PLR 200752032: IRS extends deadline for foreign LLC's disregarded entity election

Plain-English summary

A foreign limited liability company was wholly owned through another entity and intended to elect disregarded entity treatment from its formation date. It did not file Form 8832 on time. The IRS found that the requirements for relief under Treasury Regulation § 301.9100-3 were met and gave the company 60 days from the letter to file the election with its original intended effective date. The company was directed to follow the form instructions and attach a copy of the ruling.

Ruling snapshot

• Question: Could the foreign LLC file its entity classification election late and make it effective on its formation date?
• Outcome: Approved: 60 additional days to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1 through -3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200752032
Third Party Communication: None
Release Date: 12/28/2007
Date of Communication: Not Applicable

Person To Contact:
Index Number: 9100.00-00, 9100.31-00,
----------------------, ID No. -------------
7701.00-00
Telephone Number:
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--------------------------------------------------- Refer Reply To:
--------------------------------------------------------- CC:PSI:B03
----------------------------------------------------------- PLR-149939-06
--------------------------------------------------------- Date:
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September 14, 2007
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Legend:

X = ---------------------------------------------------
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A = --------------
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B = ---------------------------------------
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Country = ----------------

D1 = ------------------------

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

This responds to a letter dated October 13, 2006, and subsequent correspondence submitted on behalf of X, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations for X to file an election under § 301.7701-3(c) to be classified as an entity that is disregarded as separate from its owner for federal tax purposes effective D1.

Facts

According to the information submitted, X was formed as a limited liability company under the laws of Country on D1. Through its wholly owned entity B, A owns

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100% of X. X is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8). X intended to elect under § 301.7701-3(c) to be classified as a disregarded entity for federal tax purposes as of D1, but the election was not timely filed with the appropriate service center.

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 a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

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 of § 301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832, Entity Classification Election, and can be effective up to 75 days prior to the date the form is filed or up to 12 months after the date 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 due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or an announcement published in the Internal Revenue Bulletin.

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

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory 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

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Based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an extension of time of 60 days from the date of this letter to file Form 8832 with the appropriate service center to elect to be classified as an entity disregarded as separate from its owner for federal tax purposes effective D1. The election should be made by following the procedures set forth in Form 8832, and a copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) 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 sent to your authorized representative.

Sincerely,

/s/

William P. O'Shea
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes

cc: