Consolidated group received 60 days to waive CNOL carryback

Plain-English summary

A consolidated group intended to waive the entire carryback period for a consolidated net operating loss, and its returns were filed consistently with that intent, but the required election statement was omitted. The parent represented that no part of the loss had been or would be carried back and that it was not trying to change a penalty-sensitive return position. The IRS found that the parent reasonably relied on a qualified tax professional and acted reasonably and in good faith. It granted 60 days to file the election under the section 9100 relief rules, conditioned on aggregate tax liability not being lower than if the election had been timely. The group also had to amend its loss-year return to attach the election statement and ruling information.

Ruling snapshot

• Question: Could the consolidated group make a late election to relinquish the entire CNOL carryback period?
• Outcome: Approved, with 60 days to file and a government-interest condition.
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i) and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201906003 Third Party Communication: None
Release Date: 2/8/2019 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00
Person To Contact:
--------------------------- ---------------------, ID No. ------------------
---------------------------------------------- Telephone Number:
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------------------------------------------------------------ Refer Reply To:
-- CC:CORP:B1
PLR-122414-18
Date:
November 08, 2018

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

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

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

Tax Professional = ---------------------
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Dear ----------------:

This letter ruling responds to a letter from your authorized representatives dated July
18, 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 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 Date 1 (the “Election”). Additional information was submitted in a letter
dated September 10, 2018. The material information submitted for consideration is
summarized below.

PLR-122414-18 2

Parent is the common parent of a consolidated group (“Parent Group”). Parent Group
incurred a CNOL in the tax year ending Date 1. Parent intended to relinquish the
carryback period for its consolidated group's CNOL on its tax return for the tax year
ending Date 1. 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. During
the week of Date 2, after the date that the Election was due (with extensions), 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 has not and will not carry back any portion of
the CNOL for the tax year ending Date 1 to a prior consolidated return year of Parent
Group. Parent has also represented that no member of the consolidated group of which
Parent was the common parent for the tax year ending Date 1 had a separate return
year, within the meaning of § 1.1502-1(e), at any time during the carryback period.
Parent has further represented that Parent is not seeking to alter a return position for
which an accuracy-related penalty has been or could be imposed under § 6662 at the
time Parent requested relief (taking into account any qualified amended return filed
within the meaning of § 1.6664-2(c)(3)) and for which the new return position requires or
permits a regulatory election for which relief is requested.

Section 1.1502-21(b)(3)(1) 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. 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-122414-18 3

In this case, 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 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, 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 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, an extension of time is granted under
§ 301.9100-1, 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 Date 1, 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 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.

Parent must file the Election in accordance with § 1.1502-21(b)(3)(i). Parent Group’s
return for the tax year ending Date 1, having been filed consistent with a valid election
having been made, must be amended to attach the election statement required by
§ 1.1502-21(b)(3)(i). A copy of this letter must be attached to the election statement.
Alternatively, if Parent Group files its returns electronically, Parent may satisfy this latter
requirement by attaching a statement to its return that provides the date on and control
number (PLR-122414-18) of this ruling.

We express no opinion as to the tax effects or consequences of filing 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
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 Official, and Tax Professional.
However, the Director should verify all essential facts. In addition, notwithstanding that

PLR-122414-18 4

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
                                   Senior Technician Reviewer, Branch 3
                                   Office of Associate Chief Counsel (Corporate)