Group receives extra time for consolidated return election

Plain-English summary

A corporate parent intended for its affiliated group to elect to file a consolidated federal income tax return, but a valid election was not filed by the deadline. The parent sought discretionary relief after discovering the omission and before the IRS identified it. Based on the submitted affidavits and representations, the IRS found that the group acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days to complete the election by amending the already-filed consolidated return with the required ruling information and subsidiary consent forms. The relief was conditioned on the group’s aggregate tax liability not being lower than it would have been with a timely election.

Ruling snapshot

• Question: Whether the affiliated group could receive an extension to make its consolidated return election
• Outcome: Approved, with 60 days to complete the election and subject to a tax-liability condition
• 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: 201541006
Third Party Communication: None
Release Date: 10/9/2015
Date of Communication: Not Applicable
Index Numbers: 9100.20-00, 1502.75-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:CORP:B06
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PLR-109859-15
Date:
July 06, 2015

Legend

Parent = ------------------------------------
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Seller = ---------------------------------------------

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

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

Year 1 = -------

Company Official = -----------------------------
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Tax Professional = --------------------
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Dear ------------:
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This letter ruling responds to a letter from your authorized representative, dated March 10, 2015, 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 its affiliated subsidiaries (the “Parent 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 taxable year. The material information provided in that letter is summarized below.

On Date 1, Parent entered into an agreement with Seller to purchase all of the stock of Target, a subsidiary of Seller. Target owned the stock of several other corporations.
The sale closed on Date 2, a date within Year 1.

An election for the Parent Group to file a consolidated income tax return, with Parent as the common parent, for the Year 1 taxable year was due on the last day prescribed by law (including extensions of time) for the filing of Parent's return. Parent intended to file the Election, but for various reasons a valid Election (i.e., the filing of the consolidated return) was not filed by the due date of Parent's return. 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.
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
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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 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).

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 taxable 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 each of its affiliated subsidiaries for its Year 1 taxable year). The Parent Group, having already filed a consolidated return for the Year 1 taxable year, must amend its return by attaching 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.
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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.

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.

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Sincerely,

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