Corporate group receives 60 days to make a late consolidated return election

Plain-English summary

A corporation left its former consolidated group and became the parent of a new affiliated group. The new group intended to file a consolidated federal income tax return, but a valid election was not filed by the regulatory deadline. The parent discovered the error before the IRS did and showed that it had reasonably relied on a qualified tax professional. The IRS found that the parent acted reasonably and in good faith and granted 60 days to file the consolidated return and required Forms 1122, provided the group substantively qualified. The relief also required that aggregate tax liability for all affected years not be lower than if the election had been timely made.

Ruling snapshot

• Question: Could the new affiliated group make its consolidated return election after the filing deadline?
• Outcome: approved, with a 60-day extension
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201711008 Third Party Communication: None
Release Date: 3/17/2017 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:3
PLR-135940-16
Date:
December 15, 2016

Legend

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

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

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

Date 3 = ---------------------------

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

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

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

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

November 11, 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 being requested for Parent and its affiliated subsidiaries 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 3. The material information provided in that letter is
summarized below.
PLR-135940-16 2

  Parent was a subsidiary member of a consolidated group. As a result of certain

events, Parent disaffiliated from its prior consolidated group at the end of the day on
Date 1 and Parent and its subsidiaries became their own affiliated group beginning on
Date 2 (“Parent Group”).

    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 3 was due on the last
day prescribed by law (including extensions of time) for the filing of Parent's return.
However, 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 Parent Group’s
taxable year ending Date 3 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.

    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
PLR-135940-16 3

§ 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 3.

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

   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
PLR-135940-16 4

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, a copy of this letter is being

sent to your authorized representative.

                                    Sincerely,


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

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