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

Plain-English summary

A parent corporation acquired a former consolidated group and intended to file a new consolidated federal income tax return with itself as common parent. A valid election was not filed by the regulatory deadline, and the parent discovered the error before the IRS did. The IRS found that the parent reasonably relied on a qualified tax professional and otherwise acted reasonably and in good faith. It granted 60 days to file the consolidated return and the required Forms 1122, provided the group substantively qualified. The relief also required that aggregate tax liability for all affected years not be lower than if the election had been timely made.

Ruling snapshot

• Question: Could the newly formed affiliated group make its consolidated return election after the filing deadline?
• Outcome: approved
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201730008 Third Party Communication: None
Release Date: 7/28/2017 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:B05
PLR-103704-17
Date:
May 2, 2017

Legend

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

Sub 1 = -----------------------------------------------------

Sub 2 = ---------------------------------------------------

Sub 3 = ----------------------------------------

Year 1 = ---------------------------

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

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

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

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

  This letter responds to a letter from your authorized representative, dated

January 25, 2017, requesting an extension of time under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations to file an election. The
extension is being requested for Parent and its affiliated subsidiaries (the “Parent
PLR-103704-17 2

Group”) to make an election to file a consolidated Federal income tax return, with
Parent as the common parent, under §1.1502-75(a)(1) of the Income Tax Regulations
(the “Election”) for Year 1. Additional information was submitted in correspondence
dated March 27, 2017. The material information provided is summarized below.

    Prior to its acquisition by Parent, Sub 1 was the parent of a consolidated group

composed of Sub 1, Sub 2, and Sub 3 (the “Old Group”). On Date 1, Parent acquired
all the outstanding shares in Sub 1 and the Old Group terminated. Following the
purchase, Sub 1, Sub 2, and Sub 3 became directly or indirectly wholly-owned
subsidiaries of Parent.

    The Parent Group intended to file a consolidated return for Year 1. An election

for the Parent Group to file a consolidated income tax return for Year 1 was due on the
last day prescribed by law (including extensions of time) for the filing of Parent’s return.
For various reasons, however, a valid Election was not filed. Subsequently, Parent
discovered that a valid the Election had not been filed and submitted, under §301.9100-
3, this request for an extension of time to file the Election. The period of limitations on
assessment under §6501(a) has not expired for Year 1 or any subsequent taxable year.
Parent has represented that it does not seek to alter a return position for which an
accuracy-related penalty has been or could be imposed under §6662 at the time of the
request (taking into account any qualified amended return within the meaning of
§1.6664-2(c)(3)).

     Section 1.1502-75(a)(1) of the Income Tax Regulations provides, in part, that an

affiliated group of corporations which did not file a consolidated return for the
immediately preceding taxable year may file a consolidated return in lieu of separate
returns for the taxable year, provided that each corporation which has been a member
of the group during any part of the taxable year for which the consolidated return is to
be filed consents, in accordance with §1.1502-75(b) of the regulations, to the
regulations under §1502. If a group wishes to exercise its privilege of filing a
consolidated return, such consolidated return must be filed not later than the last day
prescribed by law (including extensions of time) for the filing of the common parent’s
return.
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
PLR-103704-17 3

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 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.

    Information, affidavits, and representations submitted by Parent, Company

Official, and 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 to advise Parent to make, the Election,
and 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) 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, provided that the Parent Group
qualifies substantively to file a consolidated return for the applicable taxable year, we
grant an extension of time, under §301.9100-3, for sixty (60) days from the date on this
letter for Parent to file the Election (by filing a consolidated return, with Parent as the
common parent, and attaching a Form 1122 for each of its affiliated subsidiaries for
Year 1).

   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.

    We express no opinion with respect to whether, in fact, the Parent Group

qualifies to file a consolidated return. In addition, we express no opinion as to the tax
effects or consequences of filing the return or 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 return or 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, Company Official, and Tax
PLR-103704-17 4

Professionals, accompanied by a penalty of perjury statement executed by an
appropriate party.

  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.

   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 of the letter ruling.

     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,


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