PLR 1224020: IRS grants more time to elect disregarded-entity status

Plain-English summary

The IRS granted a foreign limited liability company 120 days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity missed the filing deadline for its intended effective date. The IRS found that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied and required the form to be filed with a copy of the ruling. The extension did not determine whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: Could the foreign entity receive more time to file Form 8832 and elect disregarded-entity classification?
• Outcome: Approved, with 120 days from the ruling date to file the election.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201224020
Release Date: 6/15/2012
Index Numbers: 7701.00-00, 9100.31-00 Person To Contact:
----------------------, ID No. -------------
Telephone Number:

                                                              ---------------------

------------------------------------------------ Refer Reply To:
----------------------------- CC:PSI:B03 – PLR-142243-11
--------------------------- Date:
---------------------------- January 10, 2012

                                                    LEGEND

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

Y = ----------------------------------------------------------

Z = ----------------------------------------------------

Country 1 = ---------

Country 2 = -----------------

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

b = ----------------------

c = --------------------------

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

     We received a letter dated October 5, 2011, and subsequent correspondence,

submitted on behalf of X requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for the entity 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.
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                                       FACTS

    The information submitted discloses that X was formed on a as a limited liability

company under the laws of Country 1, and Y and Z were formed on b and c
respectively as limited liability companies under the laws of Country 2. X, Y, and Z each
failed to file timely a Form 8832, Entity Classification Election, to be classified as a
disregarded entity for federal tax purposes, effective a, b, and c respectively.

                                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
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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
elections. Section 301.9100-3 provides extensions of time for regulatory 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, X has established that the

requirements of §§ 301.9100-1 and 301.9100-3 are satisfied. Consequently, X is
granted an extension of time of one hundred twenty (120) days from the date of this
letter to elect under § 301.7701-3 to be treated as a disregarded entity, effective a. X
must file Form 8832 within the extension period with the appropriate service center, with
a copy of this letter attached.

   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 taxpayers requesting it. According to

§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.
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    Under a power of attorney on file with this office, we are sending a copy of this

letter to X’s authorized representative.

                                          Sincerely,

                                          Associate Chief Counsel
                                          (Passthroughs & Special Industries)


                                      By: /s/
                                         James A. Quinn
                                         Senior Counsel, Branch 3
                                         Office of the Associate Chief Counsel
                                         (Passthroughs & Special Industries)

Enclosures: Copy of this letter
Copy for § 6110 purposes