neither the group nor another taxpayer had carried back any part of the loss and that it was not changing a return position exposed to an accuracy-related penalty. Affidavits showed that the parent reasonably relied on a qualified tax professional who failed to make or recommend the election, and the request was filed before the IRS discovered the omission. The IRS granted 60 days to file the irrevocable election and amend the group's returns to attach it. Relief was conditioned on the group's aggregate tax liability, considering the time value of money, being no lower than if the election had been timely.
Ruling snapshot
- Question: Could the consolidated parent make a late election to waive the entire carryback period for its group's CNOL?
- Outcome: Approved, with 60 days to file and an aggregate-tax-liability condition
- Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i) and 301.9100-1 through -3
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201448001 Third Party Communication: None
Release Date: 11/28/2014 Date of Communication: Not Applicable
Index Number: 1502.21-00, 9100.22-00
Person To Contact:
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---------------------------- Telephone Number:
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-------------------------------------------- Refer Reply To:
------------------------------- CC:CORP:2
PLR-106676-14
Date:
August 04, 2014
Parent = ----------------------------------
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Separate Return
Year Subsidiaries = ------------------------------------------
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PLR-106676-14 3
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PLR-106676-14 6
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Date 1 = --------------------------
Company Official = -------------------------------------------------
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Tax Professional = ----------------------------------------------------
Dear -------------:
This is in response to your letter dated February 11, 2014, 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 requested for Parent to file an
election under § 1.1502-21(b)(3)(i) of the Income Tax Regulations to relinquish the
entire carryback period for the Parent consolidated group’s consolidated net operating
loss (“CNOL”) for the tax year ending Date 1 (the “Election”). Additional information was
submitted in documents dated May 20, 2014, May 21, 2014, June 10, 2014, July 8,
2014, July 18, 2014 and July 28, 2014. The material information submitted for
consideration is summarized below.
Parent is the common parent of a consolidated group (“Parent Group”). Parent Group
incurred a CNOL for the tax year ending Date 1. Parent has represented that Parent
Group has not carried back, and will not carry back, any portion of the CNOL to a prior
consolidated return year of Parent Group. Parent has also represented that no member
of Parent Group for the tax year ended Date 1, other than Separate Return Year
Subsidiaries, had a separate return year, within the meaning of § 1.1502-1(e), at any
time during the carryback period. Additional representations were also submitted by the
appropriate parties that no portion of the CNOL has been carried back, nor will be
carried back, to a prior tax year of another taxpayer. Parent has also represented that
Parent is not seeking to alter a return position for which an accuracy-related penalty has
been or could be imposed under § 6662 at the time the request for relief was submitted.
The Election was required to be filed by the due date of Parent Group’s consolidated
return for the tax year ending Date 1, but for various reasons, Parent failed to file a valid
PLR-106676-14 7
Election. Subsequently, this request was submitted, under § 301.9100-3, for an
extension of time to file the election.
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 ENTIRE 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 file 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-
21(b)(3)(i)). 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 Official, 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 timely file 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, an extension of time is granted under
§ 301.9100-3, until 60 days from the date on this letter, for Parent to file the Election
PLR-106676-14 8
with respect to the relinquishment of the entire carryback period for the CNOL for the
tax year ending Date 1, as described above.
The above extension of time is conditioned on the taxpayers’ (Parent’s and the
members of its consolidated group) 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 taxpayers’ tax liability for the years involved. A determination
thereof will be made by the Director’s office 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 Group files its returns electronically, Parent may satisfy this latter
requirement by attaching a statement to its return that provides the date and control
number of this letter ruling.
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, Tax Professional and others.
However, the Director should verify all essential facts. Moreover, notwithstanding that
an extension is granted under § 301.9100-3 to file the Election, penalties and interest
that would otherwise be applicable, if any, still apply.
This ruling is directed only to the taxpayer(s) who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
Sincerely,
Ken Cohen
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel (Corporate)
cc:
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