Private Letter Ruling
202350009
Released December 15, 2023
Approved
Late GILTI high-tax exclusion election allowed
Apply this to your situation
This page covers one taxpayer's ruling from 2023, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)
Plain-English summary
A domestic parent and its consolidated group intended to make a retroactive GILTI high-tax exclusion election for their controlled foreign corporation group. The tax department and its accounting firm began preparing an amended return but mistakenly believed the deadline was three years after the extended return due date, rather than 24 months after the unextended due date. The mistake occurred amid the departure of a key tax employee and the integration of a newly acquired company, and the group discovered it about one month after the deadline. The group was not under examination, represented that it had not used hindsight, and said relief would not lower its aggregate tax or leave barred tax uncollectible. Because the consolidated group included all affected U.S. shareholders, no other taxpayer would be affected. The IRS granted 120 days to make the election by attaching the required statement to Form 1120X.
Ruling snapshot
- Question: May the consolidated group make a GILTI high-tax exclusion election after missing the 24-month deadline for a retroactive election?
- Outcome: Approved, with the election due within 120 days
- Key authorities: IRC §§ 951A, 954(b)(4), 957(a), 1504; Treas. Reg. §§ 1.951A-2(c)(7), 1.964-1(c), 301.9100-1, 301.9100-3
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202350009 Third Party Communication: None
Release Date: 12/15/2023 Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.22-00,
951A.00-00, 951A.02-00 Person To Contact:
------------------, ID No. -----------------
----------------------- Telephone Number:
------------------------- --------------------
---------------------------------- Refer Reply To:
CC:INTL:B02
PLR-110617-23
Date:
September 18, 2023
TY: -------
X = ------------------------------------------------
Members of X’s CFC Group = ----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
PLR-110617-23 2
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
PLR-110617-23 3
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------
Tax Year 1 = ------------------------------------------------------
A = ---
B = ---
Date 1 = ------------------
Date 2 = -----------------------
Accounting Firm = -----------------------------------------
Dear ---------:
This letter responds to a letter dated April 13, 2023, submitted on behalf of X and
the U.S. consolidated group of which X is the common parent, by its authorized
representatives, requesting an extension of time under §301.9100-3 of the
Procedure and Administration Regulations for X to file a global intangible low-taxed
income (“GILTI") high-tax exclusion election (“GILTI HTE Election”) under
§1.951A-2(c)(7)(viii) with respect to each controlled foreign corporation (as defined
in section 957(a)) (“CFC”) that is a member of X’s CFC Group as defined in Treas.
Reg. §1.951A-2(c)(7)(viii)(E)(2)(i), for the CFC inclusion year (as defined in Treas.
Reg. §1.951A-1(f)(1)) that ends with or within X’s U.S. shareholder inclusion year
(as defined in Treas. Reg. §1.951A-1(f)(7)), Tax Year 1.
FACTS
X, a domestic corporation, is the common parent of a U.S. consolidated group (“X
consolidated group”). X and the X consolidated group wholly own A of the B CFCs
in the X CFC Group (each a “Member of X’s CFC Group”). There are no U.S.
shareholders of any CFC in the X CFC group that are not members of the X
consolidated group. X and members of the X consolidated group are controlling
domestic shareholders (as defined in Treas. Reg. §1.964-1(c)(5)) for each CFC in
the X CFC Group.
X and the X consolidated group timely filed its original Form 1120 for Tax Year 1
and did not make the GILTI HTE Election under Treas. Reg. §1.951A-2(c)(7) with
that filing. In addition, a retroactive GILTI HTE Election was not timely made. Prior
to Date 1, which was the date that was 24 months after the unextended due date
of X’s original federal income tax return, X had consulted with Accounting Firm
which had prepared its original Federal income tax return for Tax Year 1 and
PLR-110617-23 4
determined to make a retroactive GILTI HTE Election for Tax Year 1 with an
amended tax return.
Even though members of X’s tax department and advisors at Accounting Firm
started the process of preparing an amended return for Tax Year 1 to make the
GILTI HTE Election, due to a combination of circumstances, the due date for the
GILTI HTE Election was overlooked, such that X’s tax department believed that
the due date of the election was three years after the extended due date of the Tax
Year 1 return. These circumstances included the departure of a key member of
X’s tax department who was responsible for preparing the Forms 5471 and 8992
for Tax Year 1. In addition, around the time that X’s tax department and the
Accounting Firm considered whether to make the GILTI HTE Election, X completed
the acquisition of another company and devoted a significant portion of its
personnel, including members of its tax department, to integrating the business
operations of that company with X’s business operations. About one month after
Date 1, the leadership of X’s tax department was made aware of the missed filing
date by a member of X’s tax department who had read an article regarding the
GILTI HTE final regulations, which explained that an amended return making a
retroactive GILTI HTE Election would need to be filed within 24 months of the
unextended due date of the original return.
X and the X consolidated group are not currently under examination for Tax Year
1, or any other year in which any issue with respect to the election is presented on
a return. X represents that granting the relief requested will not result in X having
a lower tax liability in the aggregate for all affected years than X would have had if
the election had been timely made. X represents that no facts have changed that
would indicate the use of hindsight and the election would have been beneficial
from the beginning. X represents that making the GILTI HTE Election for Tax Year
1 will not result in any additional tax liability for Tax Year 1 or any other year for
which assessment is barred under section 6501(a), such that there would be a tax
liability that could not be assessed or collected as a result of the GILTI HTE
Election. Further, X and the X consolidated group comprise all of the U.S.
shareholders that directly or indirectly own stock in each member of the X CFC
Group, therefore, X and the X consolidated group are the only taxpayers affected
by the GILTI HTE Election.
LAW AND ANALYSIS
Section 951A(a) provides that a U.S. shareholder of any CFC for any taxable year
of the U.S. shareholder must include in gross income the shareholder’s GILTI for
that taxable year.
Section 951A(b) provides that the term “GILTI” means, with respect to any U.S.
shareholder for any taxable year of such U.S. shareholder, the excess (if any) of
PLR-110617-23 5
such shareholder’s net CFC tested income for such taxable year, over such
shareholder’s net deemed tangible income return for such taxable year.
Section 951A(c)(1) generally provides that the term “net CFC tested income”
means, with respect to any U.S. shareholder for any taxable year, the excess (if
any) of the aggregate of such shareholder’s pro rata share of the tested income of
each CFC with respect to which such shareholder is a U.S. shareholder for such
taxable year of such U.S. shareholder, over the aggregate of such shareholder’s
pro rata share of the tested loss of each CFC with respect to which such
shareholder is a U.S. shareholder for such taxable year of such U.S. shareholder.
Section 951A(c)(2)(A) provides that the term “tested income” means, with respect
to any CFC for any taxable year of such CFC, the excess (if any) of the gross
income of such corporation determined without regard to certain items of income,
including any gross income excluded from the foreign base company income (as
defined in section 954) and the insurance income (as defined in section 953) of
such corporation by reason of section 954(b)(4), over the deductions (including
taxes) properly allocable to such gross income under rules similar to the rules of
section 954(b)(5) (or to which such deductions would be allocable if there were
such gross income).
Section 1.951A-2(c)(7)(i) generally provides that for purposes of determining the
tested income of a CFC, a tentative gross tested income item (determined under
Treas. Reg §1.951A-2(c)(7)(ii)(A)) qualifies for the exception described in section
954(b)(4) only if a GILTI HTE Election is effective with respect to the CFC for the
CFC inclusion year (as defined in Treas. Reg §1.951A-1(f)(1)) and the tentative
tested income item with respect to the tentative gross tested income item was
subject to an effective rate of foreign tax that is greater than 90 percent of the
maximum rate of tax specified in section 11.
Section 1.951A-2(c)(7)(viii) provides that the GILTI HTE Election is made by the
controlling domestic shareholder with respect to a CFC for a CFC inclusion year
by filing the statement required under Treas. Reg §1.964-1(c)(3)(ii) with a timely
filed original federal income tax return, or with an amended federal income tax
return, for the U.S. shareholder inclusion year of each controlling domestic
shareholder in which or with which such CFC inclusion year ends; providing any
notices required under Treas. Reg §1.964-1(c)(3)(iii); and providing any additional
information required by applicable administrative pronouncements.
Section 1.951A-2(c)(7)(viii)(E)(1) provides that if a CFC is a member of a CFC
group, the GILTI HTE Election is made with respect to all CFCs that are members
of the CFC group.
Section 1.951A-2(c)(7)(viii)(E)(2) provides that a CFC group means an affiliated
group as defined in section 1504(b)(1) through (6), except that section 1504(a) is
PLR-110617-23 6
applied by substituting “more than 50 percent” for “at least 80 percent” each place
it appears, and section 1504(a)(2)(A) is applied by substituting “or” for “and.”
Section 1.951A-2(c)(7)(viii)(A)(2)(i) generally provides that a controlling domestic
shareholder may make the election with an amended federal income tax return,
duly filed within 24 months of the unextended due date of the original federal
income tax return for the U.S. shareholder inclusion year with or within which the
CFC inclusion year ends.
Section 1.951A-2(c)(7)(viii)(D) provides that a GILTI HTE Election is valid only if
all of the requirements in Treas. Reg. §1.951A-2(c)(7)(viii)(A) are satisfied.
Section 301.9100-1(c) provides that the Commissioner may 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.
Section 301.9100-1(b) defines the term “regulatory election” as an election whose
due date is prescribed by a regulation published in the Federal Register or a
revenue ruling, revenue procedure, notice, or announcement published in the
Internal Revenue Bulletin.
Section 301.9100-2 provides automatic extensions of time for making certain
elections.
Section 301.9100-3 provides rules for requesting extensions of time for regulatory
elections that do not meet the requirements of Treas. Reg. §301.9100-2. It
provides that these requests for relief are granted when the taxpayer provides the
evidence (including affidavits) 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. A taxpayer is deemed to have acted
reasonably and in good faith if, among other factors, the taxpayer requests relief
before the failure to make the regulatory election is discovered by the IRS. Treas.
Reg. §301.9100-3(b)(i).
Section 301.9100-1(a) provides that granting an extension of time for making an
election is not a determination that a taxpayer is otherwise eligible to make the
election or that a taxpayer complied with the other requirements for a valid election.
PLR-110617-23 7
CONCLUSION
Based on the facts provided and representations made, we conclude that the
requirements of Treas. Reg. §§301.9100-1 and 301.9100-3 have been satisfied.
X is hereby granted an extension of time of one hundred twenty (120) days from
the date of this letter to make a GILTI HTE Election with respect to the X CFC
Group for the CFC inclusion year that ends with or within X’s U.S. shareholder
inclusion year, Tax Year 1. X should make the election in a written statement
attached to a duly filed Form 1120X for Tax Year 1.
The ruling contained in this letter is based upon information and representations
submitted by the 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 ruling, it is subject to verification on
examination.
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.
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.
In accordance with the Power of Attorney on file with this office, a copy of this letter
is being sent to your authorized representative.
Sincerely,
/s/ Larry R. Pounders
Larry R. Pounders
Senior Counsel, Branch 3
Associate Chief Counsel (International)
Cc:
Get today's answer for your situation
You just read what the IRS ruled for one taxpayer in 2023, and it can't be cited as precedent. Ezel checks the current Internal Revenue Code and IRS guidance and answers your specific situation, with citations.
Opens in Ezel Pro. Every answer cites the authority it relies on.