Corporate group receives more time to elect consolidated return filing

Plain-English summary

A corporate parent and its affiliated group intended to elect consolidated federal income tax return filing for a tax year. The parent filed the consolidated return after the election deadline because it reasonably relied on a qualified tax professional who failed to make or recommend the election. The assessment period remained open, and the parent represented that it was not trying to change a return position associated with a potential accuracy-related penalty. The IRS found reasonable action, good faith, and no prejudice to the government, and granted 60 days to file the election. Relief was conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely, and the IRS did not decide whether the group otherwise qualified to file a consolidated return.

Ruling snapshot

• Question: May an affiliated corporate group receive extra time to elect consolidated return filing after its qualified tax professional missed the regulatory deadline?
• Outcome: Approved
• Key authorities: IRC §§ 1502, 6501(a), 6662; Treas. Reg. §§ 1.1502-75(a)(1), 1.1502-75(b), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201529001                                                Third Party Communication: None
Release Date: 7/17/2015                                          Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.75-00
                                                                 Person To Contact:
-----------------------                                          -------------------, ID No. ------------------
---------------------                                            Telephone Number:
-----------------------------------------------                  ----------------------
----------------------------------------                         Refer Reply To:
 ------------------------------------------                      CC:CORP:B02
                                                                 PLR-100509-15
                                                                 Date:
                                                                 April 16, 2015




Legend

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

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

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

Year 1                     =       -------

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


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

       This is in response to a letter dated December 18, 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. The extension is being
requested for Parent and the members of its affiliated group (the “Parent Affiliated
Group”) 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”), for the Year 1 tax year. The information submitted in that request and
subsequent submissions is summarized below.

       Parent is the common parent of the Parent Affiliated Group. The Parent Affiliated
Group intended to elect to file a consolidated income tax return, with Parent as the
common parent, for the Year 1 tax year. The Election was due on Date 1, the last day
prescribed by law (including extensions of time) for the filing of Parent’s return. For
various reasons, Parent did not timely file the Election. Instead, Parent filed the Year 1
PLR-100509-15                                 2


consolidated return on Date 2, after the due date. 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 Affiliated
Group's taxable year for which they want to make the election. 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 at the time Parent requests relief (taking into
account any qualified amended return filed within the meaning of § 1.6664-2(c)(3)) and
the new position requires or permits a regulatory election for which relief is requested.

         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 the manner provided in § 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, an affidavit, and representations submitted by Parent and Company
Official 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. See § 301.9100-3(b)(1)(v).
PLR-100509-15                                  3


        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
Affiliated Group qualifies substantively to file a consolidated return for the applicable tax
year, we grant an extension of time under § 301.9100-3, until sixty (60) days from the
date on this letter, for Parent to file the Election. Since the Parent Affiliated Group
already filed a consolidated return on Date 2, the group should amend the Year 1 return
by attaching a copy of this ruling letter to such return, or if the Parent Affiliated 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 relief is conditioned on the Parent Affiliated 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 Affiliated 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 Affiliated
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 and Company Official. 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.
PLR-100509-15                                   4


        In accordance with the Power of Attorney on file with this office, copies of this
letter are being sent to your authorized representative.



                                   Sincerely,


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