New parent group may make late consolidated return election

Plain-English summary

A corporation acquired the former common parent of a consolidated group through a subsidiary, terminating the former group and bringing its members into a new parent group. The new group failed to timely elect to file a consolidated return because it reasonably relied on a tax professional who did not make or advise it to make the election. The request was filed before the IRS discovered the omission, and the limitations periods for affected years remained open. The IRS granted 60 days to file a consolidated return with the new parent as common parent and attach Forms 1122 for eleven subsidiaries. Relief was conditioned on the group's aggregate tax liability not being lower than with a timely election, including the time value of money, and on the group substantively qualifying to file consolidated.

Ruling snapshot

• Question: Could the new affiliated group make a late election to file a consolidated federal income tax return?
• Outcome: Approved, with 60 days to file the consolidated return and subsidiary consents
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201507003 Third Party Communication: None
Release Date: 2/13/2015 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:B01
In Re: PLR-119519-14
-------------------------------------------- Date:
October 09, 2014

Legend:

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

Sub 1 = -------------------------------

Sub 2 = --------------------------------------

Sub 3 = ----------------------------------------

Sub 4 = ----------------------------------------------

Sub 5 = -----------------------------------

Sub 6 = -----------------------------

Sub 7 = --------------------------------------

Sub 8 = ----------------------------------------------------------

Sub 9 = ---------------------------

PLR-119519-14 2

Sub 10 = ---------------------------------------------------

Sub 11 = -----------------------------

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

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

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

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

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

   This letter replies to a letter from your authorized representative, dated March 26,

2014 requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to file an election. This extension is being
requested for Parent and Sub 1 through Sub 11, inclusive, 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 in that letter and subsequent correspondence is summarized below.

   Parent is the common parent of an affiliated group of corporations that includes

Sub 1 through Sub 11, inclusive (“Parent Group”). Through Date 1, Sub 1 was the
common parent of the group and filed a consolidated return with Subs 1 through 10,
inclusive (“Former Group”). On Date 1, all of the stock of Sub 1 was acquired by Sub
11, a subsidiary of Parent. This acquisition resulted in the termination of Former Group
as a consolidated group. On the day after Date 1, the members of Former Group
became members of 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 2 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.

PLR-119519-14 3

The period of limitations on assessment under § 6501(a) has not expired for any
member of the Parent Group for the taxable year ending on Date 2 or any taxable year
that would be affected by the Election if it has been timely filed. 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
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

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 make the Election was
discovered by the Internal Revenue Service. See §§ 301.9100-3(b)(1)(i) and (v).

PLR-119519-14 4

    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 sixty (60) 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 Subs 1 through 11, inclusive, for
their taxable year ending on Date 2). 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
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 Official, 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.

PLR-119519-14 5

  This ruling is directed only to the taxpayers 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 two of your authorized representatives.

                                               Sincerely,



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