IRS gives a consolidated group 75 more days to make late section 338(g) elections for a foreign subsidiary's stock purchases

Plain-English summary

A section 338(g) election lets a corporation that buys at least 80% of another corporation's stock (a "qualified stock purchase") treat the deal as if it bought the target's assets instead, which resets the target's asset basis. Here the U.S. parent of a consolidated group had a foreign subsidiary (itself a controlled foreign corporation) that acquired more than 80% of three foreign target corporations, and the group meant to make section 338(g) elections for those purchases but missed the filing deadline. The parent asked the IRS for an extension under Treas. Reg. § 301.9100-3, the general relief provision for late regulatory elections. The IRS granted it: the parent has 75 days from the date of the letter to file the elections on Form 8023, and 150 days to file or amend the affected returns to report the deals as section 338 transactions. The relief is conditioned on the elections not lowering the taxpayers' aggregate tax liability (taking the time value of money into account), and the IRS expressed no opinion on whether the purchases actually qualified as qualified stock purchases or on any other tax consequence. This is standard 9100 relief for a missed election deadline.

Ruling snapshot

• Question: May a consolidated group get an extension under Treas. Reg. § 301.9100-3 to file late section 338(g) elections for a foreign subsidiary's qualified stock purchases of three foreign targets?
• Outcome: Approved (75-day extension granted)
• Key authorities: IRC § 338(g), § 338(d)(3); IRC § 957(a); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Treas. Reg. § 1.338-2(d)

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202332003                                              Third Party Communication: None
 Release Date: 8/11/2023                                        Date of Communication: Not Applicable

 Index Number: 9100.06-00                                       Person To Contact:
                                                                ------------------------, ID No. -----------------
 -------------------------------------------------              Telephone Number:
 ------------------------                                       --------------------
 -----------------------------------                            Refer Reply To:
 -----------------------------------                            CC:CORP:1
                                                                PLR-102906-23
                                                                Date:
                                                                May 18, 2023




Legend

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

GroupMember                =        ------------------------------

ForeignPurchaser =                  ---------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------

ForeignTarget1             =        --------------------------------------------------------------

ForeignTarget2             =        ---------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

ForeignTarget3             =        ------------------------------------------------------------------

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

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

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


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

This letter responds to a letter dated February 6, 2023, submitted on behalf of Parent,
the common parent of the consolidated group that includes GroupMember, the United
States shareholder of ForeignPurchaser, requesting an extension of time under
PLR-102906-23                                 2

§301.9100-3 of the Procedure and Administration Regulations to file elections. Parent
is requesting an extension to file “section 338 elections” under section 338(g) with
respect to ForeignPurchaser's acquisition of more than 80% of the stock of each of
ForeignTarget1, ForeignTarget2, and ForeignTarget3 on Date 1 (the “Elections”). The
material information submitted is summarized below.

Parent is the common parent of a consolidated group that includes GroupMember,
which wholly owns ForeignPurchaser, a foreign entity classified as a corporation for
federal tax purposes. On Date 1, ForeignPurchaser acquired more than 80% of the
stock of each of ForeignTarget1, ForeignTarget2, and ForeignTarget3 (collectively,
“Foreign Targets”). Parent has represented that each of the foregoing acquisitions on
Date 1 qualified as a “qualified stock purchase,” as defined in section 338(d)(3).
Parent has also represented that each of Foreign Targets was a controlled foreign
corporation as defined in section 957(a) at the time of the acquisitions, and that
ForeignPurchaser is a controlled foreign corporation as defined in section 957 (taking
into account section 953(c)) and is not required under §1.6012-2(g) (other than
§1.6012-2(g)(2)(i)(b)(2)) to file a United States income tax return for its taxable year that
includes the acquisition date.

Parent, as common parent of the consolidated group that includes GroupMember, the
United States shareholder of ForeignPurchaser, intended to file the Elections, but for
various reasons valid Elections were not timely filed. After the due date for the
Elections, it was discovered that the Elections had not been timely filed. Subsequently,
this request was submitted, under §301.9100-3, for an extension of time to file the
Elections. Parent has represented that it is not seeking to alter a return position for
which an accuracy-related penalty has been or could be imposed under section 6662.
Parent has also represented that no person filed a United States tax return treating the
transaction or transactions constituting the qualified stock purchase in a manner that is
inconsistent with valid section 338(g) elections having been made.

Section 338(a) permits certain stock purchases to be treated as asset acquisitions if: (1)
the purchasing corporation makes or is treated as having made a “section 338 election”
or a “section 338(h)(10) election”; and (2) the acquisition is a “qualified stock purchase.”

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
PLR-102906-23                                   3

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 Elections is fixed by the regulations (i.e., §1.338-2(d)).
Therefore, the Commissioner has discretionary authority under §301.9100-3 to grant an
extension of time for Parent to file the Elections, provided Parent 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, Company Official, and
Tax Professional explain the circumstances that resulted in the failure to timely file valid
Elections. The information establishes that the request for relief was filed before the
failure to make the Elections was discovered by the Internal Revenue Service. See
§301.9100-3(b)(1)(i).

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 Elections
with respect to the acquisitions of the stock of Foreign Targets, as described above.

WITHIN 75 DAYS OF THE DATE ON THIS LETTER, Parent must file the Elections on
Form 8023, in accordance with §1.338-2(d) and (e)(3) and the instructions to the form.
A copy of this letter must be attached to Form 8023.

WITHIN 150 DAYS OF THE DATE ON THIS LETTER, all relevant parties must file or
amend, as applicable, all returns and amended returns (if any) necessary to report the
transactions as section 338 transactions for the taxable year in which the transactions
were consummated (and for any other affected taxable year). A copy of this letter and a
copy of Form 8883 must be attached to any tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy the requirements of
attaching a copy of this letter by attaching a statement to their return that provides the
date on, and control number (PLR-102906-23) of, the letter ruling.

Parent must also deliver written notice of the Elections (and a copy of Forms 8023 and
8883, their attachments and instructions) to any U.S. persons selling or holding stock in
Foreign Targets, in accordance with §1.338-2(e)(4).

The above extension of time is conditioned on all relevant taxpayers' tax liability (if any)
being not lower, in the aggregate, for all years to which the Elections apply, than it
would have been if the Elections had been timely made (taking into account the time
value of money). No opinion is expressed as to the taxpayers' 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.
PLR-102906-23                                  4


We express no opinion as to: (1) whether the acquisitions of the stock of Foreign
Targets qualified as a “qualified stock purchases” under section 338(d)(3); or (2) any
other tax consequences arising from the Elections.

In addition, we express no opinion as to the tax consequences of filing the Elections late
under the provisions of any other section of the Code and regulations, or as to the tax
treatment of any conditions existing at the time of, or resulting from, filing the Elections
late that are not specifically set forth in the above ruling. For purposes of granting relief
under §301.9100-3, we relied on certain statements and representations made by
Parent, Company Official, and Tax Professional. However, the Director should verify all
essential facts. In addition, notwithstanding that an extension is granted under
§301.9100-3 to file the Elections, penalties and interest that would otherwise be
applicable, if any, continue to apply.

This letter 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 the power of attorney on file in this office, copies of this letter are being sent
to your authorized representatives.

                                        Sincerely,


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




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