Corporation received 30 days to file branch-tax election statement

Plain-English summary

A foreign parent conducted a U.S. trade or business through disregarded entities. When the lowest-tier U.S. LLC elected corporate status, its assets were treated as contributed to a new corporation under § 351. The parent and new corporation intended to make the election that carries specified effectively connected earnings and profits into the transferee for branch-profits-tax purposes, but their accounting firm omitted the required transferee statement from the timely return. The firm discovered the mistake later while reviewing earnings and profits and promptly sought relief. The IRS found reasonable reliance, good faith, and no prejudice to the government, and granted 30 days to file the election statement.

Ruling snapshot

• Question: Could a domestic transferee receive more time to file the statement electing branch-tax treatment for earnings and profits transferred in a § 351 incorporation?
• Outcome: Approved
• Key authorities: IRC §§ 351 and 884; Treas. Reg. §§ 1.884-2T(d)(3)-(5), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202527001 Third Party Communication: None
Release Date: 7/3/2025 Date of Communication: Not Applicable
Index Number: 884.00-00, 884.08-00,
884.08-40, 9100.00-00 Person To Contact:
-------------------------, ID No. -----------------
-------------------------------------------- -----------------------------------------------------
----------------------------- Telephone Number:
------------- ---------------------
------------------------------------ Refer Reply To:
CC:INTL:B01
PLR-100279-25
Date:
April 09, 2025

             TY: -------

LEGEND

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

Subsidiary = -----------------------
Taxpayer = -------------------------------------------------------
-----------------------
Country A = -----------------
Country B = ----------------
State X = -------------
CPA Firm = ---------------------------------------------------
Date 1 = ---------
Date 2 = -------
Year 1 = -------
Year 2 = -------

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

This replies to your letter dated --------------------------, from your authorized
representative, in which you request an extension of time pursuant to Treas. Reg. §
301.9100-3 to permit Taxpayer to file the appropriate statement under Treas. Reg. §
1.884-2T(d)(4)(i) to increase its earnings and profits by the amount determined under
Treas. Reg. § 1.884-2T(d)(4)(ii) with respect to its Year 1 tax year.

The rulings contained in this letter are based upon facts and representations submitted
by 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

PLR-100279-25 2

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

Parent, a Country A Entity, is classified as a corporation for federal income tax purposes
and is a calendar-year taxpayer. As of the beginning of its Year 1 tax year, Parent
wholly owned Subsidiary, a Country B Entity, that was treated as a disregarded entity
for federal tax purposes pursuant to Treas. Reg. § 301.7701-3(b)(2)(i)(C). Subsidiary
wholly owned Taxpayer, a State X limited liability company, that was treated as a
disregarded entity for federal tax purposes pursuant to Treas. Reg. § 301.7701-
3(b)(1)(ii). Parent was engaged in the conduct of a U.S. trade or business that
generated effectively connected income through Taxpayer.

On Date 1, Year 1, Taxpayer filed Form 8832, “Entity Classification Election,” to elect to
be treated as a corporation for federal tax purposes. As a consequence of the election,
Taxpayer’s assets were treated as contributed by Parent to a newly formed corporation
in a transaction that was described in section 351. Parent and Taxpayer intended to
make an election under Treas. Reg. § 1.884-2T(d)(4)(i) and to include the required
statements with the appropriate tax returns.

Under Treas. Reg. § 1.884-2T(d)(3), if a foreign corporation (transferor) engaged in the
conduct of a U.S. trade or business makes a transfer under section 351(a) of the Code
of part or all of its U.S. assets to a U.S. corporation (transferee) in exchange for stock or
securities in the transferee, the transferor’s dividend equivalent amount will be
determined without regard to the section 351(a) transfer. To qualify, the transferee must
make an election under Treas. Reg. § 1.884-2T(d)(4)(i) to increase its earnings and
profits by an allocable portion of the transferor’s effectively connected earnings and
profits and non-previously taxed accumulated earnings. This election is generally only
effective if the transferee attaches the requisite statement described in Treas. Reg. §
1.884-2T(d)(4)(i) to its timely filed (including extensions) income tax return for the
taxable year in which the transaction occurs. Additionally, the transferor must also file a
statement agreeing that, upon disposition of part or all of the stock or securities it owns
in the transferee, it will treat as a dividend equivalent amount for the taxable year in
which the disposition occurs an amount equal to the lesser of (A) the amount realized
upon such disposition, or (B) the total amount of the effectively connected earnings and
profits and non-previously taxed accumulated earnings and profits that was allocated
from the transferor corporation to the transferee corporation pursuant to the election
under Treas. Reg. § 1.884-2T(d)(4)(i). Treas. Reg. § 1.884-2T(d)(5)(i). This statement
must be attached to a timely filed (including extensions) income tax return of the
transferor for the taxable year in which the section 351 transaction occurs. Treas. Reg.
§ 1.884-2T(d)(5)(iv).

Parent and Taxpayer engaged with CPA Firm for tax consulting and compliance
matters, including the preparation and filing of the appropriate U.S. federal income tax
returns for Year 1. Parent and Taxpayer relied on CPA Firm to properly make the
election under Treas. Reg. § 1.884-2T(d)(4)(i) for Year 1. CPA Firm prepared and filed

PLR-100279-25 3

Taxpayer’s Year 1 Form 1120 consistent with the intent to make the election but
inadvertently failed to attach the transferee election statement as required by Treas.
Reg. § 1.884-2T(d)(4)(i). CPA Firm discovered the error on Date 2, Year 3 while
reviewing Taxpayer’s earnings and profits. Once the error was discovered, CPA Firm
worked with Taxpayer to promptly prepare the request for an extension of time to file the
election statement.

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

Treas. Reg. § 301.9100-1(b) defines a regulatory election to mean an election whose
due date is prescribed by a regulation, a revenue ruling, a revenue procedure, a notice,
or an announcement.

Treas. Reg. § 301.9100-3 provides standards for extensions of time for making
regulatory elections when the deadline for making the election is other than a due date
prescribed by statute.

Treas. Reg. § 301.9100-3(a) provides that the 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. Except as otherwise provided in Treas. Reg. §
301.9100-3(b)(3)(i) through (iii), a taxpayer is deemed to have acted reasonably and in
good faith if the taxpayer requests relief before the failure to make the regulatory
election is discovered by the IRS. Treas. Reg. § 301.9100-3(b)(1)(i).

In the present situation, Treas. Reg. § 1.884-2T(d)(4)(i) fixes the time for Taxpayer to
make the election. 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 standard set forth in Treas. Reg. § 301.9100-3(a).

Based on the facts and circumstances of this case, we conclude that Taxpayer acted
reasonably and in good faith, and the grant of relief will not prejudice the interests of the
Government. Accordingly, under Treas. Reg. § 301.9100-3, Taxpayer is granted an
extension of time until 30 days from the date of this ruling letter to make an election
under Treas. Reg. § 1.884-2T(d)(4)(i) to increase its earnings and profits by the amount
determined under Treas. Reg. § 1.884-2T(d)(4)(ii) with respect to its Year 1 tax year.
The granting of an extension of time is not a determination that Taxpayer is otherwise
eligible to make the election. Treas. Reg. § 301.9100-1(a).

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in

PLR-100279-25 4

this letter under other provisions of the Code and regulations, or about the tax treatment
of any conditions existing at the time of, or effects resulting from, the transactions not
specifically covered by the above rulings. In particular, no opinion is expressed with
respect to (i) the application of section 351, and related provisions to the transaction
discussed, and (ii) whether the federal income tax return of Parent and the transferor
statement attached for Year 1 were timely filed (including extensions).

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

A copy of this letter must be attached to any income tax return to which it is relevant.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                               Sincerely,

                                               Associate Chief Counsel
                                               (International)


                                               By: /s/     Subin Seth
                                               Subin Seth
                                               Senior Counsel, Branch 1
                                               Office of the Associate Chief Counsel
                                               (International)

Enclosure
Copy for § 6110 purposes.

PLR-100279-25 5

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