Affiliated group received 60 days to file its consolidated return election

Plain-English summary

A domestic parent and two subsidiaries formed an affiliated group but did not timely elect to file a consolidated federal income tax return for the year at issue. The parent relied on a qualified tax professional who failed to make or advise it to make the election, and the group requested relief before the IRS discovered the omission. The limitations period remained open, and the group was not trying to change a return position exposed to an accuracy-related penalty. The IRS granted 60 days to make the election by filing the consolidated return, provided the group was substantively eligible. Relief was conditioned on aggregate tax liability not being lower than with a timely election, and otherwise applicable penalties and interest remained in force.

Ruling snapshot

• Question: Could the affiliated group make a late election to file a consolidated return?
• Outcome: Approved for 60 days, subject to substantive eligibility and a tax-liability condition.
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201929001                                                 Third Party Communication: None
Release Date: 7/19/2019                                           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:1
                                                                  PLR-101404-19
                                                                  Date:
                                                                  April 16, 2019




Legend

Parent                     =         ------------------------------------------------------------------
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Sub 1                      =        ----------------------------------------------------

Sub 2                      =        --------------------------------------------

Year 1                     =        ------------------------------------------------------

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

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

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

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

This letter responds to a letter dated December 21, 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

PLR-101404-19                                2

for Year 1 (the “Election”). Additional information was submitted in a letter dated March
29, 2019. The material information submitted for consideration is summarized below.

Parent is a domestic corporation and was the common parent of an affiliated group
consisting of itself, Sub 1, and Sub 2 during Year 1 (“Parent Group”).

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 Year 1 was due on Date 1. However, for various reasons, a
valid Election (i.e., the filing of the consolidated return) was not made. After discovery
of the missed Election, Parent submitted this request for an extension of time under
§ 301.9100-3 to file a valid Election. The period of limitations on assessment under
§ 6501(a) has not expired for Year 1 or any subsequent taxable year. 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.

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.

PLR-101404-19                                 3


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, 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, provided that Parent Group qualifies
substantively to file a consolidated return for Year 1, 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 by filing of the consolidated return. Parent Group must attach 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-101404-19) 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 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.

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 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 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.

PLR-101404-19                                 4


Pursuant to the power of attorney on file in the office, copies of this letter are being sent
to your authorized representative.

                                       Sincerely,


                                       T. Ian Russell
                                       T. Ian Russell
                                       Branch Chief, Branch 1
                                       Office of Associate Chief Counsel (Corporate)



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