Corporate group received more time to elect consolidated filing

Plain-English summary

A newly formed parent corporation acquired the stock of another corporation, terminating the acquired corporation’s former consolidated group and creating a new affiliated group. The new group failed to make a valid election to file a consolidated federal income tax return for the relevant year. The IRS found that the parent acted reasonably and in good faith, requested relief before the IRS discovered the failure, and would not prejudice the government. It granted 30 days from the ruling date to file the consolidated-return election, assuming the group otherwise qualified. The relief was 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 new parent group receive an extension to elect consolidated return filing under Treasury Regulation section 1.1502-75(a)(1)?
• Outcome: approved, with 30 days to file and subject to the aggregate-tax-liability condition
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201921011                                              Third Party Communication: None
Release Date: 5/24/2019                                        Date of Communication: Not Applicable
Index Numbers: 9100.20-00, 1502.75-00
                                                               Person To Contact:
-----------------------------------------------------.         ---------------------------, ID No. ---------------
--------------------------------------------                   -----------------
-----------------------------                                  Telephone Number:
                                                               ----------------------
----------------------------------                             Refer Reply To:
------------------------------------------------------         CC:CORP:3
                                                               PLR-128140-18
                                                               Date:
                                                               February 12, 2019




Legend

Parent                              = ------------------------------------------------------
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Corp X                              = --------------------------------------------------
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Sub 1                               = ----------------------------------------
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Sub 2                               = -------------------------------
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Sub 3                               = -----------------------
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Year 1                              = -------

Year 2                              = -------------------------------------------------------

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

Company Officials                   = ----------------------------------------------------------------
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PLR-128140-18                                             2

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

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

This letter responds to a letter dated September 18, 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 Year 2 (the “Election”). The material information submitted in this letter and
subsequent correspondence is summarized below.

Parent is a domestic corporation which was formed in Year 1 for the purpose of
acquiring a consolidated group consisting of Corp X, the common parent, and its
subsidiaries, Sub 1, Sub 2, and Sub 3 (“Corp X Group”). On Date 1, Parent acquired
100% of the stock of Corp X for cash, terminating the Corp X Group.

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.

An election for Parent Group, consisting of Parent, Corp X, Sub 1, Sub 2, and Sub 3, to
file a consolidated income tax return, with Parent as the common parent, for Year 2 was
due on the due date for filing Parent's Federal income tax return for Year 2. However,
for various reasons, a valid Election (i.e., the filing of the 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. The period of limitations on
assessment under § 6501(a) has not expired for Year 2 or any subsequent taxable year
for Parent, Corp X, Sub 1, Sub 2, or Sub 3. 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.

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

PLR-128140-18                                 3

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

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 Year 2, an extension of time is granted
under § 301.9100-3, until 30 days from the date on this letter, for Parent to file the
Election. Parent Group must attach 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-128140-
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 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

PLR-128140-18                                  4

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 Officials, 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 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
                                        Senior Technician Reviewer, Branch 3
                                        Office of Associate Chief Counsel (Corporate)




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