Grants extra time to elect consolidated-return filing

Plain-English summary

A parent corporation and its affiliated subsidiaries failed to make a timely election to file a consolidated federal income tax return. The parent showed that it had reasonably relied on a qualified tax professional who failed to make or recommend the election, and it requested relief before the IRS discovered the omission. The IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government's interests. It granted 30 days to file the consolidated return and the subsidiaries' Forms 1122, subject to the group qualifying substantively, the limitation periods remaining open, and aggregate tax liability not being lower than it would have been with a timely election. The ruling did not waive otherwise applicable penalties or interest.

Ruling snapshot

• Question: Could the affiliated group receive an extension under Treas. Reg. § 301.9100-3 to make its consolidated-return election?
• Outcome: Approved.
• Key authorities: IRC §§ 1502, 6501(a), and 6662; 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: 201813006
Release Date: 3/30/2018
Third Party Communication: None
Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00

Person To Contact:
[redacted], ID No. [redacted]
Telephone Number:
[redacted]
Refer Reply To:
CC:CORP:B1
PLR-130915-17
Date:
December 28, 2017

LEGEND

Parent = [redacted]
Sub 1 = [redacted]
Sub 2 = [redacted]
State = [redacted]
Year 1 = [redacted]
Date 1 = [redacted]
Company Officials = [redacted]
Tax Professional = [redacted]

PLR-130915-17 2

Dear [redacted]:

This letter responds to a letter from your authorized representatives, dated October 2,
2017, requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to file an election. In particular, Parent is
requesting an extension of time for Parent and the members of its affiliated group (the
“Parent Group”) 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 1. The material information submitted for
consideration is summarized below.

Parent was a domestic corporation incorporated under the laws of State that directly
and indirectly owned Sub 1 and Sub 2 at the end of the Year 1 taxable year.

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.

An election for the Parent Group to file a consolidated income tax return, with Parent as
the common parent, for the Year 1 taxable year was due on the last day prescribed by
law (including extensions of time) for the filing of Parent’s return. 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. 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 Year 1 or any subsequent taxable year. Parent has
represented that it is not attempting to alter a return position taken for which an
accuracy-related penalty has been or could be imposed under § 6662.

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-130915-17 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 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 Officials, 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, a valid 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 Parent Group qualifies
substantively to file a consolidated return for the applicable tax year and that the statute
of limitations is still open for Year 1 and all subsequent years, we grant an extension of
time, under § 301.9100-3, for thirty (30) 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 its Year 1 taxable year). Parent
must attach a copy of this ruling letter to such return, or if Parent files the return
electronically, a statement must be attached to the return that provides the date on, and
the control number of, this ruling letter.

The above extension of time is conditioned on 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.

PLR-130915-17 4

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 the purposes of granting relief under § 301.9100-3, we relied on certain statements
and representations made by Parent, Company Officials, and Tax Professional.
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.

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, copies of this letter are
being sent to your authorized representatives.

Sincerely,

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

cc: