Extra time granted to make a late election to file a consolidated return

Plain-English summary

A parent corporation heads an affiliated group that wanted to file a single consolidated federal income tax return for one tax year. To do that, the group has to make an election under Treas. Reg. § 1.1502-75(a)(1), which is effectively made by timely filing the consolidated return. For various reasons the group missed that deadline. The parent asked the IRS for more time under the § 301.9100-3 late-election rules. Those rules let the IRS grant relief when the taxpayer acted reasonably and in good faith and relief will not prejudice the government, and the request here was filed before the IRS discovered the missed election. The IRS granted the parent 90 days from the ruling to file the election by filing the consolidated return with a Form 1122 for each subsidiary. Relief is conditioned on the statute of limitations still being open and on the group's total tax not ending up lower than if the election had been timely (accounting for the time value of money). The IRS took no position on whether the group actually qualifies to file a consolidated return.

Ruling snapshot

• Question: May the parent get an extension under Treas. Reg. § 301.9100-3 to make a late election for its group to file a consolidated return under Treas. Reg. § 1.1502-75(a)(1)?
• Outcome: Approved
• Key authorities: Treas. Reg. § 301.9100-1 and § 301.9100-3; Treas. Reg. § 1.1502-75(a)(1); IRC § 6501; IRC § 6662

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202044004 Third Party Communication: None
Release Date: 10/30/2020 Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.20-00
Person To Contact:
------------------------------ --------------------------, ID No. ----------------
----------------------------------- -----------------
------------------------- Telephone Number:
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------------------------------ Refer Reply To:
--------------------------------- CC:CORP:1
PLR-106095-20
Date:
August 06, 2020

Legend

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

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

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

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

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

This letter responds to a letter dated February 10, 2020, 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 file an election. In particular, Parent is requesting an
extension of time for Parent and the members of its affiliated group (the “Parent Group”)
to make an election under §1.1502-75(a)(1) of the Income Tax Regulations to file a
consolidated federal income tax return, with Parent as the common parent, for the
taxable year ending on Date 1 (the “Election”). The material information submitted for
consideration is summarized below.

Parent was a domestic corporation that was the common parent of an affiliated group of
corporations for the taxable year ending on Date 1. 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 1 was due on the last day prescribed by law (including extensions
PLR-106095-20 2

of time) for the filing of Parent’s return. For various reasons, a valid Election (i.e., the
timely filing of the consolidated return) was not filed by the due date of Parent’s return.
Subsequently, a request was submitted under §301.9100-3 for an extension of time to
file the Election. The period of limitations on assessment under section 6501(a) of the
Internal Revenue Code (the “Code”) has not expired for the taxable year ending on Date
1 or any subsequent taxable year. Parent has represented that it is not attempting to
alter a return position for which an accuracy-related penalty has been or could be
imposed under section 6662 of the Code at the time of the request for relief.

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
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 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 applicable tax year and that the statute
of limitations is still open for the taxable year ending on Date 1 and all subsequent
years, we grant an extension of time under §301.9100-3, until 90 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 subsidiary which was a
member of the Parent Group for the taxable year ending on Date 1). Parent must
attach a copy of this ruling letter to such return, or if the return is filed electronically, a
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statement must be attached to the return that provides the date on, and the control
number (PLR-106095-20) 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 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 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
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, a copy of this letter is
being sent to your authorized representative.

                                    Sincerely,


                                    _________________________
                                    Thomas I. Russell
                                    Chief, Branch 1
                                    Office of Associate Chief Counsel (Corporate)

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