New affiliated group received time for consolidated-return election

Plain-English summary

A parent corporation created a new affiliated group through an acquisition and intended to file a consolidated return, but did not timely make a valid election under Treas. Reg. § 1.1502-75(a)(1). The failure resulted from reasonable reliance on a qualified tax professional, and the parent sought relief before the IRS discovered it. The IRS granted 60 days to make the election and amend the already filed consolidated return, provided the group substantively qualified. Relief was also conditioned on the group's aggregate tax liability for affected years not being lower than it would have been with a timely election, accounting for the time value of money.

Ruling snapshot

• Question: Could the new affiliated group receive extra time to elect to file a consolidated return?
• Outcome: Approved, subject to substantive qualification and stated tax-liability conditions.
• 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: 201819008 Third Party Communication: None
Release Date: 5/11/2018 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:B04
PLR-133554-17
Date:
February 8, 2018

Legend

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

Subsidiary X = -------------------------

Subsidiary Y = -----------------------------------------------

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

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

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

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

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

This letter responds to a letter dated October 3, 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 Federal income tax return for the tax year ended on Date

PLR-133554-17 2

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 Subsidiary X, which owned all of the stock of Subsidiary Y, on
Date 1. Such acquisition terminated the affiliated group of which Subsidiary X was the
common parent. Parent Group intended to file a consolidated return for the tax year
ended on Date 2, but for various reasons, a valid Election was not timely filed.
Immediately after discovery of this, 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 an accuracy-related penalty has
been or could be imposed under section 6662. The period of limitations on assessment
under section 6501(a) has not expired for the tax year ended on Date 2 or any
subsequent tax year.

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-133554-17 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-133554-17) 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, 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)

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