Corporate group receives 75 days for consolidated return election

Plain-English summary

A parent corporation intended to file a consolidated return with two subsidiaries but did not timely make a valid consolidated return election and omitted one subsidiary from the return. The parent sought relief before the IRS discovered the failure and showed that it had reasonably relied on a qualified tax professional. The IRS granted 75 days to correct the return, include the omitted subsidiary, and attach Forms 1122 for both subsidiaries. Relief was conditioned on the group's aggregate tax liability for all affected years not being lower than it would have been with a timely election. The ruling did not decide whether the corporations substantively qualified to file a consolidated return, and otherwise applicable penalties and interest remained in place.

Ruling snapshot

• Question: May the parent and its subsidiaries receive extra time to elect to file a consolidated federal income tax return?
• Outcome: approved
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201741006                                             Third Party Communication: None
Release Date: 10/13/2017                                      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:B04
                                                              PLR-105615-17
                                                              Date:
                                                              July 14, 2017



Legend

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

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

Sub 2                         =     ---------------------------------------------------------------------------------------------
                                    ---------------------------------------------------------------------------------------------
                                    ------------------------

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

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

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

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

      This letter responds to a letter submitted on behalf of Parent, requesting an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
PLR-105615-17                                 2

to file an election. The extension is being requested for Parent, Sub 1 and Sub 2 to
elect to file a consolidated Federal income tax return under § 1.1502-75(a)(1) of the
Income Tax Regulations, with Parent as the common parent, (hereinafter referred to as
“the Election”), for the taxable year ending Date 1. The material information submitted
for consideration is summarized below.

         For the taxable year ending Date 1, Parent was the common parent of an
affiliated group, consisting of Parent, Sub 1 and Sub 2. Parent, as the common parent,
intended to file a consolidated income tax return for the taxable year ending Date 1.
The Election was due on the last day prescribed by law (including extensions of time)
for filing Parent's return but for various reasons Parent did not timely file the Election.
Additionally, Parent failed to include Sub 2 in the consolidated return. 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 affiliated group's taxable year for which it wants to make the Election.

      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 of the
Code at the time of the request (taking into account any qualified amended return within
the meaning of § 1.6664-2(c)(3)).

        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
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).
PLR-105615-17                                 3

       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 Parent affiliated group 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 a valid Election. The information establishes that the request for relief was
filed before the failure to timely make the Election was discovered by the Internal
Revenue Service and that Parent reasonably relied on a qualified tax professional, who
failed to make, or advise Parent to make, the Election. See §§ 301.9100-3(b)(1)(i) and
(v).

       Based on the facts and information submitted, including the affidavits submitted
and 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, Sub 1 and Sub 2 qualify substantively to file a consolidated return for the
applicable taxable year, an extension of time is granted under § 301.9100-3, until 75
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 Sub 1
and Sub 2 for the taxable year ending Date 1.

        Parent having already filed a consolidated federal income tax return for the
taxable year, must correct the return to include Sub 2 and must attach a copy of this
letter to the corrected return. 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 corrected return that provides the date on (July 14, 2017) and control number of
(PLR-105615-17) this letter ruling.

         The above extension of time is conditioned on the 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 Parent affiliated
group's tax liability for the years involved. A determination thereof will be made by the
applicable 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
particular, we express no opinion with respect to whether Parent, Sub 1 and Sub 2
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
PLR-105615-17                                  4

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 Parent, Company
Official and Tax Professional. 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 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)




cc: