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

Plain-English summary

A parent corporation acquired a former consolidated group and intended to file a consolidated federal income tax return with itself as the new common parent. A valid election was not filed by the regulatory deadline, and the parent discovered the error before the IRS did. The IRS found that the parent reasonably relied on a qualified tax professional and otherwise acted reasonably and in good faith. It granted 60 days to file the election, 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 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: 201717023                                                Third Party Communication: None
Release Date: 4/28/2017                                          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:B02
                                                                 PLR-131992-16
                                                                 Date:
                                                                 January 17, 2017




Legend

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

Subsidiary                 =        ----------------------------------------------------------

Corporation X              =        ----------------------------------------------------------------

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

Year 1                     =        ------------------------------------------------------

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

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

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

This letter responds to a letter from your authorized representative, dated October 6,
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 (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 Year

1. Additional information was submitted in correspondence dated December 9, 2016.
The material information submitted is summarized below.

Parent is a holding company that was formed to acquire all of the outstanding shares of
Corporation X. Prior to the acquisition, Corporation X was the common parent of a
consolidated group comprised of Corporation X and its own subsidiaries (the “Old
PLR-131992-16                                 2

Group”). On Date 1, a transitory subsidiary of Subsidiary, a wholly-owned subsidiary of
Parent, merged with and into Corporation X with Corporation X surviving the merger
(the “Merger"), terminating the Old Group. Following the Merger, Corporation X became
a wholly-owned subsidiary of Subsidiary.

Prior to Year 1, 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 Year 1 was due on the last day prescribed by law (including
extensions of time) for the filing of Parent’s return, 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, Parent submitted, under § 301.9100-3, this request
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.

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
PLR-131992-16                                 3

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 to 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. Parent Group, having filed a return as though a valid Election
was made, must amend its previously filed return to attach a copy of this ruling letter to
such return. Alternatively, if Parent Group files its return electronically, this requirement
may be satisfied by attaching a statement to the return that provides the date on, and
the control number of, this ruling letter (January 17, 2017; PLR-131992-16).

The above extension of time is conditioned on the 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
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 purposes of granting relief under § 301.9100-3, we relied on certain statements and
representations made by Parent, Company Official, and Tax Professional, accompanied
by a penalty of perjury statement executed by an appropriate party. 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.
PLR-131992-16                                  4

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
                                           Chief, Branch 3
                                           Office of Associate Chief Counsel (Corporate)



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