PLR 200711004: Foreign entity gets time to file classification election

Plain-English summary

A company incorporated abroad intended to elect treatment as an entity disregarded from its owner for federal tax purposes as of its incorporation date. It missed the Form 8832 filing deadline and requested more time. The IRS concluded that the company met the standards for late regulatory election relief and granted 60 days from the letter date to file Form 8832 for the requested effective date. It expressed no opinion on other tax consequences of the arrangement.

Ruling snapshot

• Question: Could the foreign company file its disregarded entity election after the deadline?
• Outcome: Approved a 60-day extension to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200711004
Third Party Communication: None
Release Date: 3/16/2007
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:B01
PLR-124263-06
Date: November 30, 2006

Legend:

X = ------------------------------------------
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Country = -------------

D = --------------------------

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

This letter responds to the letter dated May 4, 2006, and related correspondence, written on behalf of X, requesting an extension of time under ' 301.9100-1 and ' 301.9100-3 of the Procedure and Administration Regulations to make an entity classification election.

FACTS

The information submitted states that X was incorporated under the laws of Country on D. X intended to file a Form 8832, Entity Classification Election, to be treated as a disregarded entity for federal tax purposes, effective D. However, the election was not timely filed.

LAW AND ANALYSIS

Section 301.7701-3(a) provides that a business entity that is 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. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with a single owner

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can elect to be classified as an association or to be disregarded as an entity separate from its owner. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

Section 301.7701-3(b)(2)(i) provides that, except for certain existing entities described in § 301.7701-3(b)(3), unless a foreign eligible entity elects otherwise, the entity is: (A) a partnership if it has two or more members and at least one member does not have limited liability; (B) an association if all members have limited liability; or (C) disregarded as an entity separate from its owner if it has a single member 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 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 301.9100-1 through 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 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 X has satisfied the requirements of '' 301.9100-1 and 301.9100-3 and, therefore, it is granted an extension of time of sixty (60) days from the date of this letter to file a Form 8832 to elect to be treated as a disregarded entity for federal tax purposes, effective D. A copy of this letter should be attached to the election. A copy is enclosed for that purpose.

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Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue 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,

William P. O’Shea
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)

Copy of this letter
Copy for ' 6110 purposes