Corporate group receives late consolidated return election

Plain-English summary

A corporation was formed to acquire five subsidiaries and intended to elect consolidated federal income tax filing for the group, but a valid consolidated return was not filed by the deadline. The parent reasonably relied on a qualified tax professional who failed to make or recommend the election, and the IRS had not discovered the omission before relief was requested. The IRS granted 60 days to file the consolidated return with a Form 1122 for each subsidiary. Relief is conditioned on the group qualifying substantively to file a consolidated return and on its aggregate tax liability not being lower than it would have been with a timely election, taking the time value of money into account. The ruling does not determine the group's substantive eligibility or tax liability, and otherwise applicable penalties and interest remain in effect.

Ruling snapshot

• Question: May the parent and its five subsidiaries make a late election to file a consolidated return?
• Outcome: Yes, by filing the consolidated return and Forms 1122 within 60 days, subject to stated conditions.
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201606019                                              Third Party Communication: None
Release Date: 2/5/2016                                         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:B1
                                                               PLR-129699-15
                                                               Date:
                                                               November 02, 2015




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

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

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

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

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

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

Year 1                   = ------

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

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

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

Tax Professional         = ----------------------------
                           --------------------------------------------------
PLR-129699-15                                 2




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

This letter ruling responds to a letter from your authorized representative, dated
September 3, 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 Sub 1 – Sub 5 (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 was incorporated for the sole purpose of acquiring the stock of Sub 1
– Sub 5. All of the stock of the five corporations was contributed to Parent on Date 2.

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.
PLR-129699-15                                3


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 the 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 each of Sub 1 – Sub 5 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 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
PLR-129699-15                                   4

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 the 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.

                                        Sincerely,


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




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