New affiliated group gets more time for consolidated election

Plain-English summary

A parent acquired eight subsidiaries and intended the resulting affiliated group to file a consolidated return. The group filed a consolidated return by the extended deadline that would have applied, but later discovered that its tax professional had not filed a valid Form 7004 extension. The parent sought relief immediately, before the IRS discovered the failure, and showed that it reasonably relied on a qualified tax professional. The IRS found reasonable action, good faith, and no prejudice to the government. It granted 60 days to make the consolidated-return election by amending the already filed return and attaching the ruling or its identifying statement.

Ruling snapshot

• Question: May the new affiliated group make a late election to file a consolidated return after its automatic extension was not validly filed?
• Outcome: approved, with 60 days to make the election
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1) and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201751012                                            Third Party Communication: None
Release Date: 12/22/2017                                     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:2
                                                             PLR-118031-17
                                                             Date:
                                                             September 27, 2017




                                                  LEGEND

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

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

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

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

Sub 4              = ---------------------------------------------------------------------------------------------
                     ---------------------------------------------------------------------------------------------
                     -----------------------

Sub 5              = ---------------------------------------------------------------------------------------------
                     ---------------------------------------------------------------------------------------------
                     -----------------

Sub 6              = ---------------------------------------------------------------------------------------------
                     ---------------------------------------------------------------------------------------------
                     --------------------

Sub 7              = ---------------------------------------------------------------------------------------------
PLR-118031-17                                            2

                       ---------------------------------------------------------------------------------------------
                       -----------------------

Sub 8            = ---------------------------------------------------------------------------------------------
                   ---------------------------------------------------------------------------------------------
                   --------------------

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

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

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

Firm 1           = -------------------------------------------

Firm 2           = ----------------

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

Company          = ---------------------------------------------------------------------------------------------
Official 2         ---------------------------------------------------------------------------------------------
                   --------------

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


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

       This letter responds to a letter dated May 24, 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.

       Parent became the common parent of a new affiliated group (“Parent Group”) as
the result of the acquisition of the stock of Sub 1, Sub 2, Sub 3, Sub 4, Sub 5, Sub 6,
Sub 7, and Sub 8 (collectively “the Subsidiaries”) on Date 1. Parent represents that the
acquisitions of the Subsidiaries did not constitute reverse acquisitions within the
meaning of § 1.1502-75(d)(3). Parent Group intended to file a consolidated return for
the tax year ended on Date 2. Parent engaged Tax Professional to prepare an
automatic extension request on Form 7004 and Firm 1 to prepare a consolidated return
PLR-118031-17                                 3

for Parent Group. Firm 2 replaced Firm 1 in preparing the consolidated return for
Parent’s tax year ended Date 2 on Date 3.

       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 at the time of the ruling request and
for which the new position requires of permits a regulatory election for which relief is
requested.

       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 1, Company Official 2, 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 of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not
PLR-118031-17                                  4

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-118031-17) 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 1, Company
Official 2, 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)


cc: