Consolidated group receives extension to waive loss carryback

Plain-English summary

A consolidated group intended to waive the entire carryback period for a consolidated net operating loss, but its return did not include a valid election. The group filed consistently with that intent and represented that no part of the loss had been or would be carried back. The IRS found that the parent reasonably relied on a qualified tax professional and sought relief before the IRS discovered the omission. It granted 90 days to file the election required by Treasury Regulation Section 1.1502-21(b)(3)(i). The relief is conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely made.

Ruling snapshot

• Question: Should a consolidated group receive extra time to elect under Treasury Regulation Section 1.1502-21(b)(3)(i) to waive the carryback period for a consolidated net operating loss?
• Outcome: Approved: the parent received 90 days to file the election.
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202117010 Third Party Communication: None
Release Date: 4/30/2021 Date of Communication: Not Applicable
Index Number: 1502.21-00, 9100.22-00
Person To Contact:
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Refer Reply To:
CC:CORP:5
PLR-120484-20
Date:
January 28, 2021

Legend

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

Company Officials = --------------------
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Tax Professional = ----------------------
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Dear ------------------:

This letter responds to a letter dated September 18, 2020, 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 to make an election under §1.1502-21(b)(3)(i) of the Income Tax
Regulations to relinquish the entire carryback period for the consolidated net operating
loss (“CNOL”) for the consolidated group of which Parent is the common parent (the
PLR-120484-20 2

“Parent Group”) for the tax year ending Date 1 (the “Election”). The material information
submitted for consideration is summarized below.

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. After the date that the Election was due, 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 the Parent Group has not carried back, and will not carry
back, any portion of the CNOL for the tax year ending Date 1 to a prior consolidated
return year of the Parent Group. Appropriate representations have been received from
Parent indicating that no portion of the CNOL for the tax year ending on Date 1 has
been or will be carried back to a prior separate return year (within the meaning of
§1.1502-1(e)) of any member of the Parent Group. Parent also has represented that it is
not seeking to alter a return position for which an accuracy-related penalty has been or
could be imposed under section 6662.

Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an irrevocable
election under section 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. Section 301.9100-3 provides extensions of time for making
regulatory elections that do not meet the requirements of §301.9100-2. 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-120484-20 3

In this case, the time for filing the Election is fixed by regulations (i.e., §1.1502-
21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-1
to grant an extension of time for Parent 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.

Information, affidavits, and representations submitted Parent, Company Officials, 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), (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 90 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 the taxpayers’ (Parent and the members
of the Parent Group) 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.

Parent must file the Election in accordance with §1.1502-21(b)(3)(i). The Parent Group’s
tax return for the tax year ending Date 1 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 the Parent Group files its returns electronically,
Parent may satisfy this latter requirement by attaching a statement to the return that
provides the date on, and control number (PLR-120484-20) of, this letter 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 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 §301.9100-1, we have relied on certain statements
and representations made by Parent, Company Officials, and Tax Professional.
However, the Director should verify all essential facts. Moreover, notwithstanding that
an extension is granted under §301.9100-1 to file the Election, penalties and interest
that would otherwise be applicable, if any, continue to apply.
PLR-120484-20 4

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.

Pursuant to 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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