Consolidated group received more time to waive loss carryback

Plain-English summary

A consolidated corporate group incurred a consolidated net operating loss and intended to waive the entire carryback period for that loss. The common parent failed to file a valid election with the group's return after relying on a qualified tax professional. The IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government's interests. It granted 90 days to file the election and required amended returns attaching the election statement. The relief was conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely made, after accounting for the time value of money.

Ruling snapshot

• Question: Could the consolidated group receive additional time to elect to relinquish the carryback period for its consolidated net operating loss?
• Outcome: Approved, with a 90-day filing period and stated conditions.
• 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: 201644005 Third Party Communication: None
Release Date: 10/28/2016 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00
Person To Contact:
----------------------------- -----------------------, ID No. -------------------
----------------------------------- ---------------------------------------------------
----------------------------- Telephone Number:
----------------------
--------------------------------------- Refer Reply To:
CC:CORP:4
PLR-103289-16
Date:
July 27, 2016

Legend

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

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

Company Official 1 = -----------------

Company Official 2/Tax Professional = --------------------

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

    This is in response to a letter dated January 11, 2016, and subsequent

correspondence, 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
file an election. The extension is being requested for Parent to file 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.

  Parent is the common parent of a consolidated group (“Parent Group”). Parent

Group incurred a CNOL for the tax year ending Date 1.
PLR-103289-16 2

   Parent intended to file the Election. The Election was required to be filed by the

due date for Parent Group’s consolidated return for the tax year ending Date 1, but for
various reasons, Parent failed to file a valid Election. The period of limitations on
assessment under § 6501(a) has not expired for Parent Group’s tax year ending Date 1
or any subsequent taxable year.

    Parent has represented that Parent Group has not, and will not, carry back any

portion of the CNOL to a prior consolidated return year of Parent Group and that no
member of Parent Group for the tax year ending Date 1 had a separate return year,
within the meaning of § 1.1502-1(e), at any time during the carryback period. Parent
has also represented that Parent is not seeking to alter a return position for which an
accuracy-related penalty has been or could be imposed under § 6662.

    Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an

irrevocable election under § 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. 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
§ 301.9100-1 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.
PLR-103289-16 3

    Information, affidavits, and representations submitted by Parent, Company

Official 1, and Company Official 2/Tax Professional explain the circumstances that
resulted in the failure to timely file the 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 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’s and the

members of its consolidated 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 should file the Election in accordance with § 1.1502-21(b)(3)(i). Parent

Group’s returns must be amended to attach the Election statement required by
§ 1.1502-21(b)(3)(i). A copy of this letter should be attached to the Election statement.
Alternatively, if Parent Group files its returns electronically, Parent may satisfy this latter
requirement by attaching a statement to its return that provides the date and control
number 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 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 purposes of granting relief under § 301.9100-1, we relied on certain

statements and representations made by Parent, Company Official 1, and Company
Official 2/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, still apply.

  This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.
PLR-103289-16 4

    In accordance with the Power of Attorney on file with this office, copies of this

letter will be sent to your authorized representatives.

                                   Sincerely,


                                   _________________
                                   Ken Cohen
                                   Chief, Branch 3
                                   Office of Associate Chief Counsel (Corporate)

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