IRS grants 90 days for late consolidated-return and de minimis safe-harbor elections

Plain-English summary

A domestic parent corporation and its affiliated group failed to timely make two elections with their federal return. One election was to file a consolidated return with the corporation as common parent, and the other was to use the de minimis safe harbor for capital expenditures. The parent requested relief before the IRS discovered the omissions, while the relevant assessment periods remained open. The IRS concluded that the parent acted reasonably and in good faith and that relief would not prejudice the government. It granted 90 days to file the consolidated return with the required subsidiary consents and attach the de minimis safe-harbor statement, subject to substantive eligibility and aggregate-tax-liability conditions.

Ruling snapshot

• Question: Could the affiliated group receive extra time to make its consolidated-return and de minimis safe-harbor elections?
• Outcome: approved (90 days to file both elections with the required return materials)
• Key authorities: Treas. Reg. §§ 1.1502-75(a)(1), 1.263(a)-1(f), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202031005 Third Party Communication: None
Release Date: 7/31/2020 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.75-00
Person To Contact:
---------------- ----------------------------, ID No. --------------
------------------------------ -----------------
--------------------------------------------- Telephone Number:
------------------------------------- --------------------
---------------------------- Refer Reply To:
CC:CORP:2
PLR-126592-19
Date:
April 16, 2020

Legend

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

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

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

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

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

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

This letter responds to a letter dated October 8, 2019, submitted on behalf of Parent,
requesting extensions of time under §§301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations to file two elections. In particular, Parent is requesting:
(1) an extension of time for Parent and the members of its affiliated group (the “Parent
Group”) to make an election under §1.1502-75(a)(1) of the Income Tax Regulations to
file a consolidated federal income tax return, with Parent as the common parent, for the
taxable year ending on Date 1, and (2) an extension of time to make an election under
§1.263(a)-1(f) to apply the de minimis safe harbor for capital expenditures for the
taxable year ending on Date 1 (the “Elections”). Additional information was submitted
subsequently. The material information submitted for consideration is summarized
below.

PLR-126592-19 2

Parent was a domestic corporation that was the common parent of an affiliated group of
corporations for 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 due on the last day prescribed by law (including extensions
of time) for the filing of Parent's return. Similarly, an annual election by Parent for any of
the members of the Parent Group to apply the de minimis safe harbor for capital
expenditures for the taxable year ending on Date 1 was due on the last day prescribed
by law for the filing of Parent’s return.

For various reasons, valid Elections were not filed by the due date of Parent's return for
the taxable year ending on Date 1. Subsequently, a request was submitted under
§301.9100-3 for extensions of time to file the Elections. The period of limitations on
assessment under section 6501(a) of the Internal Revenue Code (Code) 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 of the
Code.

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
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 times for filing the Elections are fixed by the regulations (i.e., §1.1502-75(a)(1) and
§1.263(a)-1(f)). Therefore, the Commissioner has discretionary authority under
§301.9100-3 to grant extensions of time for Parent to file the Elections, 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
Elections. The information establishes that the request for relief was filed before the
failure to make the Elections was discovered by the Internal Revenue Service. See
§301.9100-3(b)(1)(i).

PLR-126592-19 3

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 the Parent Group qualifies
substantively to file a consolidated return for the applicable tax year and to make the de
minimis safe harbor election, and that the statute of limitations is still open for the
taxable year ending on Date 1 and all subsequent years, an extension of time is granted
under §301.9100-3, until 90 days from the date on this letter, for Parent to file the
Elections (by (1) filing a consolidated return, with Parent as the common parent, and
attaching a Form 1122 for each subsidiary which was a member of the Parent Group for
the taxable year ending on Date 1, and (2) attaching to the return the statement
described in §1.263(a)-1(f)(5)). Parent must attach a copy of this ruling letter to such
return, or if the return is filed electronically, a statement must be attached to the return
that provides the date on, and the control number (PLR-126592-19) of, this ruling letter.

The above extension of time is conditioned on the Parent Group's tax liability (if any)
being not lower, in the aggregate, for all years to which the Elections apply, than it
would have been if the Elections 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 the Parent Group qualifies substantively
to file a consolidated return or whether any member of the Parent Group is entitled to
elect to apply the de minimis safe harbor. In addition, we express no opinion as to the
tax effects or consequences of filing the return or the Elections 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 Elections 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
extensions are granted under §301.9100-3 to file the Elections, 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.

PLR-126592-19 4

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

                                       Sincerely,


                                       ____________________________
                                       Thomas I. Russell
                                       Chief, Branch 1
                                       Office of Associate Chief Counsel (Corporate)

cc: