Parent group gets 60 days for consolidated return election

Plain-English summary

A parent corporation acquired another affiliated group, whose members then joined the parent's group. The parent intended to elect consolidated-return treatment for the first applicable year but did not file a valid consolidated return by the deadline. The IRS found that the parent reasonably relied on a qualified tax professional and requested relief before the IRS discovered the failure. Subject to the group being substantively eligible, the IRS granted 60 days to file a consolidated return with the parent as common parent and attach Form 1122 for each affiliated subsidiary. 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: May the parent group make a late election to file a consolidated federal income tax return?
• Outcome: approved; a 60-day extension was granted
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 1.1502-75(b), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201702019 Third Party Communication: None
Release Date: 1/13/2017 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:B04
PLR-126581-16
Date:
October 17, 2016

Legend

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

Corp 1 = -------------------------------------------

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

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

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

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

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

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

   This letter ruling responds to a letter from your authorized representative, dated

August 24, 2016, 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
PLR-126581-16 2

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
taxable year ending Date 2. The material information provided in that letter is
summarized below.

   On Date 1, Parent, through Sub 1, its wholly-owned subsidiary, acquired 100% of

the outstanding stock of an unrelated corporation, Corp 1. Before Corp 1 was acquired,
Corp 1 filed consolidated returns with its own affiliated subsidiaries (the “Corp 1
Group”). As a result of Parent acquiring Corp 1, the Corp 1 Group terminated at the end
of the day on Date 1. The members of the Corp 1 Group then became members of the
Parent Group.

    Prior to the taxable year ending Date 2, the Parent Group did not file a

consolidated Federal income tax return. An election for the Parent Group to file a
consolidated income tax return, with Parent as the common parent, for the taxable year
ending Date 2 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 the Corp 1 Group’s taxable year
ending Date 1, the Parent Group’s taxable year ending Date 2, 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 at the
time Parent requested relief (taking into account any qualified amended return within the
meaning of § 1.6664-2(c)(3)).

     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-126581-16 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 Parent reasonably relied on a
qualified tax professional who failed to make, or advise Parent to make, the 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 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
taxable year ending Date 2).

    The above extension of time is conditioned on the taxpayers’ (Parent’s and the

members of Parent Group) 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 taxpayers’ tax liability for the years involved. A determination thereof will be
made by the Director’s office upon audit of the Federal income tax returns involved.

   A copy of this letter must be attached to any income tax return to which it is

relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.
PLR-126581-16 4

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

    The rulings contained in this letter are based upon information and

representations submitted by Parent, Company Official, and Tax Professional and
accompanied by a penalty of perjury statement executed by an appropriate party. While
this office has not verified any of the material submitted in support of the request for
rulings, it is subject to verification on examination. Moreover, notwithstanding that an
extension is granted under § 301.9100-3 to file the Election, penalties and interest that
would otherwise be applicable, if any, still 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.

   Pursuant to the power of attorney on file in this office, copies of this letter are

being sent to your authorized representatives.

                                    Sincerely,


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