Corporate group received 60 days to make a late consolidated-return election

Plain-English summary

A newly formed parent corporation acquired a C corporation and an S corporation with qualified subchapter S subsidiaries. The resulting affiliated group intended to elect consolidated federal return treatment by timely filing a consolidated return, but no valid election was filed by the due date. The parent requested relief before the IRS discovered the omission and showed that it acted reasonably and in good faith. The IRS granted 60 days to file the consolidated return and required Form 1122 consents, provided the group substantively qualified. Relief was also conditioned on the group's aggregate tax liability not being lower than it would have been if the election had been timely made.

Ruling snapshot

• Question: Could the affiliated group receive extra time to elect consolidated federal income tax return treatment?
• Outcome: approved
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75(a)(1), 1.1502-75(b), 301.9100-1, 301.9100-2, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201738006                                                 Third Party Communication: None
Release Date: 9/22/2017                                           Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
                                                                  Person To Contact:
----------------------                                            -------------------------, ID No. -----------------
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-------------------------------                                   Telephone Number:
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------------------------------                                    Refer Reply To:
                                                                  CC:CORP:3
                                                                  PLR-114988-17
                                                                  Date:
                                                                  June 26, 2017


Legend

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

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

Date 3                     =        ---------------------------

Company Officials =                  ----------------------------------------------
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Tax Professional           =         ----------------------------------
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Dear ----------------------:

This letter responds to a letter from your authorized representative, dated May 2, 2017,
requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure

PLR-114988-17                                  2

and Administration Regulations to file an election. The extension is being requested for
Parent and the members of its affiliated group (the “Parent 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 the taxable
year ending on Date 3. The material information submitted for consideration is
summarized below.

On Date 1, Parent was incorporated in connection with the acquisition of a C
corporation and an S corporation including its qualified subchapter S subsidiaries. On
Date 2, Parent completed the acquisition.

An election for the Parent Group to file a consolidated income tax return, with Parent as
the common parent, for the taxable year ending on Date 3 was due on the last day
prescribed by law (including extensions of time) for the filing of Parent’s return. Parent
intended to file the Election, but for various reasons, a valid Election (i.e., the filing of a
consolidated return) was not filed by the due date of the Parent’s return. After the due
date for the Election, it was discovered that the Election had not been filed.
Subsequently, this request was submitted, under § 301.9100-3, for an extension of time
to file the Election. The period of limitations on assessment under § 6501(a) has not
expired for the taxable year ending on Date 3 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 of the Code at the time
Parent Group requested relief and for which the new position requires or permits a
regulatory election for which relief is requested.

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 an 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

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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 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 Officials, and
Tax Professional explain the circumstances that resulted in the failure to timely file the
Election. The information establishes 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).

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 Parent Group qualifies
substantively to file a consolidated return for the applicable tax year, we grant an
extension of time, under § 301.9100-3, until 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 member of the Parent Group for the taxable
year ending on Date 3.) Parent Group must attach a copy of this ruling letter to such
return, or if Parent Group files the return electronically, a statement must be attached to
the return that provides the date and the control number of this ruling letter.

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 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, Parent Group qualifies
substantively 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 Officials, and Tax Professional. However,

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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,



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