Late election to file a consolidated return is allowed after a missed filing

Plain-English summary

A corporation became the parent of a new affiliated group after acquiring another company and its subsidiaries. The group meant to file a single consolidated federal income tax return for the year, but the return was never filed and the election to consolidate was missed. The parent asked the IRS for extra time to make that election under the "9100 relief" regulations (Treas. Reg. §§ 301.9100-1 through 301.9100-3), which let the Commissioner forgive a missed regulatory election deadline when the taxpayer acted reasonably and in good faith and relief will not hurt the government. The IRS agreed, finding that the parent had reasonably relied on a qualified tax professional who failed to make or advise the election. It granted 60 days from the date of the letter to file the consolidated return (attaching a Form 1122 for each subsidiary), on the condition that the group's total tax liability not come out lower than if the election had been made on time. Anyone who has blown a tax election deadline cares about this because it shows the standard path back: reliance on a professional plus no prejudice to the government.

Ruling snapshot

• Question: May the parent group get an extension of time to make a missed election to file a consolidated federal income tax return?
• Outcome: Approved (extension granted under Treas. Reg. § 301.9100-3, 60 days from the letter date).
• Key authorities: Treas. Reg. §§ 301.9100-1 through 301.9100-3; Treas. Reg. § 1.1502-75(a)(1); IRC § 1502.

Full text (IRS public release)

Internal Revenue Service                        Department of the Treasury
                                                Washington, DC 20224

Number: 201833009                    Third Party Communication: None
Release Date: 8/17/2018              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:B01
                                     PLR-109733-18
                                     Date:
                                     May 23, 2018

                  TY: -----------------------------------------------------

Legend

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

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

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

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

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

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

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

This letter responds to a letter dated March 6, 2018, 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 Group, as defined below, to make an election under § 1.1502-
75(a)(1) of the Income Tax Regulations to file a consolidated Federal income tax return
for the tax year ending on Date 2 (the "Election"). Additional information was submitted
in a letter dated April 12, 2018. The material information submitted for consideration is
summarized below.

Parent became the common parent of a new affiliated group ("Parent Group") as the
result an acquisition of Corp X and its subsidiaries on Date 1. Parent Group intended to
file a consolidated return for the tax year ending on Date 2, but for various reasons, a
consolidated return was not filed. After discovery of the missed Election, Parent
submitted this request for an extension of time under § 301.9100-3 to file a valid
Election. Parent Group 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. 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.

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).

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 Group to file the Election, provided Parent 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 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)(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, provided that Parent Group qualifies
substantively to file a consolidated return for the tax year ending on Date 2, an
extension of time is granted under § 301.9100-3, until 60 days from the date on this
letter, for Parent Group to file the Election (by filing a consolidated return, with Parent as
the common parent, and attaching a Form 1122 for each subsidiary for the tax year
ending Date 2). Parent must attach a copy of this letter to the return, or if Parent Group
files its returns electronically, a statement must be attached to the return that provides
the date on, and the control number (PLR-109733-18) of, this letter ruling.

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 taxpayer's 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.

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
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, Company Official, 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 who requested 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__________________________
                                       Ken Cohen
                                       Senior Technician Reviewer, Branch 3
                                       Office of Associate Chief Counsel (Corporate)

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