Late consolidated return election receives 60-day extension

Plain-English summary

A new corporate parent failed to timely elect to file a consolidated federal income tax return with its subsidiaries and members of an acquired group's former consolidated group. It requested discretionary relief under Treasury Regulation § 301.9100-3. Based on the submitted facts, affidavits, and representations, the IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government. The IRS granted 60 days from the ruling date to file the consolidated return and attach Form 1122 for each subsidiary. The extension was conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely made.

Ruling snapshot

• Question: Could the new parent make its consolidated return election after 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: 201648014                                              Third Party Communication: None
Release Date: 11/25/2016                                       Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
                                                               Person To Contact:
-------------------------                                      --------------------------, ID No. ----------------
-------------------------------                                -----------------
----------------------------------------------------           Telephone Number:
--------------------------------------------------             ----------------------
-----------------------------                                  Refer Reply To:
In Re:                                                         CC:CORP:B01
         ---------------------------------------------------   PLR-116127-16
                                                               Date:
                                                               August 24, 2016


New Parent                          =         ----------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
---------------------------------------------------------------------

Acquiring                           =         ------------------------------------
---------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------

Old Parent                          =         ---------------------------
-----------------------------------------------------------------------------
---------------------------------------------------------------------

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

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

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

Tax Professional 1                  =         ---------------------------
-----------------------------------------------------------------------------

Tax Professional 2                  =         -----------------------
--------------------------------------------------------------------------------------------------
PLR-116127-16                                 2



Dear -----------------

         This letter responds to a letter dated May 16, 2016, submitted on behalf of New
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 New
Parent, Acquiring, and the members of Old Parent’s former consolidated group to elect
to file a consolidated Federal income tax return, with New 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.

       Through Date 1, Old Parent was the common parent of a consolidated group.
On Date 1, Acquiring, a wholly-owned subsidiary of New Parent, acquired all of the
stock of Old Parent, terminating the Old Parent consolidated group.

         An election for New Parent, Acquiring, and the members of Old Parent’s former
consolidated group to file a consolidated income tax return, with New Parent as the
common parent, for the taxable year ending Date 2 was required to be filed no later
than the last day prescribed by law (including extensions of time) for filing of New
Parent’s return, but for various reasons New 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 New Parent affiliated group's taxable year for which it wants to make the
Election.

         New 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 at the
time it requested relief, and the new position requires or permits the election for which
relief is requested.

       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
PLR-116127-16                                  3

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 New Parent affiliated group to file the
Election, provided New 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 New Parent, Company
Official, Tax Professional 1, and Tax Professional 2 explain the circumstances that
resulted in the failure to timely file a valid Election.

        Based on the facts and information submitted, including the affidavits submitted
and the representations made, we conclude that New 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 60 days from the
date on this letter, for New Parent to file the Election, by filing a consolidated return, with
New Parent as the common parent, and attaching a Form 1122 for each subsidiary,
including the members of Old Parent’s former consolidated group, for the taxable year
ending Date 2. New 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-116127-16) of this letter ruling.

         The above extension of time is conditioned on the New 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 New 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
PLR-116127-16                                  4

particular, we express no opinion with respect to whether New Parent and its
subsidiaries 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 New Parent,
Company Official, Tax Professional 1, and Tax Professional 2. 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.

       In accordance with a power of attorney on file with this letter, copies of this letter
are being sent to your authorized representatives.


                                                   Sincerely,


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




cc: