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International Tax Blog - New and Interesting International Tax Issues

International PLR of the 6th week of 2013


Last week the IRS published the following Private Letter Rulings relating to international taxation.

PLR 201306007 - Code §1504(a) - A U.S. company was acquired by a foreign parent. A subsidiary of the U.S. company (“Proxy Sub”) was required to have security clearances granted by the U.S. Government. Because of the foreign indirect ownership of stock in Proxy Sub, the U.S. Government required that Proxy Sub be effectively insulated from foreign ownership, control, or influence in order to maintain the security clearances.

Various entities in the chain of ownership executed a Proxy Agreement whereby certain resident U.S. citizens, as Proxy Holders, became directors of Proxy Sub. The equity interest in Proxy Sub was deposited with the Proxy Holders in order to enforce the terms of the Proxy Agreement; however the Proxy Holders did not own an economic interest in Proxy Sub.

The Proxy Holders were the only parties with the right to vote with respect to the management of Proxy Sub. In their role as directors, the Proxy Holders were specifically authorized to take certain actions such as the appointing or removing of non-Proxy Holder directors at their sole discretion.

The ruling held that Proxy Sub will be a member of the U.S. affiliated group and will be permitted to join in the filing of a consolidated federal income tax return.

Tags: Authority - PLRs / CCAs