PLR 201119012: Foreign entities granted time to elect disregarded-entity status

Plain-English summary

Eleven foreign entities asked for more time to file Form 8832 elections to be treated as disregarded entities for federal tax purposes. The entities were eligible to make the elections but had not filed them on time. The IRS granted each entity 120 days from the ruling date to file Form 8832 and make the requested election effective on the specified date. The entities had to attach a copy of the ruling to each form.

Ruling snapshot

• Question: May the foreign entities make late elections to be treated as disregarded entities?
• Outcome: Approved, with a 120-day extension for each entity.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Third Party Communication: None
Number: 201119012
Date of Communication: Not Applicable
Release Date: 5/13/2011
Person To Contact:
Index Number: 7701.02-00, 9100.00-00,
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9100.31-00
Telephone Number:
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Refer Reply To:

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CC:PSI:B02
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PLR-134822-10
Date: January 21, 2011
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Country 1 = ------------------
Country 2 = ------------
Country 3 = ----------
Country 4 = ---------------------
Country 5 = ------------
Country 6 = ---------------
Country 7 = -------
Country 8 = ------
Country 9 = ----------------
Date 1 = -------------------
Date 2 = ---------------------
Date 3 = -----------------------
Date 4 = -----------------------
Date 5 = --------------------------
Date 6 = --------------------------
Date 7 = -------------------------
Date 8 = -------------------
Date 9 = --------------------------

Dear --------------

This responds to a letter dated August 24, 2010, submitted on behalf of X1, X2, X3, X4, X5, X6, X7, X8, X9, X10 and X11, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X1, X2, X3, X4, X5, X6, X7, X8, X9, X10 and X11 to file entity classification elections to be treated as disregarded entities.

The information submitted states that X1 was formed under the laws of Country 1 on Date1; X2 was formed under the laws of Country2 on Date2; X3, X4 and X5 were formed under the laws of Country 3 on Date 3; X6 was formed under the laws of Country 4 on Date 4; X7 was formed under the laws of Country 5 on Date 5; X8 was formed under the laws of Country 6 on Date 6; X9 was formed under the laws of Country 7 on Date 7; X10 was formed under the laws of Country 8 on Date 8; and that X11 was formed under the laws of Country 9 on Date 9. X1, X2, X3, X4, X5, X6, X7, X8, X9, X10 and X11 represent that they are foreign entities eligible to elect to be treated as disregarded entities for federal tax purposes. However, X1, X2, X3, X4, X5, X6, X7, X8, X9, X10 and X11 did not timely file a Form 8832, Entity Classification Election, electing to be treated as disregarded entities.

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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. 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.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 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) 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 the election. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result, X1 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 1. In addition, X2 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax

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purposes, effective Date 2. X3, X4 and X5 are granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as disregarded entities for federal tax purposes, effective Date 3. X6 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 4. X7 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 5. X8 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 6. X9 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 7. X10 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 8. X11 is granted an extension of time of 120 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as a disregarded entity for federal tax purposes, effective Date 9. A copy of this letter should be attached to each Form 8832.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue Code and the regulations thereunder.

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 sent to your authorized representative.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: ________
Bradford R. Poston, Senior Counsel
Branch 2
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2):
Copy of this letter
Copy for § 6110 purposes