Consolidated group received 75 days to waive a loss carryback

Plain-English summary

A consolidated corporate group generated a consolidated net operating loss and carried it forward on its returns. The group intended to waive the loss's carryback period but relied on a tax professional who did not advise it to file the required election statement. It represented that no part of the loss had been or would be carried back and that it was not changing a return position exposed to an accuracy-related penalty. The IRS found reasonable reliance, good faith, and no prejudice to the government. It granted the parent corporation 75 days to amend the relevant return and attach the election, conditioned on the group's aggregate tax liability not being lower than if the election had been timely.

Ruling snapshot

• Question: May the consolidated group make a late election to relinquish the entire carryback period for its consolidated net operating loss?
• Outcome: Approved
• Key authorities: IRC § 172(b)(3); Treas. Reg. §§ 1.1502-21(b)(3) and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202524008 Third Party Communication: None
Release Date: 6/13/2025 Date of Communication: Not Applicable
Index Number: 172.01-00, 1502.21-00,
9100.22-00 Person To Contact:
--------------------------, ID No. ----------------
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------------------------------------------- Telephone Number:
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Refer Reply To:
CC:CORP:B03
PLR-116379-24
Date:
March 17, 2025

LEGEND

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

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

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

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

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

This letter ruling responds to a letter from your authorized representatives dated August
13, 2024, 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 Parent
consolidated group's consolidated net operating loss ("CNOL") for the tax year ending
Date 1 (the "Election"). The material information submitted is summarized below.

Parent is the common parent of a consolidated group (the "Parent Group"). The Parent
Group generated a CNOL for the tax year ending Date 1. The Form 1120 filed by the
Parent Group for its fiscal year ending Date 1, reflected a CNOL, which, along with a
prior unused CNOL, was carried forward to the next fiscal year.

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.
Parent has also represented that no potion 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
PLR-116379-24 2

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.

The Parent Group relied on Tax Professional to advise the Parent Group on the need to
waive CNOL carryback under § 1.502-21(b)(3)(i) and § 172(b)(3). Parent assumed the
remaining CNOL would be carried forward to subsequent fiscal years.

Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an irrevocable
election under § 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 FISCAL YEAR
ENDING [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 § 172(b)(1)(D), any net operating loss arising in a taxable year beginning after
December 31, 2017, and before January 1, 2021 shall be a net operating loss carryback
to each of the 5 taxable years preceding the taxable year of such loss. Under § 1.1502-
21(b)(3) and § 172(b)(3), any taxpayer entitled to a carryback period may elect to
relinquish the entire carryback period with respect to a CNOL for any taxable year.

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 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. § 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.
PLR-116379-24 3

Information, affidavits, and representations submitted by Parent 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).

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-116379-24) 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 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 taxpayers requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
PLR-116379-24 4

Pursuant to the Power of Attorney on file with this office, copies of this letter are being
sent to your authorized representative.

                                           Sincerely,



                                           Gerald B. Fleming
                                           Senior Technician Reviewer, Branch 2
                                           (Corporate)

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