Parent received 60 days to waive the consolidated NOL carryback period

Plain-English summary

A newly formed affiliated group intended to relinquish the carryback period for its consolidated net operating loss, and it filed all returns consistently with that intent. A qualified tax professional failed to make or recommend the required separate election statement. The group represented that none of the loss had been carried back to the former parent's consolidated group and that it sought relief before the IRS discovered the omission. The IRS granted 60 days to file the election and amend the consolidated return by attaching the ruling. Relief was conditioned on the group's aggregate tax liability not being lower than if the election had been timely, while any otherwise applicable penalties and interest remained in effect.

Ruling snapshot

• Question: Could the parent file a late election to relinquish the entire carryback period for the group's consolidated net operating loss?
• Outcome: Approved, with a 60-day filing period and a no-lower-tax condition.
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201825015                                                 Third Party Communication: None
Release Date: 6/22/2018                                           Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00
                                                                  Person To Contact:
-------------------------------------                             ---------------------------, ID No. ---------------
---------------------------------------------                     -----------------
-------------------------                                         Telephone Number:
----------------------------                                      ----------------------
-------------------------------------------                       Refer Reply To:
                                                                  CC:CORP:1
                                                                  PLR-130511-17
                                                                  Date:
                                                                  March 14, 2018




Legend

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

Corp X                     =         -----------------------------------------------
------------------------------------------------------------

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

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

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

Company Official &
Tax Professional           =         ---------------------
-----------------------------------------------------------------
-------------------------------------------------------------------------


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

This letter responds to a letter dated October 5, 2017, submitted on behalf of Parent,
requesting an extension of time under §§ 301.9100-1 through 301.9100-3 of the
Procedure and Administration Regulations to make an election. The extension is being
requested for Parent to make an election under § 1.1502-21(b)(3)(i) to relinquish the
entire carryback period for the Parent consolidated group’s consolidated net operating
loss (“CNOL”) for the tax year ending on Date 2 (the “Election”). Additional information
was submitted in a letter dated January 4, 2018. The material information submitted for
consideration is summarized below.
PLR-130511-17                                2


Parent became the common parent of a new affiliated group (“Parent Group”) as the
result of the distribution of the stock of Parent by Corp X on Date 1. Parent intended to
relinquish the carryback period for its consolidated group’s CNOL for the tax year
ending on Date 2. All returns for Parent Group were filed consistent with a valid Election
having been made. However, for various reasons, a valid Election was not filed. After
Date 3, the date that the Election was due, it was discovered that a valid election was
not filed. Subsequently, this request was submitted for an extension of time to file a
valid election.

Parent has represented that Parent Group did not exist prior to the tax year ending on
Date 2, and that no member of Parent Group for the tax year ending on Date 2 had a
separate return year, within the meaning of § 1.1502-1(e), at any time during the
carryback period, other than a separate return year in which it was a member of the
Corp X consolidated group. Corp X has represented that no portion of the CNOL of the
Parent Group for the tax year ending on Date 2 has been carried back, nor will be
carried back, to offset income in a consolidated return of the Corp X consolidated group.

Parent Group has also 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 at the time of the request for relief (taking into account any qualified amended
return within the meaning of § 1.6664-2(c)(3)). The period of limitations on assessment
under § 6501(a) has not expired for the tax year ending on Date 2 or any subsequent
tax year.

Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an irrevocable
election under § 172(b)(3) to relinquish the entire carryback period with respect to a
CNOL for any consolidated return year. The election is made in a separate statement
entitled “THIS IS AN ELECTION UNDER § 1.1502-21(b)(3)(i) TO WAIVE THE ENTIRE
CARRYBACK PERIOD PURSUANT TO SECTION 172(b)(3) FOR THE [insert
consolidated return year] CNOLs OF THE CONSOLIDATED GROUP OF WHICH [insert
name and employer identification number of common parent] IS THE COMMON
PARENT.” Section 1.1502-21(b)(3)(i) also provides that the statement must be filed with
the group’s income tax return for the consolidated return year in which the loss arises.

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. Section 301.9100-3 provides extensions of time for making
PLR-130511-17                                 3

regulatory elections that do not meet the requirements of § 301.9100-2. 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).

The time for filing the Election is fixed by the regulations (i.e., § 1.1502-21(b)(3)(i)).
Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an
extension of time for Parent Group to file the Election, provided Parent establishes 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 and Company Official &
Tax Professional explain the circumstances that resulted in the failure to timely file a
valid 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 timely 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 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, an extension of time is granted under
§ 301.9100-3, until 60 days from the date on this letter, for Parent to file the Election
with respect to the relinquishment of the entire carryback period for the CNOL for the
tax year ending on Date 2, as described above.

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 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.

Parent Group, having already filed its consolidated return for the tax year consistent
with the making of the Election, including the filing of the election statement described in
§ 1.1502-21(b)(3)(i), must amend the return by attaching a copy of this letter to the
return, or if Parent Group files its returns electronically, Parent Group may satisfy this
requirement by attaching a statement to its return that provides the date on, and the
control number (PLR-130511-17) of, this letter ruling.

We express no opinion as to the tax effects or consequences of filing the Election or the
return late under the provisions of any other section of the Code and regulations, or as
PLR-130511-17                                  4

to the tax treatment of any conditions existing at the time of, or resulting from, filing 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, Corp X, and Company Official & 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 letter is directed only to the taxpayer who requested it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

Pursuant to the power of attorney on file in the office, a copy of this letter is being sent
to your authorized representative.

                                        Sincerely,


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



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