SECTION 5. EFFECT ON OTHER

DOCUMENTS

Notice 89–79, 1989–2 C.B. 392, Section II, Procedural Rules, is modified and superseded.

DRAFTING INFORMATION

The principal author of this revenue procedure is Alexandra K. Helou of the Office of the Associate Chief Counsel (International). For further information regarding this revenue procedure, contact Ms. Helou at (202) 622–3840 (not a toll-free number). For further information concerning the processing of an election under section 953(d), contact Technical Services Group Manager in Plantation, FL, at (954) 423–7344 (not a toll-free number).

based on the office and assets of a U.S. corporation that is a member of the consolidated group (“U.S. Affiliate”). An electing corporation will satisfy the Asset Test based on the assets of the U.S. Affiliate if the U.S. Affiliate owns assets that are physically located in the United States with an adjusted basis equal to 10% of the electing corporation's gross income for the base year, as defined below.

(c) The “base year” is the taxable year immediately before the taxable year for which the election is first made. However, if the electing corporation did not receive gross income in such prior taxable year, the base year is the first year of the election. If the first year is not a full taxable year, gross income is determined on an annualized basis. If, in any taxable year subsequent to the base year, the electing corporation's gross income is more than 120% of the gross income for the base year, such subsequent taxable year is treated as the new base year and the electing corporation must satisfy the Asset Test with respect to the new base year based on its assets, or based on the assets of the U.S. Affiliate pursuant to section 4.04(4)(b) and (e) of this revenue procedure. If the electing corporation does not satisfy the Asset Test with respect to the new base year, the electing corporation must provide an amended election statement indicating that it no longer satisfies the Asset Test and must enter into a closing agreement and provide a letter of credit to maintain its election.

(d) To satisfy the Asset Test, a corporation may include an asset only to the extent

that any claim of the U.S. government with respect to the asset, which may arise from the failure of the corporation to pay any tax imposed by the Internal Revenue Code, is not subordinated to the claims of any other creditor. Intangible personal property will qualify as an asset physically located in the United States only if the income from that property is income from sources within the United States, within the meaning of section 861, and the evidence of ownership of such property is physically present in the United States.

(e) If the electing corporation chooses to satisfy the Office and Asset Tests based on the office and assets of a U.S. Affiliate, the U.S. Affiliate must enter into a closing agreement with the Internal Revenue Service to agree that, in the event of termination or revocation of the electing corporation's section 953(d) election, the U.S. Affiliate will be liable for excise tax imposed under section 4371 (up to a stated amount) that remains unpaid after the electing corporation has been issued a statement of notice and demand for such tax. Information regarding the preparation of this closing agreement will be sent to the electing corporation after it has filed an election statement.

(5) Approval of Election . When the section 953(d) election is approved, a stamped copy of the election statement and, if applicable, the executed closing agreement will be returned to the electing corporation. If an insured or broker receives a copy of the stamped election statement, he will no longer be liable under section 4374 with respect to

APPENDIX A

The election statement must set forth the following information, which may be provided in the following format:

FOREIGN INSURANCE COMPANY ELECTION UNDER SECTION 953(d)

(1)

( Name, address, principal place of business, if different, tax identification number, and place of incorporation of the electing corporation ) hereby elects to be treated as a domestic corporation for U.S. tax purposes. [The electing corporation may obtain a tax identification number by filing a Form SS–4 ( “Application for Employer Identification Number ”) with the Philadelphia Submission Processing Center.]

July 14, 2003 57 2003-28 I.R.B.

(2) ( Name of electing corporation ) waives all benefits to ( Name of electing corporation ) granted by the United States under any treaty.

(3) ( Name of electing corporation ) agrees, (for all years in which this election is in effect), to timely file a U.S. income tax return and timely remit the income tax due on its income, determined as if ( Name of electing corporation ) were a domestic corporation subject to part I or part II of subchapter L, and the additional tax imposed under section 953(d)(6).

(4) Attached to this election statement is a complete list of all U.S. shareholders (within the meaning of section 953(c)(1)(A)) of ( Name of electing corporation ) as of a date no more than 90 days prior to the date this election statement is mailed. The list includes the name, address, and tax identification number of, and ownership percentage for, each U.S. shareholder. ( Name of electing corporation ) agrees to file an updated list containing the information prescribed in this paragraph determined as of the last day of each taxable year. This updated list will be filed with the U.S. tax return reporting the income earned by the electing corporation for each taxable year the election is in effect.

(5) Attached to this election statement is the Form 2848 ( “Power of Attorney and Declaration of Representative” ) or Form 8821 ( “Tax Information Authorization” ) designating a U.S. resident authorized to receive confidential tax information, including any notice of deficiency, on behalf of ( Name of electing corporation ). ( Name of electing corporation ) agrees to produce its books and records, or a true and accurate copy thereof, in the United States upon request of the Internal Revenue Service.

(6) ( Name of electing corporation ) maintains an office or other fixed place of business in the United States located at

and owns assets which are physically located in the United States with an adjusted basis equal to 10% of the base year's gross income of ( Name of electing corporation ) (“Office and Asset Tests”). Attached is the Asset Calculation Sheet [see Appendix B].

or

(6) ( Name of electing corporation ) is a member of a consolidated group within the meaning of Treas. Reg. § 1.1502–1(h). ( Name of electing corporation ) satisfies the Office and Asset Tests based on the office and assets of ( Name of U.S. Affiliate ) (a member of the consolidated group). ( Name of U.S. Affiliate ) maintains an office or fixed place of business in the United States located at and owns assets that are physically located in the United States with an adjusted basis equal to 10% of ( Name of electing corporation )'s gross income for the base year. Attached are:

1. a copy of the Form 1122 ( “Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return” ) in which the electing corporation consented to be included in the consolidated return, if such form was filed for the electing corporation; 2) a copy of the most recent Form 851 ( “Affiliations Schedule” ) filed by the consolidated group; 3) copies of the supporting statements attached to the most recent consolidated return, showing gross and taxable income and beginning and ending balance sheets with respect to the U.S. Affiliate upon whose office and assets the electing corporation will rely to satisfy the Office and Asset Tests; and 4) the Asset Calculation Sheet [see Appendix B].

or

(6) ( Name of electing corporation ) agrees to provide security for the payment of any amounts due under the Code. The security will be in an amount and upon such terms as stated in a closing agreement to be executed between the Internal Revenue Service and ( Name of electing corporation ). Attached is the power of attorney, Form 2848, for the person authorized to execute a closing agreement on behalf of ( Name of electing corporation ).

(7) This election shall be effective as of the first day of the electing corporation's taxable year (including a short taxable year) commencing . The undersigned declares under penalty of perjury that the statements contained in this election and accompanying documents are true and complete to the best of his/her knowledge and belief.

Date (Title)

(Name of corporation)

2003-28 I.R.B. 58 July 14, 2003

APPENDIX B

Asset Calculation Sheet

Taxable year upon which this calculation is based:

Is this calculation based upon full year actual or annualized figures? (See Section 4.04(4)(c) of this revenue procedure)

Gross Premiums

Less return premiums and premiums paid for reinsurance ( )

Investment income

Total gross income of electing corporation

10% of gross income of electing corporation

Total assets of (electing corporation or U.S. Affiliate) held in the United States

July 14, 2003 59 2003-28 I.R.B.