IRS grants extra time for a new consolidated group to elect to waive the loss-carryback period to its former parent's group

Plain-English summary

When companies leave one consolidated tax group and form or join another, their later net operating losses could normally be carried back to years when they belonged to the old group. A regulation (Treasury Reg. § 1.1502-21(b)(3)(ii)(B)) lets the new group elect to give up (relinquish) that carryback to the former group, but the election must be filed with the new group's original return for the year the companies joined. Here the new parent and its subsidiaries had left a former parent's group, but the waiver election was not filed on time. The group sought "9100 relief," a discretionary extension to make the late election under Treasury Regulation § 301.9100-3. The IRS found the group acted reasonably and in good faith, requested relief before the IRS discovered the lapse, and would not prejudice the government, and granted 75 days to file the election, conditioned on no reduction in aggregate tax liability.

Ruling snapshot

• Question: May the new consolidated group get an extension of time to elect to relinquish its loss-carryback period to the former parent's group?
• Outcome: Approved (75-day extension, subject to the no-lower-tax condition)
• Key authorities: Treas. Reg. § 1.1502-21(b)(3)(ii)(B); IRC § 172; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202219012 Third Party Communication: None
Release Date: 5/13/2022 Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.22-00
Person To Contact:
--------------------------------------------------- ------------------------, ID No. ---------------
------------------------------------- Telephone Number:
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---------------------------------- Refer Reply To:
CC:CORP:3
PLR-121560-21
Date:
February 17, 2022

Legend

Parent = -------------------------------------
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FormerParent = --------------------------------------------
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Date1 = ------------------

Date2 = --------------------------

Company Official = ----------------------------------------------------
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Tax Professionals = ---------------------------------------
----------------

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

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

This letter responds to a letter dated October 13, 2021, requesting, on behalf of Parent,
an extension of time under §301.9100-3 of the Procedure and Administration
Regulations to file an election. The extension is being requested for Parent to file an
election under §1.1502-21(b)(3)(ii)(B) of the Income Tax Regulations to relinquish, with
respect to all consolidated net operating losses ("CNOLs") attributable to Parent and its
PLR-121560-21 2

subsidiaries ("Subsidiaries"), the portion of the carryback period for which Parent and
Subsidiaries were members of FormerParent's consolidated group (the "Election"). The
material information submitted for consideration is summarized below.

Parent and Subsidiaries became a consolidated group, with Parent as the common
parent, on Date1. Prior to becoming a consolidated group, Parent and Subsidiaries
were members of the FormerParent consolidated group and were included in the
consolidated federal income tax return of the FormerParent consolidated group. For the
taxable year beginning Date1 and ending Date2, Parent and Subsidiaries (the "New
Group") timely filed a consolidated federal income tax return.

Section 1.1502-21(b)(3)(ii)(B) required the Election to be filed with the New Group's
consolidated return for the taxable year ending Date2, but for various reasons, a valid
Election was not filed. After the due date of the return for the taxable year ending
Date2, it was discovered that a valid Election had not been filed. Subsequently, this
request was submitted, under §301.9100-3, for an extension of time to file the Election.
Parent has represented that no CNOLs from the New Group for the taxable year ending
Date2, or any subsequent year, have been carried back, or will be carried back, to a
prior return year of the FormerParent consolidated group.

Section 1.1502-21(b)(3)(ii)(B) provides that if one or more members of a consolidated
group become members of another consolidated group, the acquiring consolidated
group may elect to relinquish, with respect to all CNOLs attributable to the member, the
portion of the carryback period for which the corporation was a member of another
group. This election is available provided that any other corporation joining the
acquiring group that was affiliated with the member immediately before it joined the
acquiring group is also included in the waiver. This election is not a yearly election and
applies to all losses that would otherwise be subject to a carryback to a former group
under section 172. The election is made in a separate statement entitled "THIS IS AN
ELECTION UNDER SECTION 1.1502-21(b)(3)(ii)(B) TO WAIVE THE PRE-[insert first
taxable year for which the member (or members) was not a member of another group]
CARRYBACK PERIOD FOR THE CNOLs attributable to [insert names and employer
identification number of members]." Section 1.1502-21(b)(3)(ii)(B) provides that the
statement must be filed with the acquiring consolidated group's original income tax
return for the year the corporation (or corporations) became a member.

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 Parent 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
PLR-121560-21 3

certain elections that do not meet the requirements of §301.9100-2. Requests for relief
under §301.9100-3 will be granted when the Parent provides evidence to establish to
the satisfaction of the Commissioner that the Parent 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 the regulations (i.e., §1.1502-
21(b)(3)(ii)(B)). Therefore, the Commissioner has discretionary authority under
§301.9100-3 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 by Parent, Company Official, and
Tax Professionals explain the circumstances that resulted in the failure to timely file a
valid 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 established that it acted reasonably and in good faith in failing
to timely file the Election, the requirements of §§301.9100-1 and 301.9100-3 are
satisfied, and granting relief will not prejudice the interests of the government.
Accordingly, we grant an extension of time under §301.9100-3, until 75 days from the
date on this letter, for Parent to file the Election.

Parent should file the Election in accordance with §1.1502-21(b)(3)(ii)(B). The New
Group's return must be amended to attach the election statement required by §1.1502-
21(b)(3)(ii)(B). A copy of this letter must be attached to any income tax return to which
it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date on, and
control number (PLR-121560-21) of, the letter ruling.

The above extension of time is conditioned on the New 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 Parents' tax liability for the years involved.
A determination thereof will be made upon audit of the federal income tax returns
involved.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.
PLR-121560-21 4

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                Sincerely,


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

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