IRS grants late consolidated-return election

Plain-English summary

A parent corporation failed to make a valid consolidated-return election by the return deadline after reasonably relying on a qualified tax professional. The IRS found that the parent acted reasonably and in good faith and sought relief before IRS discovery. It granted 60 days to file the consolidated return and subsidiary Form 1122, conditioned on substantive eligibility, open limitation periods, and aggregate tax liability no lower than if the election had been timely made.

Ruling snapshot

• Question: Should an affiliated group receive extra time to elect consolidated-return filing under section 1.1502-75(a)(1)?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 301.9100-1, 301.9100-3; IRC §§ 6501(a), 6662

Full text (IRS public release)

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Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202013008 Third Party Communication: None
Release Date: 3/27/2020 Date of Communication: Not Applicable
Index Number: 1502.00-00, 1502.75-00,
9100.00-00, 9100.20-00 Person To Contact:
-----------------------, ID No. -----------------
------------------------- Telephone Number:
---------------- --------------------
---------------------- Refer Reply To:
-------------- CC:CORP:5
------------------------------ PLR-116798-19
Date:
December 18, 2019

LEGEND

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

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

Sub = -----------------------
-------------------------

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

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

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

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

This letter responds to a letter from your authorized representatives, dated July 9, 2019,
requesting an extension of time under §§301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations to file an election. In particular, Parent is requesting an
extension of time for Parent and the members of its affiliated group (the “Parent Group”)
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 Date 1. Additional information was submitted subsequently. The material
information submitted for consideration is summarized below.

Parent was a domestic corporation that owned Sub at the end of the taxable year
ending on Date 1. 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 1 was
PLR-116798-19 2

due on the last day prescribed by law (including extensions of time) for the filing of
Parent's return. For various reasons, a valid Election (i.e., the filing of the consolidated
return) was not filed by the due date of Parent's return. Subsequently, a request was
submitted under §301.9100-3 for an extension of time to file the Election. The period of
limitations on assessment under section 6501(a) has not expired for the taxable year
ending on Date 1 or any subsequent taxable year. Parent 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.

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).

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 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 Official, and
Tax Professional explain the circumstances that resulted in the failure to timely file the
Election. The information establishes that Parent reasonably relied on a qualified tax
professional who failed to make, or advise Parent to make, a valid 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 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 and that the statute
of limitations is still open for the taxable year ending on Date 1 and all subsequent
years, we grant an extension of time, under §301.9100-3, until 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 Sub for its taxable year ending on
Date 1). Parent must attach a copy of this ruling letter to such return, or if Parent files
PLR-116798-19 3

the return electronically, a statement must be attached to the return that provides the
date on, and the control number (PLR-116798-19) 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 the 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, the 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 the 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, copies of this letter are
being sent to your authorized representatives.

                                       Sincerely,



                                       _T.Ian Russell____
                                       T. Ian Russell
                                       Chief, Branch 1
                                       Office of Associate Chief Counsel (Corporate)

cc:
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