Corporate group received 60 days to elect consolidated filing

Plain-English summary

A newly formed parent corporation and its subsidiaries failed to timely elect to file a consolidated federal income tax return after acquiring another corporate group. The parent requested relief before the IRS discovered the missed election, and affidavits from the parent, a company official, and a tax professional explained the failure. The IRS concluded that the parent acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days to file the consolidated return and Forms 1122 for each affiliated subsidiary. Relief was conditioned on the group's aggregate tax liability not being lower than it would have been with a timely election, and the IRS did not rule that the group substantively qualified to consolidate.

Ruling snapshot

• Question: Could the parent make a late election for its affiliated group to file a consolidated federal income tax return?
• Outcome: approved, with 60 days to file the consolidated return and subsidiary consents
• Key authorities: IRC §§ 1502, 6501(a), 6662; Treas. Reg. §§ 1.1502-75, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201930019                                              Third Party Communication: None
Release Date: 7/26/2019                                        Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
                                                               Person To Contact:
--------------------------                                     --------------------------, ID No. ----------------
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------------------------                                       Telephone Number:
                                                               ----------------------
------------------------------------------------------------   Refer Reply To:
---------------------                                          CC:CORP:B05
                                                               PLR-133698-18
                                                               Date:
                                                               May 01, 2019




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

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

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

Company Official =                   -------------------------------------------------------------------
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Tax Professional           =         ----------------------------------------------------------
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Dear ---------------:

This letter responds to a letter dated November 9, 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 the taxable year
ending on Date 3. Additional information was submitted in letters dated February 27,
2019 and April 16, 2019. The material information submitted for consideration is
summarized below.

Parent, Sub 1, and Sub 2 were formed on Date 1. On Date 2, Sub 2, which was wholly-
owned by Sub 1, which in turn was wholly-owned by Parent, acquired all of the stock of
Sub 3, which owned all of the stock of Sub 4, Sub 5, Sub 6, Sub 7, Sub 8, and Sub 9.
An election for the Parent Group to file a consolidated income tax return, with Parent as
the common parent, for the taxable year ending on Date 3 was due on the last day
prescribed by law (including extensions of time) for the filing of Parent’s return.
However, 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 the taxable
year ending on Date 3 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 at the time Parent requested relief and for
which the new position requires or permits a regulatory election for which relief is
requested.

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).

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 Professional explain the circumstances that resulted in the failure to timely file the
Election. The information establishes 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).

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 3, 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 its affiliated subsidiaries) for
its taxable year ending on Date 3. Parent must attach a copy of this letter ruling 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-133698-18) 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 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 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 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,


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