Foreign insurer receives more time for domestic corporation election

Plain-English summary

A regulated foreign insurance company timely filed a section 953(d) election statement with its return, then mailed additional information requested by the IRS. The IRS later reported that it had not received the additional material and had not approved the election. The company had filed several years of returns as though the election had been effective from the first requested year, so relief would not lower its tax liability for the affected years. The IRS found that the regulatory relief standards were satisfied and allowed 60 days to make the election under Revenue Procedure 2003-47, without deciding whether the company was otherwise eligible.

Ruling snapshot

• Question: Could a foreign insurance company receive an extension to elect domestic corporation treatment under IRC § 953(d)?
• Outcome: Approved, with 60 days from the letter date to make the election.
• Key authorities: IRC §§ 953(d) and 6072(b); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2003-47

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201612007                                              Third Party Communication: None
Release Date: 3/18/2016                                        Date of Communication: Not Applicable
Index Number: 953.06-00, 9100.22-00
                                                               Person To Contact:
                                                               ---------------------, ID No. ------------------
-------------------------                                      Telephone Number:
-------------------------------                                ----------------------
-------------------                                            Refer Reply To:
---------------------------------------------                  CC:INTL:B02
------------------------                                       PLR-126770-15
------------------------------------------------------------   Date:
--------                                                       December 16, 2015




                  TY: -------

LEGEND:

Taxpayer:             -------------------
             -----------------------
Year 1:               -------
Year 2:               -------
Year 3:               -------
Year 4:               -------
Year 5:               -------
Country X:            -----------------------
Accounting Firm: ----------------



Dear Mr. -----------:

       This is in response to a letter received by our office dated August 7, 2015,
submitted on behalf of Taxpayer by its authorized representative, requesting an
extension of time under Treas. Reg. § 301.9100-3 to make the election provided by
section 953(d) of the Internal Revenue Code (Code) to be treated as a domestic
corporation for U.S. tax purposes commencing on the first day of Taxpayer’s Year 1
taxable year.

      The ruling contained in this letter is predicated upon facts and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. This office has not verified any of the material submitted in

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support of the request for a ruling. Verification of the factual information,
representations, and other data may be required as part of the audit process.

        Taxpayer has provided an affidavit representing the following. Taxpayer is a
regulated insurance company organized under the laws of Country X. Taxpayer, with
Accounting Firm’s assistance, filed a section 953(d) election statement along with its
timely filed tax return for Year 1. In Year 2, the IRS notified Taxpayer that additional
information was required from Taxpayer in connection with the section 953(d) election
approval process. During Year 3 Taxpayer, with Accounting Firm’s assistance, mailed
the additional information to the IRS. In Year 4, Accounting Firm contacted the IRS
because Taxpayer had not received a letter approving its section 953(d) election. The
IRS informed Accounting Firm that the election was not approved because the IRS did
not receive the requested additional information. In Year 5 Taxpayer, with Accounting
Firm’s assistance, makes this request to be granted an extension of time to make the
election provided by section 953(d). A grant of relief will not result in a lower tax liability
for the taxable years affected by the election because Taxpayer, with Accounting Firm’s
assistance, filed its tax returns for Year 1 through Year 5 as if a section 953(d) election
had been in place since Year 1. Accordingly, a grant of relief will not prejudice the
interests of the Government.

        Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to
grant a taxpayer a reasonable extension of time, under the rules set forth in Treas. Reg.
§ 301.9100-3, to make a regulatory election under all subtitles of the Code, except
subtitles E, G, H, and I.

         Treas. Reg. § 301.9100-1(b) provides that an election includes an application for
relief in respect of tax, and defines a regulatory election as an election whose due date
is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or
announcement.

        Treas. Reg. § 301.9100-3(a) provides that requests for relief subject to this
section will be granted when the taxpayer provides the evidence (including affidavits
described in Treas. Reg. § 301.9100-3(e)) to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith, and the grant of
relief will not prejudice the interests of the Government.

        Treas. Reg. § 301.9100-3(b)(1) provides that except as provided in paragraphs
(b)(3)(i) through (iii) of that section, a taxpayer is deemed to have acted reasonably and
in good faith if it meets one of the conditions described in Treas. Reg. § 301.9100-
3(b)(1)(i) through (v). One such condition is that that taxpayer reasonably relied on a
qualified tax professional, including a tax professional employed by the taxpayer, and
the tax professional failed to make, or advise the taxpayer to make the election. Treas.
Reg. § 301.9100-3(b)(1)(v). Treas. Reg. § 301-9100-3(b)(3)(i) through (iii) does not
apply to the facts as presented in this request.

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       Treas. Reg. § 301.9100-3(b)(2) provides that a taxpayer is not considered to
have reasonably relied on a qualified tax professional if the taxpayer knew or should
have known that the professional was not competent to render advice on the regulatory
election or was not aware of all relevant facts.

       Treas. Reg. §301.9100-3(c)(1) provides that relief will be granted only when the
interests of the Government will not be prejudiced.

        Rev. Proc. 2003-47, 2003-2 C.B. 55, 56 provides that the election to be treated
as a domestic corporation under section 953(d), to be effective for a taxable year, must
be filed by the due date prescribed in section 6072(b) (with extensions) for the United
States income tax return that is due if the election becomes effective.

       In the present situation, Rev. Proc. 2003-47 fixes the time to make the election
under section 953(d). Therefore, the Commissioner has discretionary authority under
Treas. Reg. § 301.9100-1(c) to grant Taxpayer an extension of time, provided that
Taxpayer satisfies the standards set forth under Treas. Reg. § 301.9100-3(a).

        Based on the facts and information submitted, we conclude that Taxpayer
satisfies Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is granted an extension of
time of 60 days from the date of this ruling letter to make the election provided by
section 953(d), in accordance with the procedural rules set forth in Rev. Proc. 2003-47,
to be treated as a domestic corporation for federal income tax purposes commencing on
the first day of Taxpayer's Year 1 taxable year.

      The granting of an extension of time is not a determination that Taxpayer is
otherwise eligible to make the section 953(d) election. Treas. Reg. § 301.9100-1(a).

       The Taxpayer should attach a copy of this letter ruling to its federal income tax
return for the relevant year.

      This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

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Pursuant to a power of attorney on file in this office, a copy of this ruling letter is being
furnished to your authorized representative.


                                                   Sincerely,



                                                   Jeffery G. Mitchell
                                                   Branch Chief, Branch 2
                                                   (International)

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