PLR 1216003: IRS grants extra time to make a disregarded-entity election

Plain-English summary

A foreign entity intended to elect disregarded-entity treatment for federal tax purposes but inadvertently failed to timely file Form 8832. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 had been satisfied and granted 120 days from the ruling letter date to file the election. The election could be effective as of the specified date, and the letter was to be attached to Form 8832. The relief was conditioned on filing all required returns for open years within the same 120-day period, consistent with the requested treatment.

Ruling snapshot

• Question: May the foreign entity file Form 8832 late and elect disregarded-entity treatment effective as of the specified date?
• Outcome: Approved, subject to the 120-day filing deadline and required return filings
• Key authorities: Treas. Reg. §§ 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

Number: 201216003 Third Party Communication: None
Release Date: 4/20/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 7701.00-00, 9100.31-00 ---------------------------, ID No. -------------
Telephone Number:
---------------------
-------------------- Refer Reply To:
-------------------------- CC:PSI:B01
-------------------------- PLR-110138-11
Date:
December 13, 2011

LEGEND

X = -------------------------------

Country = ---------
D = -------------------------

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

      This responds to a letter dated February 1, 2011 and subsequent

correspondence, submitted on behalf of X, requesting that the Service grant X an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
to file an election under § 301.7701-3(c) to be treated as a disregarded entity for federal
tax purposes.

FACTS

     According to the information submitted, X was formed under the laws of Country

on D. X intended to elect be treated as a disregarded entity for federal tax purposes
effective D. However, X inadvertently failed to timely file Form 8832, Entity
Classification Election, to elect to be treated 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. An eligible entity with at least two
members can elect to be classified as either an association 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.
PLR-110138-11 2

     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 member 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 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.

    Section 301.7701-3(c)(2) provides that such an election must be signed by either

(A) each member of the electing entity who is an owner at the time the election is filed;
or (B) any officer, manager, or member of the electing entity who is authorized (under
local law or the entity’s organization documents) to make the election and who
represents to having such authorization under penalties of perjury.

   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) defines
the term “regulatory election” as an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

    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.

CONCLUSION

   Based solely on the information submitted and the representations made, we

conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X 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 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 Form
8832. A copy is enclosed for that purpose.
PLR-110138-11 3

    This ruling is contingent on the owner of X filing within 120 days of this letter all

required returns for all open years consistent with the requested relief. These returns
may include, but are not limited to, the following forms: (i) Forms 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
8858, Information Return of U.S. Persons With Respect to Disregarded Entities, such
that these forms reflect the consequences of the relief granted in this letter. A copy of
this letter should be attached to any such returns.

   Except as specifically set forth above, 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.

   Pursuant to a power of attorney on file with this office, a copy of this letter is

being sent to X's authorized representative.

                                Sincerely,




                                David R. Haglund
                                David R. Haglund
                                Chief, Branch 1
                                Office of the Associate Chief Counsel
                                (Passthroughs & Special Industries)

Enclosures (2)

   Copy of this letter
   Copy of this letter for section 6110 purposes

cc: