PLR 200307007: Foreign subsidiary gets time for disregarded entity election

Plain-English summary

A domestic corporation wholly owned a foreign entity that intended to be treated as disregarded for U.S. tax purposes from its incorporation date. The foreign entity missed the deadline to file its classification election. It represented that it was eligible to elect and that its owner had limited liability. The IRS found the extension requirements satisfied and gave the entity 60 days to file Form 8832 with the requested effective date and a copy of the ruling attached. The extension did not establish that the entity otherwise qualified to make the election.

Ruling snapshot

• Question: May the foreign subsidiary file a late election for disregarded entity treatment?
• Outcome: Approved, with 60 days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200307007
Washington, DC 20224
Release Date: 2/14/2003
Index Number: 9100.31-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:2-PLR-129560-02
Date:
October 30, 2002

Legend

X
=

Y
=

Date 1
=

Country
=

State
=

Dear
:

This letter responds to a letter dated May 16, 2002, together with subsequent correspondence, submitted on behalf of X, requesting a ruling that X be granted an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be treated as a disregarded entity for federal tax purposes.

FACTS

According to the information submitted, X was incorporated on Date 1 under the laws of Country. Y, a corporation formed under the laws of State, owns 100 percent of the stock of X. X intended to elect to be treated as a disregarded entity for federal tax purposes effective Date 1. However, X inadvertently failed to timely file the proper election.

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PLR-129560-02

X represents that X is a foreign entity that is not required to be classified as a corporation for U.S. federal income tax purposes, and that Y has limited liability within the meaning of § 301.7701-3(b)(2)(ii).

Law and Analysis

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as an association if all members have limited liability, unless the entity makes an election to be treated otherwise. A foreign eligible entity with a single owner having limited liability may elect to be treated as a disregarded entity pursuant to the rules under § 301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date on which the form is filed.

Under § 301.9100-1(c), 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 including an election whose deadline is prescribed by a regulation published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100-3(a).

Conclusion

Based on the information submitted and representations made, X has established that the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied. Consequently, X is granted an extension of 60 days from the date of this letter to make an election under § 301.7701-3 to be treated as a disregarded entity effective Date 1. X must file Form 8832 within the extension period with the appropriate service center, with a copy of this letter attached.

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PLR-129560-02

Except for the specific ruling above, we express or imply no opinion concerning the federal income tax consequences of the facts of this case under any other provision of the Code. Section 301.9100-1(a) provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election.

This ruling is directed only to the taxpayer on whose behalf it was requested.
According to § 6110(k)(3) of the Internal Revenue Code, this ruling may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures:
Copy of this letter
Copy for 6110 purposes