Affiliated group gets 60 days to elect consolidated filing

Plain-English summary

A domestic parent corporation and its 18 subsidiaries failed to make a valid election to file a consolidated federal income tax return by the applicable deadline. The parent requested regulatory relief before the IRS discovered the failure, the relevant assessment periods remained open, and the submitted information showed that it had reasonably relied on qualified tax professionals. 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 with a Form 1122 for each subsidiary, subject to substantive eligibility and an aggregate-tax-liability condition.

Ruling snapshot

• Question: May the affiliated group receive extra time to elect consolidated filing with the parent as common parent?
• Outcome: Approved, with 60 days to file the consolidated return and required Forms 1122.
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, and 301.9100-3; IRC §§ 6501(a) and 6662.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201951004 Third Party Communication: None
Release Date: 12/20/2019 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:B05
---------------- PLR-107284-19
Date:
September 26, 2019

Legend

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

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

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

Sub 3 = ---------------------------------------------

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Sub 7 = -------------------------------------

Sub 8 = -------------------------------------------------

Sub 9 = -------------------------------------------------------
PLR-107284-19 2

Sub 10 = -----------------------

Sub 11 = ----------------------------

Sub 12 = -------------------------------------------------

Sub 13 = -------------------

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Sub 17 = -------------------------------------

Sub 18 = -------------
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Company Official = ---------------------------

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

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

State = --------------

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

Year = -------
PLR-107284-19 3

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

This letter responds to a letter dated March 14, 2019, 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. In particular, Parent is requesting
an extension of time for Parent and the members of its affiliated group (the “Parent
Group”) 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 Date 1. Additional information was submitted subsequently. The
material information submitted for consideration is summarized below.

Parent was a domestic corporation incorporated under the laws of State that directly
and indirectly owned Sub 1, Sub 2, Sub 3, Sub 4, Sub 5, Sub 6, Sub 7, Sub 8, Sub 9,
Sub 10, Sub 11, Sub 12, Sub 13, Sub 14, Sub 15, Sub 16, Sub 17, and Sub 18 at the
end of the Year taxable year.

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 section 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 the Year taxable year was due on the last day prescribed by law
(including extensions of time) for the filing of Parent’s return. For various reasons,
however, 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 section 6501(a) has not expired for Year 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 section 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.
PLR-107284-19 4

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 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 qualified tax
professionals who failed to make, or advise Parent to make, a valid 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 the Parent Group qualifies
substantively to file a consolidated return for the applicable taxable year, we grant an
extension of time, under §301.9100-3, for 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 Year taxable
year). Parent Group must attach a copy of this letter to the return, or if Parent Group
files the return electronically, a statement must be attached to the return that provides
the date on, and the control number (PLR-107284-19) of, this letter ruling.

The above extension of time is conditioned on the Parent Group’s tax liability (if any) not
being 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 Election late under the provisions of any other
PLR-107284-19 5

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 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,

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

cc: