PLR 200525006: Parent company receives more time for foreign entity classification election

Plain-English summary

A U.S. parent company formed an entity abroad with two owners to comply with local law. It intended the entity to make a federal tax classification election effective on its formation date, but did not file Form 8832. The IRS found that the parent met the standards for discretionary filing relief in Treas. Reg. § 301.9100-3. It granted 60 days from the ruling letter to file Form 8832 with the originally intended effective date and instructed the parent to attach a copy of the letter. The ruling did not address other tax consequences of the entity's structure.

Ruling snapshot

• Question: May the parent file a late Form 8832 for its foreign entity with the intended effective date?
• Outcome: Approved, with 60 days to file.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200525006
[Third Party Communication:
Release Date: 6/24/2005
Date of Communication: Month DD, YYYY]
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
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PLR-150173-04
Date:
March 16, 2005
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Legend:

X = ---------------
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Y = -------------------------------------
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D = -----------------------

Country = ----------

Z = ---------------------------------
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a = ---------

b = --------

Dear -------------------:

This letter responds to the letter dated September 15, 2004, and related correspondence, written on behalf of X, requesting an extension of time, pursuant to § 301.9100-3 of the Procedure and Administration Regulations, to file a late Form 8832, Entity Classification Election.

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FACTS

The information submitted discloses that X is a domestic parent company of several operating companies throughout the world. Y is a wholly owned domestic subsidiary of X. On D, X formed Z under the laws of Country. To comply with local law, Z has two owners: Y owns a percent, and a local individual owns b percent. X intended for Z to make an entity classification election, effective D, but the election was not filed.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal tax purposes. Section 301.7701-3(b)(2)(i) provides that, except as provided in § 301.7701-3(b)(3), unless the entity elects otherwise, a foreign eligible entity is classified as a partnership if it has two or more members and at least one member does not have limited liability, an association if all members have limited liability, or disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under ' 301.7701-3(b) by filing Form 8832, Entity Classification Election, with the appropriate service center. Under ' 301.7701- 3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified. The date specified on Form 8832 cannot be more than 75 days prior to the date on which the election 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 Code, except 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 Federal Register.

Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. 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

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and in good faith, and that granting relief will not prejudice the interests of the government.
CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 are satisfied. As a result, X is granted an extension of time of 60 days from the date of this letter to make an entity classification election by filing a Form 8832, effective D, with the appropriate service center. A copy of this letter should be attached to the election. A copy of this letter is attached for this purpose.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being mailed to your authorized representative.

Sincerely,

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

Enclosures (2)

Copy of this letter
Copy for ' 6110 purposes