Late election to waive the NOL carryback period granted to a consolidated group (9100 relief)

Plain-English summary

A parent company that files a consolidated tax return for its corporate group asked the IRS for extra time to make a missed election. When a consolidated group has a net operating loss (a "CNOL"), it can elect under section 172(b)(3) and Treasury Regulation 1.1502-21(b)(3)(i) to relinquish the entire carryback period, meaning it carries the loss only forward instead of back to earlier profitable years. That election must be attached to the group's tax return for the loss year, but here a valid election was not filed on time. Under the "9100 relief" rules (Treas. Reg. 301.9100-3), the IRS may grant more time to make a regulatory election if the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS found those conditions met, noting that relief was requested before the IRS discovered the missed election, and 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 total tax not being lower than if the election had been timely, and it does not excuse any otherwise-applicable penalties or interest.

Ruling snapshot

• Question: Should the IRS grant a consolidated group an extension of time to make a late election to relinquish the entire NOL carryback period?
• Outcome: Approved (9100 relief granted; 75 days to file the election)
• Key authorities: Treas. Reg. § 301.9100-1 and § 301.9100-3; Treas. Reg. § 1.1502-21(b)(3)(i); IRC § 172(b)(3)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202319014                                              Third Party Communication: None
Release Date: 5/12/2023                                        Date of Communication: Not Applicable
Index Numbers: 9100.22-00, 1502.21-00
                                                               Person To Contact:
----------------------------                                   -----------------, ID No. -----------------
----------------------------                                   Telephone Number:
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----------------------------                                   Refer Reply To:
                                                               CC:CORP:1
                                                               PLR-120456-22
                                                               Date:
                                                               February 14, 2023


Legend

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

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

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


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

This letter ruling responds to a letter from your authorized representatives dated
October 7, 2022, submitted on behalf of 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) 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 was the common parent of a consolidated group (“Parent Group”) for the tax
year ending Date 1. Parent Group incurred a CNOL in the tax year ending Date 1 (“the
CNOL”). The Election was required to be filed with Parent Group's income tax return for
the tax year ending Date 1. However, for various reasons, a valid election was not filed.
After the date that the Election was due, 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 any portion of the
CNOL back to a prior consolidated return year of Parent Group. Parent has also
represented that none of the CNOL has been carried back or will be carried back to a
prior separate return year (within the meaning of §1.1502-1(e)) of any member of the
Parent Group 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.

Section 1.1502-21(b)(3)(1) 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, Company Official, and
Tax Professional explain the circumstances that resulted in the failure to timely file a
valid election. The information establishes 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, 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-120456-22) 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, 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,


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

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