PLR 1236001: IRS grants extra time for a foreign entity classification election

Plain-English summary

The IRS granted a foreign eligible entity 120 additional days to file Form 8832 and elect to be treated as a disregarded entity for federal tax purposes. The entity had inadvertently missed the filing deadline, and the IRS found that it met the standards for reasonable cause and good faith without prejudice to the government. The relief required the owners to file all required and amended returns consistent with the election within the same 120-day period. The ruling did not determine whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: Can the foreign entity receive extra time to file Form 8832 and elect disregarded-entity treatment?
• Outcome: Approved, subject to the stated filing conditions.
• 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: 201236001 Third Party Communication: None
Release Date: 9/7/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.31-00 --------------, ID No. -----------------
Telephone Number:
-------------------
--------------------------------------- Refer Reply To:
------------------------------- CC:PSI:03
---------------- PLR-100411-12
------------------------ Date:
---------------------- June 07, 2012

                                            LEGEND

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

Country = ----------------------

Date = ---------------------------

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

   This letter responds to a letter dated December 22, 2011, and subsequent

correspondence, submitted on behalf of Company requesting 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

      Company was formed under the laws of Country on Date. Company represents

that it is a foreign entity eligible to elect to be treated as a disregarded entity for federal
tax purposes. However, Company inadvertently failed to timely file a Form 8832, Entity
Classification Election, electing to treat Company as a disregarded entity effective Date.

                                       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 a single owner can elect to be classified as an
association or to be disregarded as an entity separate from its owner.
PLR-100411-12 2

     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 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 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.

   Section 301.9100-2 provides automatic extensions of time for making certain

elections. Section 301.9100-3 provides extensions of time for making 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 solely on the information submitted and the representations made, we

conclude that Company has satisfied the requirements of §§ 301.9100-1 and 301.9100-

3. Accordingly, Company is granted an extension of time of one hundred twenty (120)
   days from the date of this letter to file a Form 8832 with the appropriate service center
   PLR-100411-12 3

to elect to be treated as a disregarded entity effective Date. A copy of this letter should
be attached to the Form 8832.

    This ruling is contingent on the owners of Company filing within 120 days of this

letter all required returns and amended income tax returns 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
Foreign 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 for the specific ruling above, we express or imply no opinion concerning

the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. 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.

   The ruling contained in this letter is based upon information and representations

submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

                                   Sincerely,

                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)

                           By:
                                   Stacy L. Short
                                   Senior Technician Reviewer, Branch 3
                                   Office of Associate Chief Counsel
                                   (Passthroughs & Special Industries)

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