Corporate group receives 60 days to make late consolidated-return election

Plain-English summary

A corporation became the parent of a new affiliated group and intended to file a consolidated return. Its adviser prepared the return as consolidated, but a valid Form 7004 extension was not filed, so the return did not timely make the election under Treasury Regulation § 1.1502-75(a)(1). The group sought relief immediately after discovering the problem and before the IRS did. The IRS found reasonable reliance on a qualified tax professional and granted 60 days to amend the already-filed return by attaching the ruling. Relief depended on the group being substantively eligible and not obtaining lower aggregate tax liability than it would have had with a timely election, and any otherwise applicable penalties and interest remained.

Ruling snapshot

• Question: Could the affiliated group make a late election to file a consolidated return after its filing extension failed?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201728002 Third Party Communication: None
Release Date: 7/14/2017 Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
Person To Contact:
---------------------------------------- ------------------------, ID No. ------------------
------------------------------- ----------------------------------------------------
------------------------------- Telephone Number:
-------------- --------------------
------------------------- Refer Reply To:
CC:CORP:4
PLR-107215-17
Date:
April 12, 2017

              TY: -------

Legend

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

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

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

Firm = -------------------

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

Tax Professional = ----------------------------------------------------

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

This letter responds to a letter dated February 20, 2017, 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 Group, as defined below, to make an election under § 1.1502-
75(a)(1) to file a consolidated return for the tax year ended on Date 2 (“the Election”).
The material information submitted for consideration is summarized below.
PLR-107215-17 2

Parent became the common parent of a new affiliated group ("Parent Group") as the
result of a stock purchase on Date 1. Parent Group intended to file a consolidated
return for the tax year ended on Date 2. Parent engaged Firm to prepare an automatic
extension request on Form 7004 and a consolidated return for Parent Group.

Parent Group filed a consolidated return for the tax year ended Date 2 on or before the
extended due date of the return if a valid automatic extension had been filed. It was
then discovered that, for various reasons, a valid extension on Form 7004 had not been
filed. Immediately after this discovery, Parent submitted this request for an extension of
time under § 301.9100-3 to file a valid Election. Parent Group has represented that it is
not attempting to alter a return position taken for which a penalty has been or could be
imposed under section 6662.

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).

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

Information, affidavits, and representations submitted by Parent, Company Official, 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) 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
PLR-107215-17 3

of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the
interests of the government. Accordingly, provided that Parent Group qualifies
substantively to file a consolidated return for the tax year ended Date 2, an extension of
time is granted under § 301.9100-3, until 60 days from the date on this letter, for Parent
to file the Election. Parent Group, having already filed a consolidated return for the tax
year, must amend the return by attaching a copy of this letter to the return, or if Parent
Group files its returns electronically, Parent Group may satisfy this requirement by
attaching a statement to its return that provides the date on, and the control number
(PLR-107215-17) of, this letter ruling.

The above extension of time is conditioned on 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 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.

We express no opinion as to the tax effects or consequences of filing the Election or the
return 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 § 301.9100-3, we relied on certain statements and
representations made by Parent Group, Company Official, and Tax Professional.
However, the Director should verify all essential facts. Moreover, 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 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 in the office, copies of this letter are being sent
to your authorized representatives.

                                       Sincerely,




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