PLR 1037022: IRS granted more time for a disregarded-entity election

Plain-English summary

The IRS granted a 120-day extension for a foreign single-member limited liability company to file Form 8832 and elect disregarded-entity treatment for federal tax purposes. The company’s parent had always intended that classification, but the form was not timely filed. The IRS found that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied. The ruling requires the form to be filed within the extension period and conditions the relief on the parent filing consistent returns and amended returns, including Form 8858 where appropriate.

Ruling snapshot

• Question: Could the company obtain an extension to make a disregarded-entity classification election?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-2, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201037022
Release Date: 9/17/2010
Index Numbers: 7701.00-00, 9100.31-00

------------------------------------------------------------ Person To Contact:
------------ ----------------------, ID No. -------------
----------------------------------------- Telephone Number:
--------------------------------- ---------------------
----------------------------------------------- Refer Reply To:
-------------------------------- CC:PSI:B03 – PLR-155068-09
Date: June 17, 2010

                                                LEGEND

Company = --------------------------------------------------------------------------------

Parent = ---------------------------------------

Country = --------

a = -----------------------

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

    We received a letter dated December 17, 2009, submitted on behalf of Company

requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for Company to file an election under § 301.7701-3(a) to be
classified as a disregarded entity for federal tax purposes. This letter responds to that
request.

                                                 FACTS

     The information submitted discloses that Company was formed on a, as a limited

liability company under the laws of Country. Company represents that its sole member,
Parent, always intended that Company be a disregarded entity. Company, however,
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failed to timely file Form 8832, Entity Classification Election, to be classified as a
disregarded entity for federal tax purposes.

                                LAW AND ANALYSIS

    Section 301.7701-3(a) provides, in part, 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 as provided in
§ 301.7701-3. 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 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)(i) provides that, except as provided in § 301.7701-

3(b)(3), unless the entity elects otherwise, a foreign eligible 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 owner that does not have limited liability.
Section 301.7701-3(b)(2)(ii) provides, in part, that for purposes of § 301.7701-3(b)(2)(i),
a member of a foreign eligible entity has limited liability if the member has no personal
liability for the debts of or claims against the entity by reason of being a member.

   Section 301.7701-3(c)(1)(i) provides, in part, that, except as provided in

§ 301.7701-3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as
provided under § 301.7701-3(b), or to change its classification, by filing Form 8832,
Entity Classification Election, with the service center designated on Form 8832.

     Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under

§ 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on Form 8832
or on the date filed if no such date is specified on the election form. The effective date
specified on Form 8832 can not be more than 75 days prior to the date on which the
election is filed and can not be more than 12 months after 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 Internal
Revenue Code (Code) except subtitles E, G, H, and I. Section 301.9100-1(b) provides
that the term “regulatory election” includes an election whose due date 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
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elections. Section 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2.

   Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be

granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.

                                  CONCLUSION

    Based on the facts and representations submitted, Company has established

that the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied. Consequently,
Company is granted an extension of time of 120 days from the date of this letter to elect
under § 301.7701-3 to be treated as a disregarded entity, effective a. Company must
file Form 8832 within the extension period with the appropriate service center, with a
copy of this letter attached. This ruling is contingent on Parent filing within 120 days of
this letter all required returns and amended income tax returns consistent with the
requested relief being effective a. To the extent appropriate these returns must include,
but are not limited to, Forms 8858, Information Return of U.S. Persons With Respect To
Foreign Disregarded Entities, such that these forms reflect the consequences of the
relief granted in this letter.

   Except for the specific ruling above, we express or imply no opinion concerning

the federal tax consequences of the facts of this case under any other provision of the
Code. In addition, § 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 requesting it. According to

§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.

    Under a power of attorney on file with this office, we are sending a copy of this

letter to Company’s authorized representative.

                                          Sincerely,

                                          Associate Chief Counsel
                                          (Passthroughs & Special Industries)



                                      By: _/s/_________________________

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                                   Mary Beth Carchia, Senior Technician
                                   Reviewer, Branch 3
                                   Office of Associate Chief Counsel
                                   (Passthroughs & Special Industries)

Enclosures: 2 copies of this letter
Copy for § 6110 purposes