Parent received late consolidated-return election relief

Plain-English summary

A corporate parent and subsidiary failed to make a valid election to file a consolidated federal income tax return for their first taxable year. The parent reasonably relied on a qualified tax professional who failed to make or recommend the election, and the relief request was filed before the IRS discovered the omission. The IRS found reasonable action, good faith, and no prejudice to the government. It granted 60 days to file the consolidated return with Form 1122, provided the group otherwise qualified and its aggregate tax liabilities were no lower than if the election had been timely. Any otherwise applicable penalties and interest remained in place.

Ruling snapshot

• Question: Could the parent and subsidiary make a late election to file a consolidated return?
• Outcome: Approved, with 60 days to file
• Key authorities: Treas. Reg. §§ 1.1502-75, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201524008 Third Party Communication: None
Release Date: 6/12/2015 Date of Communication: Not Applicable
Index Number: 1502.75-00, 9100.20-00
Person To Contact:
------------------------- --------------------------, ID No. ------------
------------------------- Telephone Number:
---------------------------------------------- --------------------
-------------------------------- Refer Reply To:
-------------------------- CC:CORP:B06
PLR-133561-14
Date:
March 04, 2015

Legend

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

Subsidiary = --------------------------

Year 1 = ------

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

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

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

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

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

This ruling letter responds to a letter from your authorized representative, dated
September 2, 2014, 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 and Subsidiary 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 (the “Election”), effective for the

PLR-133561-14 2

Year 1 taxable year ended on Date 2, Year 1. Additional information was received in
letters dated January 14, February 20 and 27, 2015. The material information is
summarized below.

Parent is the common parent of Parent Group, an affiliated group of corporations
consisting of Parent and Subsidiary, each of which was formed on Date 1. An election
to file a consolidated return for Parent Group for Year 1 was required to be filed by the
due date (including extensions) for the filing of Parent’s income tax return for Year 1.
However, for various reasons, a valid election was not 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 Year 1 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
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) of the regulations, 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

PLR-133561-14 3

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, a valid 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 Parent Group qualifies
substantively to file a consolidated return for the applicable tax year, we grant an
extension of time, under § 301.9100-3, for 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 Subsidiary for its Year 1 taxable year). Parent
Group must attach a copy of this ruling letter to such return, or if 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 Parent’s and Subsidiary’s tax liabilities (if
any) being not lower, in the aggregate, for all years to which the Election applies, than
they would have been if the Election had been timely made (taking into account the time
value of money). No opinion is expressed as to Parent’s and Subsidiary’s tax liabilities
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, 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.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

PLR-133561-14 4

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.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

                                   Sincerely,


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

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