Rev. Proc. 2014-24 - Automatic determination to treat subsidiary as member of consolidated group, even if Form 1122 not filed 

March 10:  The IRS today released an advance copy of Rev. Proc. 2014-24, establishing the rules for when the IRS will automatically determine that a subsidiary corporation that had failed to file Form 1122, Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return, will, nevertheless, be treated pursuant to Reg. section 1.1502-75(b) as if it filed a Form 1122 to be a member of an affiliated group of corporations.

Reg. section 1.1502-75(b) authorizes the Commissioner (in certain cases) to treat a subsidiary member of an affiliated group of corporations as if it had filed a Form 1122, even though it failed to do so.

Rev. Proc. 2014-24 [PDF 25 KB] lists the criteria under which the IRS will treat one or more subsidiary members of an affiliated group as if the subsidiary(s) had filed a Form 1122. To qualify for relief under Rev. Proc. 2014-24, the following conditions must be met:

  • The affidavit group timely filed what purported to be a consolidated return for the period;
  • The non-filing subsidiary was not prevented from joining in the filing of the consolidated return by any applicable rule of law;
  • A separate return generally was not filed by the non-filing subsidiary for any period of time included in the consolidated return, or any subsequent period; and
  • The failure to include the Form 1122 was due to a mistake of law or fact, or to inadvertence and the affiliate group included the non-filing subsidiary’s income and deductions in the consolidated return.

Rev. Proc. 2014-24 is the exclusive procedure for curing missed Form 1122 filings for affiliated groups that meet the conditions of this revenue procedure. An affiliated group that satisfies the requirements of Rev. Proc. 2014-24 will automatically be granted consolidated return status, even if the subsidiary failed to actually file Form 1122. This automatic determination is available regardless of whether the return of the common parent of the affiliated group is under examination.

However, if an affiliated group cannot satisfy the requirements of Rev. Proc. 2014-24, relief by the Commissioner under Reg. section 1.1502-75(b) is available only by requesting a determination letter from the appropriate Director with exam jurisdiction over the affiliated group (and not a letter ruling issued by the Associate Chief Counsel (Corporate)) pursuant to the annual revenue procedure (e.g., Rev. Proc. 2014-1).

Note that the Commissioner can initiate (either on his own or at the request of the common parent of the affiliated group) to determine that a subsidiary is to be treated as if it filed a Form 1122 based upon the standards set forth in Reg. section 1.1502-75(b)(2) and (3).

Rev. Proc. 2014-24 is generally effective March 24, 2014 (i.e., the date when it will appear in the Internal Revenue Bulletin).

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