Empty Link Skip to Content

The Susquehanna Case: The Court of Appeal Rules on Tax Residence of Disregarded US LLC

AUTHORs: Mark O'Sullivan co-author(s): Cormac Phelan Services: Tax DATE: 18/07/2025

The Court of Appeal recently affirmed a previous decision of the High Court, ruling that a disregarded US LLC was not a resident of the US for the purposes of the US-Ireland double tax treaty (the “DTA”) and, consequently, the taxpayer's claim for group loss relief was denied.  This judgment will be relevant to US multinational groups that have disregarded US LLCs in their group structure which hold Irish subsidiaries.

Background:

The Revenue Commissioners v Susquehanna International Securities Limited, Susquehanna International Group Limited and Susquehanna Atlantic Limited (the “Susquehanna Case”) considered whether the Irish subsidiaries of Susquehanna International Holdings LLC (“SIH LLC”) were entitled to corporation tax group relief under section 411 of the Taxes Consolidation Act 1997.  In order to avail of group relief, all companies in the group must be resident in Ireland, the EU, the EEA or a treaty partner jurisdiction.  The Irish Revenue Commissioners (“Revenue”) rejected Susquehanna’s claims for group relief on losses amounting to €46.6 million for the 2010, 2011 and 2012 financial years, arguing that SIH LLC was not resident in the US and therefore it and its three Irish subsidiaries could not form a group for the purposes of the Irish group relief rules. 

Revenue’s assessment was first appealed to the Tax Appeals Commission (“TAC”).  The TAC heard evidence from a number of US tax experts and determined that, as a matter of fact, SIH LLC was not resident in the US as a matter of US law.  While this would have defeated the claim for group relief under domestic law, the taxpayer also argued that the non-discrimination article of the DTA should provide a remedy. 

The taxpayer argued that Article 25 of the DTA precluded discriminatory treatment of Irish subsidiaries that were owned by US residents.  In order to rely on this argument, the taxpayer needed to establish that SIH LLC was a resident of the US for the purposes of the DTA.  This required the taxpayer to demonstrate that SIH LLC was “liable to tax” in the US.  Drawing on the Canadian decision in TD Securities, the taxpayer convinced the TAC to take a purposive approach to interpreting the DTA.  As the income of SIH LLC was ultimately taxed in the US at the level of the five individuals who indirectly held the shares in SIH LLC, the TAC was satisfied that SIH LLC was liable to tax and therefore a resident of the US for the purposes of the DTA.  As a result, the Irish subsidiaries could rely on the non-discrimination article to claim group relief.

Revenue successfully appealed that finding of the TAC to the High Court arguing:

  • SIH LLC, the common shareholder of the three Irish companies seeking to share corporation tax losses, was a disregarded entity for US tax purposes.  As a result, Revenue argued that SIH LLC was not liable to tax in the US and therefore did not satisfy the definition of “resident of a contracting state” under Article 4 of the DTA.
  • Given Revenue’s position that SIH LLC was not a resident of the US for the purposes of the DTA, Revenue argued that the taxpayer could not rely on the anti-discrimination provisions under Article 25 of the DTA. 

Revenue were successful in their appeal of the TAC determination to the High Court.  The taxpayer appealed that decision to the Court of Appeal.

Court of Appeal:

The Court of Appeal  delivered its judgment on 27 May 2025 and focused on the following points of law:

  • Whether SIH LLC satisfied the definition of “resident of a contracting state” by virtue of being ‘liable to tax’ under Article 4.1 of the DTA:  The Court of Appeal ultimately held that SIH LLC was not itself ‘liable to tax’ in the US and consequently, did not meet the definition of “resident of a contracting state” under Article 4.1Allen J noted that “If – as it is – the purpose of the treaty is to avoid double taxation, it seems to me that it stands to reason that it should only apply to persons who otherwise would be exposed to a liability to pay tax. SIH LLC had no such exposure.”
  • Given SIH LLC is indirectly owned by residents of the US, whether it is necessary to establish that SIH LLC satisfies the definition of “resident of a contracting state” to rely on the anti-discrimination provisions under Article 25 of the DTA:  On the basis that SIH LLC did not satisfy the definition of “resident of a contracting state”, the Court of Appeal found that it followed that SIH LLC was not entitled to rely on the anti-discrimination provisions contained in Article 25 of the DTA.
  • TD Securities Case:  The Court of Appeal opted not to apply the Canadian decision of TD Securities.  The Court of Appeal were of the view that TD Securities was based on US and Canadian interpretation of the US-Canada double tax treaty and consequently, its findings were not persuasive in an Irish court.  Therefore, the Court of Appeal noted that the extent TD Securities was relevant to the Susquehanna Case was limited to “the extent – if at all – to which it persuades me that SIH LLC is “liable to tax” within the meaning of Article 4 DTA.  For the reasons given, it does not so persuade me”. 

Distinguishing Factors for Other Multinational Group Structures:

The Susquehanna Case is the first Irish case to consider the tax residence of a US LLC.  The case confirmed that a disregarded US LLC ultimately owned by individuals who are liable to tax in the US on the income of the LLC should not be regarded as a resident of the US for the purposes of the DTA.  It is difficult to say how widely the decision should apply given, the Susquehanna Case ultimately turned on the specific and somewhat unusual facts of the taxpayer’s group structure. 

The Court of Appeal signalled (in an obiter statement) that the position might be different for US LLCs that are held by US tax resident corporations rather than individuals.  The Court of Appeal, following detailed consideration of the Canadian case of TD Securities (USA) LLC v. Her Majesty the Queen 12 ITLR 783, found that the Susquehanna Case could be distinguished on the basis that the LLC in TD Securities was ultimately held by a corporation which was subject to US tax (as opposed to SIH LLC which was held by other disregarded entities and ultimately US individuals).

It remains to be seen whether an Irish court would reach a different conclusion if a US disregarded LLC was held by a corporation who is subject to US tax.  Taxpayers with disregarded US LLCs holding Irish companies in their group structure should consider the potential impact of the Susquehanna Case and be cautious in asserting that these LLCs are a resident of the US for the purposes of the DTA.  There are a number of other relieving provisions in the Irish tax rules that restrict reliefs to residents of treaty partner jurisdictions.  Susquehanna should be considered when seeking to rely on those provisions in the context of a disregarded LLC.

Contact Us

For more information regarding the material referred to in this insight, please contact our Tax Department or your usual contact at Matheson.