Corporate group gets 45 days to make late consolidated election

Plain-English summary

A corporate parent failed to timely elect to file a consolidated federal income tax return with its affiliated group. The parent showed that it had reasonably relied on a qualified tax professional who failed to make, or advise it to make, a valid election. The request for relief was filed before the IRS discovered the missed election. The IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government. It granted 45 days from the ruling date to file the consolidated return and Forms 1122, subject to the group's aggregate tax liability not being lower than it would have been with a timely election.

Ruling snapshot

• Question: Could the affiliated group make its consolidated return election after missing the regulatory deadline?
• Outcome: approved
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                    Department of the Treasury
                                                            Washington, DC 20224

Number: 201648012                                           Third Party Communication: None
Release Date: 11/25/2016                                    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:B05
                                                            PLR-112851-16
                                                            Date:
                                                            August 17, 2016

                  TY: -------

Legend

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

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

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

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

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

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

This responds to your letter dated April 14, 2016, as modified by your letter dated June
14, 2016, requesting an extension of time under §§ 301.9100-1 through 301.9100-3 of
the Procedure and Administration Regulations to file an election. The Extension is
being requested for Parent and the members of its 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 for the taxable year ending
Date 1 (hereinafter referred to as “the Election”). The material information submitted for
consideration is summarized below.
PLR-112851-16                                2

Parent was the common parent of an affiliated group consisting of Parent and multiple
subsidiaries (the “Parent Group”). An election for the Parent Group to file a
consolidated return, with Parent as the common parent, for Parent’s taxable year ending
Date 1 was due on the last day prescribed by law (including extensions of time) for filing
Parent’s return but for various reasons a valid Election was not filed. 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) of the Internal Revenue Code
(the “Code”) for Parent and any member of the Parent Group for their taxable years
ending Date 1 and for any subsequent year will not expire prior to Date 2. 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 of the Code.

Section 1.1502-75(a)(1) 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
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, 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
PLR-112851-16                                   3

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, 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 each member of Parent Group for the taxable
year ending Date 1). 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 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 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 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.
PLR-112851-16                                  4



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______________
                                       Ken Cohen
                                       Chief, Branch 3
                                       Office of Associate Chief Counsel (Corporate)




cc: