Affiliated group gets 60 days to file its first consolidated return

Plain-English summary

A corporate parent created a new affiliated group by acquiring another corporation and intended to file a consolidated federal income tax return for the group. It failed to make a valid election through the timely filing of that return. The parent requested relief after discovering the omission and before the IRS did, explaining that it had reasonably relied on a qualified tax professional. The IRS found that the parent acted reasonably and in good faith and granted 60 days to file the consolidated return with a Form 1122 for each subsidiary. Relief depends on the group being substantively eligible to file a consolidated return and on its aggregate tax liability not being lower than it would have been with a timely election. Penalties and interest that otherwise apply are unaffected.

Ruling snapshot

• Question: May the newly affiliated group make a late election to file a consolidated federal income tax return?
• Outcome: Approved, with the consolidated return and subsidiary Forms 1122 due within 60 days
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201902029                                            Third Party Communication: None
Release Date: 1/11/2019                                      Date of Communication: Not Applicable
 9100.20-00, 1502.75-00
                                                             Person To Contact:
------------------------------------------                   ------------------------------, ID No. ------------
---------------------------------------                      -----------------
-----------------------------                                Telephone Number:
----------------------------                                 ----------------------
                                                             Refer Reply To:
                                                             CC:CORP:B01
                                                             PLR-125748-18
                                                             Date:
                                                             October 10, 2018



Legend

Parent                      = ------------------------------------------------------------------------------------
                              ------------------------------------------------------------------------------------
                              -----------
Corp X                      = ---------------------------------
Corp Y                      = --------------------------------------------
Date 1                      = ------------------------
Date 2                      = ---------------------------
Date 3                      = ---------------------------
Company Official            = --------------------------------------------------------------------------------
Tax Professional            = ------------------------------------------------------------------------

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

This letter responds to a letter dated August 13, 2018, 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) of the Income Tax Regulations to file a consolidated Federal income tax return
for the tax year ending on Date 3 (the “Election”). Additional information was submitted
in a letter dated September 13, 2018. The material information submitted for
consideration is summarized below.

Parent, an entity taxed as a corporation for Federal income tax purposes, became the
common parent of a new affiliated group (“Parent Group”) as the result of its acquisition
of Corp X from Corp Y on Date 2. Corp X had previously been the common parent of its
own affiliated group until it was acquired by Corp Y on Date 1. Neither transaction was a
reverse acquisition within the meaning of § 1.1502-75(d)(3). Parent Group intended to
file a consolidated return for the tax year ending on Date 3, but for various reasons, a

valid Election (i.e. the timely filing of a consolidated return) was not made. After
discovery of the missed Election, 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 § 6662 at the time it requested relief, and the new
position requires or permits the election for which relief is granted. The period of
limitations on assessment under § 6501(a) has not expired for the tax year ending on
Date 3 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. 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).

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 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 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 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 tax year ending on Date 3, an
extension of time is granted under § 301.9100-3, until 60 days from the date on this
letter, for Parent Group to file the Election (by filing a consolidated return, with Parent as
the common parent, and attaching a Form 1122 for each subsidiary for the tax year
ending on Date 3). Parent must attach a copy of this letter to the return, or if Parent

Group files its returns electronically, a statement must be attached to the return that
provides the date on, and the control number (PLR-125748-18) 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 taxpayer's 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 or the return 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. 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________________________
                                       Ken Cohen
                                       Senior Technician Reviewer, Branch 3
                                       Office of Associate Chief Counsel (Corporate-)