Consolidated group receives 75 days to waive former-group loss carrybacks

Plain-English summary

A consolidated group's parent acquired corporations that had belonged to another consolidated group. The parent intended to elect to relinquish the portion of the carryback period covering the acquired corporations' former-group years for all consolidated net operating losses attributable to them, but a valid election was not attached to the acquisition-year return. The parent represented that none of the relevant losses had been or would be carried back to a separate return year of a group member or predecessor. The IRS found that the parent reasonably relied on a qualified tax professional and met the discretionary relief requirements. It granted 75 days to amend the consolidated return and attach the election statement, conditioned on the group's aggregate tax liability not being lower than if the election had been timely made, taking the time value of money into account.

Ruling snapshot

• Question: May the consolidated group make a late election to waive the former-group carryback period for losses attributable to the acquired corporations?
• Outcome: Approved, with 75 days to amend the return and file the election
• Key authorities: IRC § 172; Treas. Reg. §§ 1.1502-21(b)(3)(ii)(B), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202445013 Third Party Communication: None
Release Date: 11/8/2024 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00, Person To Contact:
172.01-00 --------------------------, ID No. -----------------
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---------------------------------------------- Telephone Number:
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----------------------------------------- Refer Reply To:
------------------------- CC:CORP:BO4
PLR-105081-24
Date:
August 06, 2024

Legend

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Targets = ---------------------------
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PLR-105081-24 2

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Former Parent = -----------

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

Date 2 = ---------------------

Company Official = ----------------------------------------------
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Tax Professional = --------------------------
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Dear ----------------:

This letter responds to a letter from your authorized representatives dated March 12,
2024, submitted on behalf of Parent, requesting 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 Targets, the portion of the carryback period for which
Targets were members of Former Parent’s consolidated group (the “Election”). The
material information submitted for consideration is summarized below.

Parent is the common parent of a consolidated group (“Parent Group”). On Date1,
Parent acquired Targets. Prior to becoming members of the Parent Group, Targets
were members of the Former Parent consolidated group and were included in the
consolidated federal income tax return of Former Parent.

Section 1.1502-21(b)(3)(ii)(B) required the Election to be filed with Parent Group’s
consolidated return for the taxable year ending Date 2, but for various reasons, a valid

PLR-105081-24 3

Election was not filed. Subsequently, this request was submitted, under §301.9100-3,
for an extension of time to file the Election. It has been represented that no portion of
any CNOL of the Parent Group for the tax year ending Date 2, or any subsequent year,
has been carried back, or will be carried back, to a separate return year (within the
meaning of §1.1502-1(e)) of any member (or predecessor) of the Parent 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 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
certain 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).

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 Professional explain the circumstances that resulted in the failure to timely file a

PLR-105081-24 4

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. See
§301.9100-3(b)(1)(v).

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 Parent
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-105081-24) of, the letter ruling.

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 taxpayer’s 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 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 representatives.

                                       Sincerely,

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

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