Parent company gets extra time to elect to file a consolidated return for the year it acquired a group of subsidiaries

Plain-English summary

A group of affiliated corporations can choose to file one combined ("consolidated")
federal income tax return instead of separate returns, but the group makes that
election simply by filing the consolidated return by the parent's return due date.
Here a parent had acquired a subsidiary that owned thirteen other subsidiaries and
intended to file a consolidated return for that year, but for various reasons did
not file it on time, so the election was never validly made. The parent asked the
IRS for an extension under the "9100 relief" rules. Because the consolidated-return
election deadline is set by regulation, the IRS can grant extra time when the
taxpayer acted reasonably and in good faith (here, it relied on a tax professional
who failed to advise it to file) and relief will not prejudice the government. The
IRS granted 60 days to file the consolidated return with a Form 1122 for each
subsidiary, conditioned on the group actually qualifying to consolidate and on the
group's tax not being lower than if the election had been timely made.

Ruling snapshot

• Question: May a parent corporation get an extension of time to make the election to file a consolidated return for the acquisition year?
• Outcome: Approved (60-day extension granted, subject to conditions)
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-3; IRC § 1501

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201839009                                                 Third Party Communication: None
Release Date: 9/28/2018                                           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:B05
-----                                                             PLR-107064-18
                                                                  Date:
                                                                  June 28, 2018




Legend

Parent                     =         ----------------------------------------------------------------
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Sub 1                      =         -------------------------------------------------
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Sub 2                      =         -----------------------------------
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Sub 3                      =         ---------------------
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Sub 4                      =         --------------------------------------------------------
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Sub 5                      =         -----------------------------------------
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Sub 6                      =         -----------------------
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Sub 7                      =         --------------------------
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Sub 8                      =         ------------------------------
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Sub 9                      =         --------------------------------------------
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Sub 10                     =         ------------------------------------------
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Sub 11                     =         ------------------------------------------------
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Sub 12                     =         ------------------------------------------
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Sub 13                     =         --------------------------------------
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Year 1                     =        -------

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

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

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

Tax Professionals          =         ------------------------------------------
                                    ----------------------
                                    -------------------------------------
                                    --------------------------------

                                    ----------------------------------------------------------
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                                    ------------------------------


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

This letter responds to a letter dated February 20, 2018, submitted on behalf of Parent,
requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations to make 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 on April 13, April 27, and May 10, 2018. The material
information submitted for consideration is summarized below.

Parent acquired Sub 1, which owned all of the stock of Sub 2, Sub 3, Sub 4, Sub 5, Sub
6, Sub 7, Sub 8, Sub 9, Sub 10, Sub 11, Sub 12, and Sub 13 (collectively, the
“Subsidiaries”), on Date 1. 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. Parent Group intended to file a consolidated return for the taxable year
ending on Date 2, 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. This request was
submitted under § 301.9100-3, for an extension of time to file the Election.

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.

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
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.

Section 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 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 Official and
Tax Professionals 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 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 Parent Group qualifies
substantively to file a consolidated return for the taxable year ending on Date 2, an
extension of time is granted under § 301.9100-3, until sixty (60) 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 the Subsidiaries) 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 (PLR-107064-18) 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.

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 Professionals. 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______________
                                       Ken Cohen
                                       Senior Technician Reviewer, Branch 3
                                       Office of Associate Chief Counsel (Corporate)




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