Consolidated group gets 75 more days to elect to waive the carryback of its net operating loss

Plain-English summary

When a consolidated group of corporations has a net operating loss, it can
choose to carry that loss back to earlier years or instead waive the carryback
and only carry it forward. Waiving the carryback requires a specific election
statement filed with the group's return under Treas. Reg. § 1.1502-21(b)(3)(i)
(pursuant to IRC § 172(b)(3)). Here the parent company intended to waive the
carryback and filed all its returns as if it had, but the required election
statement was never actually filed. After the deadline passed, the parent asked
the IRS for relief under Treas. Reg. §§ 301.9100-1 through 301.9100-3, which let
the IRS extend a missed regulatory-election deadline when the taxpayer acted
reasonably and in good faith and the government is not prejudiced. Because the
request was made before the IRS discovered the failure and the group had not
carried the loss back, the IRS granted 75 days from the date of the letter to
file the election by amending the return. The relief is conditioned on the
group's tax not being lower than if the election had been timely made, and
penalties and interest still apply.

Ruling snapshot

• Question: Should the consolidated group get an extension of time to make
  the § 1.1502-21(b)(3)(i) election to waive its NOL carryback period?
• Outcome: approved (75-day extension granted)
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i),
  301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202228001 Third Party Communication: None
Release Date: 7/15/2022 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00
Person To Contact:
----------------------------------- ------------------------, ID No. -----------------
---------------------- Telephone Number:
-------------------------------------------- --------------------
------------------------------- Refer Reply To:
CC:CORP:3
PLR-100180-22
Date:
April 19, 2022

Legend

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

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

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

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

This letter ruling responds to a letter dated December 6, 2021, submitted by Parent,
requesting an extension of time under §§301.9100-1 through 301.9100-3 of the
Procedure and Administration Regulations, to make an election under §1.1502-
21(b)(3)(i) to relinquish the entire carryback period for the Parent consolidated group's
consolidated net operating loss ("CNOL") for the tax year ending Date 1 (the "Election").
The material information submitted for consideration is summarized below.

Parent is the common parent of a consolidated group ("Parent Group"). Parent Group
incurred a CNOL in the tax year ending Date 1. Parent intended to relinquish the
carryback period for its consolidated group's CNOL on its tax return for the tax year
ending Date 1. All returns for Parent Group were filed consistent with a valid election
having been made. However, for various reasons, a valid election was not filed. After
the date that the Election was due (with extensions), it was discovered that a valid
election was not filed. Subsequently, this request was submitted for an extension of
time to file a valid election.

Parent has represented that Parent Group has not, and will not, carry back any portion
of the CNOL for the tax year ending Date 1 to a prior consolidated return year of Parent
PLR-100180-22 2

Group. Parent has also represented that no portion of the CNOL for the tax year ended
Date 1 has been carried back, or will be carried back, to a separate return year (within
the meaning of §1.1502-1(e)) of any corporation that was a member of Parent Group at
any time during the tax year ended Date 1. Parent has further represented that Parent
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 Parent requested relief (taking into
account any qualified amended return filed within the meaning of §1.6664-2(c)(3)) and
for which the new return position requires or permits a regulatory election for which
relief is requested.

Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an irrevocable
election under section 172(b)(3) to relinquish the entire carryback period with respect to
a CNOL for any consolidated return year. The election is made in a separate statement
entitled "THIS IS AN ELECTION UNDER §1.1502-21(b)(3)(i) TO WAIVE THE ENTIRE
CARRYBACK PERIOD PURSUANT TO SECTION 172(b)(3) FOR THE [insert
consolidated return year] CNOLs OF THE CONSOLIDATED GROUP OF WHICH [insert
name and employer identification number of common parent] IS THE COMMON
PARENT." Section 1.1502-21(b)(3)(i) also provides that the statement must be filed
with the group's income tax return for the consolidated return year in which the loss
arises.

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-
21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-
3 to grant an extension of time for Parent to file the Election, provided Parent
establishes 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, an affidavit, and representations submitted by Parent and Company Official
explain the circumstances that resulted in the failure to timely file a valid election. The
information establishes that that the request for relief was filed before the failure to
PLR-100180-22 3

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 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, an extension of time is granted under
§301.9100-1, until 75 days from the date on this letter, for Parent to file the Election with
respect to the relinquishment of the entire carryback period for the CNOL for the tax
year ending Date 1, as described above.

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 must file the Election in accordance with §1.1502-21(b)(3)(i). Parent Group's
return for the tax year ending Date 1, having been filed consistent with a valid election
having been made, must be amended to attach the election statement required by
§1.1502-21(b)(3)(i). A copy of this letter must be attached to the election statement.
Alternatively, if Parent Group files its returns electronically, Parent may satisfy this latter
requirement by attaching a statement to its return that provides the date on, and control
number (PLR-100180-22) of, this ruling.

We express no opinion as to the tax effects or consequences of filing 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
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 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.
PLR-100180-22 4

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.

                                  Sincerely,


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

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