Consolidated group received 75 days to make a late CNOL carryback waiver

Plain-English summary

The common parent of a consolidated group failed to make a valid election to give up the entire carryback period for a consolidated net operating loss. The group represented that it had not carried any part of the loss back to a prior consolidated year or to a separate-return year of a group member. It also said it was not trying to change a position that could draw an accuracy-related penalty. Affidavits showed that the parent reasonably relied on a qualified tax professional who failed to make or recommend the election, and the parent requested relief before the IRS discovered the mistake. The IRS found that the parent acted reasonably and in good faith and that relief would not prejudice the government. It granted 75 days to file the election, conditioned on the group's aggregate tax liability not being lower than it would have been with a timely election.

Ruling snapshot

• Question: May the consolidated group's parent receive extra time to elect under Treas. Reg. § 1.1502-21(b)(3)(i) to waive the entire carryback period for its consolidated net operating loss?
• Outcome: Approved, with 75 days to file the election
• 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: 202349011 Third Party Communication: None
Release Date: 12/8/2023 Date of Communication: Not Applicable
Index Number: 9100.22-00, 1502.21-00,
172.01-00 Person To Contact:
---------------------, ID No. -----------------
-------------------------------- Telephone Number:
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------------------------------- Refer Reply To:
-------------------------------- CC:CORP:1
PLR-109685-23
Date:
September 12, 2023

Legend

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

Company = --------------------------------------------------------------------------------------
Officials ------------------------------------

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

This letter ruling responds to a letter from your authorized representatives dated April
19, 2023, 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 is the common parent of a consolidated group (the “Parent Group”). The Parent
Group incurred a CNOL in the tax year ending Date 1 (“the CNOL”). The Election was
required to be filed with the Parent Group’s income 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, 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 the Parent Group has not carried back, and will not carry
back, any portion of the CNOL to a prior consolidated return year of the Parent Group.

PLR-109685-23 2

Parent has also represented that no portion of the CNOL 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 the 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.

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 Officials
explain the circumstances that resulted in the failure to timely file a valid election. The
information establishes that Parent reasonably relied on a qualified tax professional who
failed to make, or advise Parent to make, the Election, and 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) and (v).

PLR-109685-23 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, an extension of time is granted under
§301.9100-3, 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 Parent Group’s
CNOL for the tax year ending Date 1, as described above.

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 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 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.

Parent must file the Election in accordance with §1.1502-21(b)(3)(i). The 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 the 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-109685-23) 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 Officials. 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-109685-23 4

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

Sincerely,

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

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