75-day extension for a consolidated group to elect to waive its NOL carryback period

Plain-English summary

When a corporate group that files a consolidated return has a net operating loss,
the default rule lets it carry that loss back to earlier years, but the group can
instead elect to waive the carryback and only carry the loss forward. That
election has to be made with the return for the loss year, on a specific statement.
Here, the parent of a consolidated group intended to make the waiver election for a
loss year but never filed a valid one. The group asked the IRS for extra time under
the Section 301.9100-3 relief rules, represented that it has not and will not carry
the loss back, and showed it reasonably relied on a tax professional who failed to
make the election. The IRS granted a 75-day extension for the group's current
parent to file the waiver election by amending the loss-year return. The relief is
conditioned on the group's tax liability not being lower than if the election had
been timely made. The IRS expressed no opinion on the group's actual tax liability.

Ruling snapshot

• Question: Should the IRS grant more time to make a late election waiving the consolidated group's NOL carryback period?
• Outcome: Approved (75-day extension granted under Treas. Reg. § 301.9100-3)
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i), 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                          Department of the Treasury
                                                  Washington, DC 20224

Number: 202427004                                 Third Party Communication: None
Release Date: 7/5/2024                             Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.20-00,
              1502.00-00, 1502.21-00               Person To Contact:
                                                    --------------, ID No. --------
[Taxpayer name and address redacted]              Telephone Number:
                                                    --------------
                                                  Refer Reply To:
                                                    CC:CORP:2
                                                  PLR-120464-23
                                                  Date:
                                                  April 05, 2024

Legend

Agent            = --------------
Parent           = --------------
Date 1           = --------------
Date 2           = --------------
Company Official = --------------

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

This letter ruling responds to your authorized representatives' letter dated October 9,
2023, submitted by Agent on behalf of Parent, requesting an extension of time under
§301.9100-3 of the Procedure and Administration Regulations to make an election
under §1.1502-21(b)(3)(i) to relinquish the entire carryback period for the Parent
consolidated group's consolidated net operating loss ("CNOL") for the tax year ending
Date 1 (the "Election"). The material information submitted for consideration is
summarized below.

For the taxable year ended Date 1, Parent was the common parent of a consolidated
group (the "Parent Group") that included Parent and Agent. The Parent Group incurred
a CNOL in the tax year ending Date 1 (the "CNOL"). The Election was required to be
filed with the Parent Group's income tax return for the tax year ending Date 1, but for
various reasons, a valid election was not filed. On Date 2, Agent succeeded Parent as
the common parent of the Parent Group.

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.

Agent has represented that the Parent Group has not carried back, and will not carry
back, any portion of the CNOL to a prior consolidated return year of the Parent Group.
Agent has also represented that no portion of the CNOL has been carried back, or will
be carried back, to a separate return year (within the meaning of §1.1502-1(e)) of any
corporation that was a member of the Parent Group at any time during the tax year
ended Date 1. Agent has further 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 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. 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 the regulations (i.e., §1.1502-
21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-
3 to grant an extension of time for Agent to file the Election, provided Agent establishes
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 Agent and Company Official
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) and (v).

Based on the facts and information submitted, including the representations made, we
conclude that Agent has shown 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. Accordingly, an extension of time is granted
under §301.9100-1, until 75 days from the date of this letter, for Agent to file the
Election with respect to the relinquishment of the entire carryback period for the Parent
Group's CNOL for the tax year ending Date 1, as described above.

The above extension of time is conditioned on the 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.

Agent must file the Election in accordance with §1.1502-21(b)(3)(i). The Parent Group's
return for the tax year ending Date 1, having been filed consistent with a valid election
having been made, 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, Agent may satisfy this
latter requirement by attaching a statement to its return that provides the date on, and
control number (PLR-120464-23) of, this 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 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 Agent and Company Official. 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,



                                            Justin O. Kellar
                                            Senior Technician Reviewer, Branch 3
                                            (Corporate)


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