Affiliated group received late consolidated-return election relief

Plain-English summary

A parent corporation acquired all the stock of a subsidiary and intended to file a consolidated federal income tax return for the acquisition year. The affiliated group did not timely make the consolidated-return election and requested discretionary relief before the IRS discovered the failure. The parent represented that the assessment period remained open and that it was not changing a position subject to an accuracy-related penalty. The IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government. It granted 45 days to file the consolidated return with Form 1122 and the ruling information attached. Relief was conditioned on the group's aggregate tax liability not being lower than it would have been with a timely election, and penalties and interest otherwise due remained applicable.

Ruling snapshot

• Question: Could the parent and its newly acquired subsidiary make a late election to file a consolidated return?
• Outcome: Approved, with 45 days to file the consolidated return and Form 1122
• Key authorities: IRC § 1502; 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: 201533004
Third Party Communication: None
Release Date: 8/14/2015
Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
Person To Contact:
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Telephone Number:
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CC:CORP:B02
PLR-106574-15
Date
May 14, 2015

Legend

Parent = --------------------------------------------------
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Subsidiary 1 = --------------------------------------
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Date 1 = ----------------------------

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

Company Official = ---------------------------------------------------------------------------------
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Dear ----------------:

This letter responds to a letter dated January 28, 2015, submitted on behalf of Parent, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election. The extension is being requested for Parent and Subsidiary 1 to elect 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”), for the taxable year ending Date 2. The material information submitted for consideration is summarized below.

Parent filed its tax returns prior to the acquisition of Subsidiary 1 on a calendar year basis. On Date 1, Parent acquired all of the stock of Subsidiary 1.

The Parent affiliated group intended to file a consolidated income tax return, with Parent as the common parent, for the taxable year ending Date 2. The Election was
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due on the last day prescribed by law (including extensions of time) for filing Parent’s return but for various reasons Parent did not timely file the Election. 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 it wants to make the election.

Parent represents that it does not seek to alter a return position for which an accuracy-related penalty has been or could have been imposed under § 6662 of the Code.

Section 1.1502-75(a)(1) provides that a group 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 no later than the last day prescribed by law (including extensions of time) for filing 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 the Parent affiliated group 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 a valid Election. The information establishes that the request for relief was filed before the failure to timely make the Election was discovered by the Internal Revenue Service. See § 301.9100-3(b)(1)(i).
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Based on the facts and information submitted, including the affidavit submitted and 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 45 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 1 for the taxable year ending Date 2. Parent must attach a copy of this letter to the return. Alternatively, if such return is filed electronically, the requirement of attaching a copy of this letter to the return may be satisfied by attaching a statement to the return that provides the date and control number (PLR-106574-15) of this letter ruling.

The above extension of time is conditioned on the Parent affiliated 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 timely made (taking into account the time value of money). We express no opinion as to the Parent affiliated group’s tax liability for the years involved. A determination thereof will be made by the Director’s office upon audit of the income tax returns involved.

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 with respect to whether Parent and Subsidiary 1 qualify substantively to make the Election. 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 Internal Revenue Code or regulations, or as to the tax treatment of any conditions existing at the time of, or resulting from, filing the return or the Election late that are not specifically set forth in this letter.

For purposes of granting relief under § 301.9100-3, we relied on certain statements and representations made under penalty of perjury by Parent and Company Official. The Director, however, should verify all essential facts. In addition, 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.

This letter ruling is directed only to the taxpayer 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)