Foreign insurer receives 60 days to elect domestic corporation treatment

Plain-English summary

A regulated foreign insurance company did not learn about the IRC § 953(d) election to be treated as a domestic corporation until its U.S. parent hired an accounting firm. The election deadline was set by published administrative guidance, making discretionary relief available under Treas. Reg. § 301.9100-3. The IRS found that the insurer met the relief standard and granted 60 days to make the election for the requested taxable year. The extension was conditioned on the insurer's aggregate tax liability not being lower than it would have been with a timely election, taking the time value of money into account. The ruling did not decide whether the insurer otherwise qualified to make the election.

Ruling snapshot

• Question: May the foreign insurance company make a late IRC § 953(d) election to be treated as a domestic corporation?
• Outcome: Approved with conditions. The insurer received 60 days to make the election.
• Key authorities: IRC §§ 953(d), 6072(b); Treas. Reg. §§ 301.9100-1, 301.9100-3; Rev. Proc. 2003-47

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201722003
Third Party Communication: None
Release Date: 6/2/2017
Date of Communication: Not Applicable
Index Number: 953.06-00, 9100.22-00
Person To Contact:
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Telephone Number:
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------------------------------------------------ Refer Reply To:
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PLR-111752-16
Date:
March 03, 2017

TY: -------

LEGEND:

Taxpayer: ------------------------------------------------
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Country X: -------------
Company Y: --------------------------------------------------------
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State Z: ---------------------------
Date: ----------------------------
Accounting Firm: ---------------------------

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

This is in response to a letter received by our office on April 12, 2016, and subsequent submissions, 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 effective for Taxpayer’s taxable year ended Date.

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 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.
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Taxpayer is a regulated insurance company organized under the laws of Country X. Taxpayer is a wholly owned subsidiary of Company Y, a corporation organized under the laws of State Z. Taxpayer did not become aware of the availability of a section 953(d) election until Company Y engaged the services of Accounting Firm to assist with certain tax matters, including its ownership and operation of Taxpayer.

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).

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,
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to be treated as a domestic corporation for federal income tax purposes effective for Taxpayer's taxable year ended Date.

The above extension of time is conditioned on Taxpayer’s tax liability (if any) being not lower, in the aggregate, for all years to which the section 953(d) election applies than it would have been if the election had been timely filed (taking into account the time value of money). No opinion is expressed as to Taxpayer’s tax liability for the years involved. Further, the granting of the above extension 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.

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,

Kristine A. Crabtree
Senior Technical Reviewer, Branch 2
(International)