PLR 1338032: IRS grants five foreign companies more time to elect corporate treatment

Plain-English summary

Five foreign companies were eligible to elect to be treated as associations taxable as corporations for federal tax purposes but failed to timely file Form 8832. They asked for relief under Treas. Reg. § 301.9100-3, and the IRS found that the companies acted reasonably and in good faith and that relief would not prejudice the government. The IRS granted each company 120 days from the ruling date to file Form 8832 with the requested effective date. The relief was conditioned on filing required returns and amended returns for open years, including Forms 5471, 8865, and 8858 when applicable.

Ruling snapshot

• Question: May five foreign eligible entities file late Forms 8832 to elect association treatment for federal tax purposes?
• Outcome: Approved, 120-day extensions granted.
• Key authorities: 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: 201338032 Third Party Communication: None
Release Date: 9/20/2013 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00 Person To Contact:
---------------------, ID No. ------------------
-------------------------- Telephone Number:
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------------------------------- Refer Reply To:
---------------------------------- CC:PSI:B01
------------------------------- PLR-151881-12
-------------------------------------------------- PLR-151883-12
----------------------------------------------------------- PLR-151884-12
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PLR-151886-12
Date:
April 25, 2013

LEGEND

X1 = ---------------------------

X2 = -------------------------------------------

X3 = --------------------------------

X4 = -----------------------------------

X5 = ---------------------------

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

Date 1 = ---------------------------

Date 2 = -------------------

Date 3 = --------------------------

PLR-151881-12 2

Date 4 = ------------------------

Date 5 = -----------------------

Date 6 = ----------------------------

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

This responds to a letter dated December 4, 2012, and subsequent correspondence,
submitted on behalf of X1, X2, X3, X4, and X5 (the “Companies”) requesting that the
Service grant each of the Companies 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 an association taxable as a corporation for federal tax purposes effective
on Date 1.

FACTS

According to the information submitted, X1, X2, X3, X4, and X5 were formed under the
laws of Country on Date 2, Date 3, Date 4, Date 5, and Date 6, respectively. The
Companies represent that they are foreign entities eligible to elect to be treated as
associations taxable as corporations for federal tax purposes. The Companies each
intended to be treated as an association taxable as a corporation for federal tax
purposes effective Date 1. However, due to inadvertence, each of the Companies failed
to timely file Form 8832, Entity Classification Election, to elect to be treated as an
association taxable as a corporation 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.

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.

PLR-151881-12 3

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, the Companies
are each 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 an association
taxable as a corporation for federal tax purposes effective Date 1. A copy of this letter
should be attached to the Form 8832 filed for each of the Companies.

This ruling is contingent on the owners of each of the Companies filing within 120 days
of this letter all required returns and amended 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.

PLR-151881-12 4

Except as specifically set forth 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. Specifically, we express or imply no opinion regarding the
application of section 1503(d) and the regulations thereunder to the transactions
described in this ruling. 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. 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, we are sending a copy of this
letter to each of the Companies’ authorized representatives.

                                  Sincerely,

                                  Associate Chief Counsel (Passthroughs &
                                  Special Industries)


                                  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: