IRS consents to a retroactive QEF election for two foreign corporations

Plain-English summary

A domestic limited partnership asked the IRS for consent to make a retroactive qualified electing fund (QEF) election for two foreign corporations that were passive foreign investment companies (PFICs). The partnership said its tax adviser did not identify the PFIC status or advise it to make the election by the original deadline. It submitted affidavits, agreed to file amended returns for affected later years, and represented that the IRS had not raised the PFIC issue on audit. The IRS concluded that the taxpayer satisfied the regulatory conditions for relief and consented to the retroactive election, subject to compliance with the timing and procedural rules in Treas. Reg. § 1.1295-3(g).

Ruling snapshot

• Question: May the partnership make a retroactive QEF election for its investments in two PFICs?
• Outcome: Approved.
• Key authorities: IRC § 1295(a), (b); Treas. Reg. § 1.1295-3(f), (g); IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202636015
Third Party Communication: None
Release Date: 9/4/2026
Date of Communication: Not Applicable
Index Number: 1295.02-00, 1295.02-02
Person To Contact:
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Telephone Number:
------------------------------------------------- --------------------- Refer Reply To:
CC:INTL:B02
PLR-121408-24
PLR-122701-24
Date:
June 08, 2026

TY: -------

Legend

Taxpayer = -------------------------------------------------------- FC1 = ----------------------------------------- FC2 = ------------------------------ Country = ------------ Year 1 =------- Year 2 = ------- Accounting Firm = ------------------

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

This is in response to a letter submitted on Taxpayer’s behalf by an authorized representative requesting the consent of the Commissioner of the Internal Revenue Service (“Commissioner”) to make a retroactive qualified electing fund (“QEF”) election under section 1295(b) of the Internal Revenue Code (the “Code”) and Treas. Reg.
§ 1.1295-3(f) with respect to Taxpayer’s investment in FC1 and FC2.

The ruling contained in this letter is based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

FACTS

In Year 1, Taxpayer, a domestic limited partnership, wholly owned FC1. FC1 wholly owned FC2. FC1 and FC2 are foreign corporations organized in Country. Taxpayer has two domestic partners that each own a greater than 10 percent interest in

PLR-121408-24; PLR-122701-24
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Taxpayer. The remaining partners each own a less than 10 percent ownership interest in Taxpayer.

In Year 1, Taxpayer engaged Accounting Firm to provide tax consulting and compliance services. Accounting Firm was competent to render international tax advice with respect to Taxpayer’s investment in FC1 and FC2. Accounting Firm failed to identify, and Taxpayer had no knowledge, that FC1 and FC2 were passive foreign investment companies (“PFIC”). Accounting Firm neither advised Taxpayer about making a QEF election nor prepared a Form 8621 for FC1 or FC2. In Year 2, Accounting Firm informed Taxpayer that FC1 and FC2 were PFICs in Year 1.

Taxpayer submitted affidavits, under penalties of perjury, describing the events that led to the failure to make the QEF election by the election due date. Taxpayer has agreed to file amended returns for each of the subsequent taxable years affected by the retroactive election, if any. Taxpayer represents that, as of the date of the request for ruling, the PFIC status of FC1 and FC2 had not been raised by the IRS on audit for any of the taxable years at issue.

RULING REQUSTED

Taxpayer requests the consent of the Commissioner to make a retroactive QEF election under Treas. Reg. § 1.1295-3(f) with respect to FC1 and FC2 for Year 1.

LAW

Section 1295(a) provides that a PFIC will be treated as a QEF with respect to a shareholder if (1) an election by the shareholder under section 1295(b) applies to the PFIC for the taxable year; and (2) the PFIC complies with the requirements prescribed by the Secretary for purposes of determining the ordinary earnings and net capital gains of the company.

Under section 1295(b)(2), a QEF election may be made for a taxable year at any time on or before the due date (determined with regard to extensions) for filing the return for the taxable year. To the extent provided in regulations, the election may be made after the due date if the shareholder failed to make the election by the due date because the shareholder reasonably believed the company was not a PFIC.

Under Treas. Reg. § 1.1295-3(f), a shareholder may request the consent of the Commissioner to make a retroactive QEF election for a taxable year if:

1. the shareholder reasonably relied on a qualified tax professional, within the
   meaning of Treas. Reg. § 1.1295-3(f)(2);
2. granting consent will not prejudice the interests of the United States
   government, as provided in Treas. Reg. § 1.1295-3(f)(3);

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3. the request is made before a representative of the Internal Revenue Service
   raises upon audit the PFIC status of the company for any taxable year of the
   shareholder; and
4. the shareholder satisfies the procedural requirements of Treas. Reg.
   § 1.1295-3(f)(4).

The procedural requirements include filing a request for consent to make a retroactive election with, and submitting a user fee to, the Office of the Associate Chief Counsel (International). Treas. Reg. § 1.1295-3(f)(4)(i). Additionally, affidavits signed under penalties of perjury must be submitted that describe:

1. the events that led to the failure to make a QEF election by the election due
   date;
2. the discovery of the failure;
3. the engagement and responsibilities of the qualified tax professional; and
4. the extent to which the shareholder relied on the professional.

Treas. Reg. § 1.1295-3(f)(4)(ii) and (iii).

CONCLUSION

Based on the information submitted and representations made with Taxpayer’s ruling request, we conclude that Taxpayer has satisfied Treas. Reg. § 1.1295-3(f).

Accordingly, consent is granted to Taxpayer to make a QEF election for FC1 and FC2 retroactive to Year 1, provided that Taxpayer complies with the rules under Treas. Reg.
§ 1.1295-3(g) regarding the time for, and manner of, making the retroactive QEF election.

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 this letter.

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.

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

A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling.

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Sincerely,

/s/ Melinda E. Harvey

Melinda E. Harvey
Branch Chief, Branch 2
Associate Chief Counsel (International)

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