IRS grants a 9100 extension of time for a consolidated group to make a closing-of-the-books election under Treas. Reg. section 1.382-6(b) after a section 382 ownership change

Plain-English summary

When a loss corporation undergoes an "ownership change," section 382 limits how much of its pre-change losses it can use against post-change income. Regulations let the corporation elect to "close its books" on the change date, rather than ratably allocating income across the year, to split income between the pre-change and post-change periods. That election was due with the consolidated group's tax return for the change year, but the common parent did not make it in time. The parent asked the IRS for an extension under Treas. Reg. §§ 301.9100-1 through 301.9100-3. The IRS granted relief. It found the parent acted reasonably and in good faith, the request came before the IRS discovered the failure, and granting relief would not prejudice the government. The parent has 75 days from the date of the letter to file the election by amending the group's return, and the extension is conditioned on the group's total tax liability for the affected years being no lower than if the election had been timely made (taking the time value of money into account).

Ruling snapshot

• Question: Should the consolidated group get an extension of time under section 301.9100-3 to make the closing-of-the-books election under Treas. Reg. § 1.382-6(b) for its section 382 ownership change?
• Outcome: Approved (75-day extension granted, subject to a no-lower-tax-liability condition)
• Key authorities: IRC § 382; Treas. Reg. § 1.382-6(b); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202142007 Third Party Communication: None
Release Date: 10/22/2021 Date of Communication: Not Applicable
Index Numbers: 9100.22-00, 382.00-00
Person To Contact:
-------------------------- ------------------, ID No. -----------------
---------------------------------------------------------- Telephone Number:
------------------------------------------------- ---------------------
------------------------------------ Refer Reply To:
CC:CORP:1
PLR-105863-21
Date:
July 29, 2021

Legend

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

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

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

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

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

This letter responds to a letter submitted March 11, 2021, on behalf of Parent,
requesting an extension of time under §§301.9100-1 through 301.9100-3 of the
Procedure and Administration Regulations to file an election. In particular, Parent is
requesting an extension of time for the consolidated group of which Parent is the
common parent to make a closing-of-the-books election under §1.382-6(b) of the
Income Tax Regulations (the "Election") with respect to an ownership change within the
meaning of section 382 of the Internal Revenue Code (the "Code"). The information
provided is summarized below.

Parent is the common parent of a consolidated group (“Parent Group”). On Date 1,
Parent Group experienced an ownership change as defined in section 382(g) (the
“ownership change”) and, consequently, section 382(a) limited its ability to offset post-
change taxable income by pre-change losses.
PLR-105863-21 2

An election under §1.382-6(b) to close its books with respect to the ownership change
was due by the due date (including extensions) of Parent Group's tax return for the
taxable year ending Date 2, but for various reasons, Parent did not make the Election.
Subsequently, Parent submitted this request, under §301.9100-3, for an extension of
time to file the Election. Parent has represented that it is not seeking to alter a return
position for which an accuracy related penalty has been or could be imposed under
section 6662 at the time of the request for relief.

Section 1.382-6(b)(1) allows a loss corporation to elect to allocate its net operating loss
or taxable income and its net capital loss or modified capital gain net income for the
change year between the pre-change period and the post-change period as if the loss
corporation's books were closed on the change date.

Section 1.382-6(b)(2)(i) provides that a loss corporation makes the closing-of-the-books
election by including the following statement on the information statement required by
§1.382-11(a) for the change year: “THE CLOSING-OF-THE-BOOKS ELECTION
UNDER §1.382-6(b) IS HEREBY MADE WITH RESPECT TO THE OWNERSHIP
CHANGE OCCURRING ON [INSERT DATE].” The election must be made on or before
the due date (including extensions) of the loss corporation’s income tax return for the
change year.

Section 1.382-6(b)(3)(i) provides that if an election under §1.382-6(b) is made with
respect to an ownership change occurring in a consolidated return year, all allocations
under this section with respect to that ownership change must be consistent with the
election.

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 that it 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., §1.382-
6(b)(2)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-3
to grant an extension of time for Parent to file the Election, provided that Parent
establishes to the satisfaction of the Commissioner that it acted reasonably and in good
faith, and that granting relief will not prejudice the interests of the government.
PLR-105863-21 3

Information, affidavits, and representations submitted by Parent and Company Official
explain the circumstances that resulted in the failure to timely file the Election. The
information establishes 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).

Based on the facts and information submitted, including the affidavits submitted and
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, we grant
an extension of time under §301.9100-3, for 75 days from the date of this letter, for
Parent to file the Election.

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 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.

Parent should file the election in accordance with §1.382-6(b)(2). Parent Group’s return
must be amended to attach the election statement required by §1.382-6(b)(2). A copy
of this letter should be attached to the election statement. Alternatively, if Parent Group
files its amended return electronically, Parent Group may satisfy this latter requirement
by attaching to the return a statement that provides the date on, and control number
(PLR-105863-21) of, this letter ruling.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

For purposes of granting relief under §301.9100-3, we relied on certain statements and
representations made by Parent and Company Official. 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.
PLR-105863-21 4

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

                                   Sincerely,



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

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