PLR 201213007: Foreign entity gets extra time to elect disregarded-entity treatment

Plain-English summary

The IRS granted a foreign eligible entity 120 days to file Form 8832 electing to be treated as a disregarded entity for federal tax purposes. The entity was formed in a foreign country and was eligible for that classification, but the election was not filed on time. The IRS concluded that the entity satisfied the standards for relief under the regulatory-election rules and made the election effective on the specified date. The ruling expressed no opinion on the application of section 1503(d) or its regulations.

Ruling snapshot

• Question: Could the foreign entity make a late Form 8832 election to be treated as a disregarded entity?
• Outcome: Approved, a 120-day extension was granted.
• Key authorities: IRC § 7701; Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 1503(d)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201213007
Third Party Communication: None
Release Date: 3/30/2012
Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
Person To Contact:
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----------------------------------------- Refer Reply To:
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CC:PSI:B01
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PLR-126839-11
Date:
November 22, 2011

Legend:

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

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

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

This responds to the letter dated June 23, 2011, and related correspondence, submitted on behalf of X, requesting an extension of time under ' 301.9100-1 and ' 301.9100-3 of the Procedure and Administration Regulations to file an entity classification election.

FACTS

The information submitted states that X was formed under the laws of Country on Date. X represents X was a foreign entity eligible to elect to be classified as a disregarded entity for federal tax purposes, effective D. The election, however, was not timely filed.

LAW AND ANALYSIS
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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, Entity Classification Election, with the appropriate campus. 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 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.

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. § 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. § 301.9100-3(a).

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 120 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
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copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as specifically ruled upon above, no opinion is expressed or implied concerning the federal tax consequences of facts described under any other provision of the Internal Revenue Code. Specifically, no opinion is expressed regarding the application of § 1503(d) and the regulations thereunder to the transactions described in this ruling.

This ruling is directed only to the taxpayer who requested 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 ruling will be sent to your authorized representative.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

Faith P. Colson
By: Faith P. Colson
Senior Counsel, Branch 1
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)

Copy of this letter
Copy for ' 6110 purposes