Consolidated group received 75 days to waive an NOL carryback period

Plain-English summary

A consolidated corporate group incurred a consolidated net operating loss and intended to give up the entire carryback period for that loss. The group filed its return consistently with that intention but omitted the separate election statement required by the consolidated-return regulations. It represented that no part of the loss had been or would be carried back and that no member had belonged to another consolidated group during the carryback period. The IRS found reasonable conduct and good faith and granted 75 days to make the irrevocable election. The group had to amend its return to attach the required statement and this ruling. Relief was conditioned on aggregate tax liability not being lower than it would have been with a timely election, and otherwise applicable penalties and interest remained in force.

Ruling snapshot

• Question: Could the consolidated group make a late election to relinquish the entire carryback period for its consolidated net operating loss?
• Outcome: approved, 75-day extension subject to stated conditions
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3)(i), 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                    Department of the Treasury
                                                             Washington, DC 20224

 Number: 202249009                                           Third Party Communication: None
 Release Date: 12/9/2022                                     Date of Communication: Not Applicable
 Index Number: 1502.00-00, 1502.21-00,
               9100.00-00, 9100.22-00                        Person To Contact:
                                                             -------------------------,
 --------------------------------                            ID No. -----------------
 ---------------------------------                           Telephone Number:
 --------------------------                                  --------------------
 ----------------------------------                          Refer Reply To:
                                                             CC:CORP:BO2
                                                             PLR-107894-22
                                                             Date:
                                                             September 14, 2022


Legend

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

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

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


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

This letter responds to a letter dated April 8, 2022, submitted by Parent, requesting an
extension of time under §301.9100-3 of the Procedure and Administration Regulations
to make an election under §1.1502-21(b)(3)(i) of the Income Tax Regulations 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 Parent Group's CNOL on its tax return for the tax year ending Date
1, but 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 carried back, and will not carry back,
any portion of the CNOL to a prior consolidated return year of Parent Group or another
consolidated group. Parent has also represented that no member of the consolidated
group of which Parent was the common parent for the tax year ending Date 1 was a
member of a different consolidated group at any time during the carryback period.
PLR-107894-22                                 2

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.

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, affidavits, 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
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, we grant an extension of time under
§301.9100-3, until 75 days from the date on this letter, for Parent to file the Election.
PLR-107894-22                                  3


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-107894-22) 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.

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,


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




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