Foreign entities granted extra time to elect corporation status

Plain-English summary

The IRS granted seven foreign entities an extension of time to file Form 8832 entity-classification elections. The entities had failed to timely file valid elections to be classified as corporations for federal tax purposes. Based on the submitted facts and representations, the IRS found that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied. Each entity received 120 days from the letter date to make the election, subject to filing required and affected returns consistent with the relief.

Ruling snapshot

• Question: Could seven foreign eligible entities receive additional time to elect corporation status for federal tax purposes?
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201403013 Third Party Communication: None
Release Date: 1/17/2014 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
---------------- -------------, ID No. ----------------
------------------------------------- Telephone Number:
----------------------------------- --------------------
--------------------------------------- Refer Reply To:
--------------------------------- CC:PSI:B02
PLR-129834-13
Date:
July 26, 2013

Legend

X = -----------------------------------
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S1 = --------------------------------------------------------------
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S2 = ----------------------------------------------
----- ---------------

S3 = ----------------------------------------------------
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S4 = -----------------------------------------------------------
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S5 = --------------------------------------------------
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S6 = -------------------------------------------------------------
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S7 = -------------------------------------------
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Country A = ----------

Country B = ----------

Country C = ----------------

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Country D = --------

Country E = ---------------------

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

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

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

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

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

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

Date 7 = ---------------------

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

This is in response to a letter dated June 28, 2013 submitted by X on behalf of S1, S2,
S3, S4, S5, S6, and S7, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for S1, S2, S3, S4, S5, S6, and S7 to file
entity classification elections.

The information submitted states that S1 and S2 were formed under the laws of Country
A on Date 1 and Date 2, respectively. The information further states that S3 and S4
were formed under the laws of Country B on Date 3; S5 was formed under the laws of
Country C on Date 4; S6 was formed under the laws of Country D on Date 5; and S7
was formed under the laws of Country E on Date 6.

X represents that S1, S2, S3, S4, S5, S6, and S7 are foreign entities eligible to make an
entity classification election for federal tax purposes, effective Date 7. However, S1, S2,
S3, S4, S5, S6, and S7 each failed to timely file a valid Form 8832, Entity Classification
Election, to elect their respective intended entity classification.

Section 301.7701-3(a) of the Income Tax Regulations provides that an eligible entity
with at least two members may elect to be classified as either an association (and thus
a corporation under § 301.7701-2(b)(2)) or as 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-129834-13 3

Section 301.7701-3(a) further provides that so long as a business entity is not classified
as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity),
it may elect its classification for federal tax purposes.

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 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) provides that an entity classification election must be filed on
Form 8832 and can be effective up to seventy-five (75) days prior to the date the form is
filed or up to twelve (12) months after the date on which the form is filed.

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.

Based solely on the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, S1, S2, S3, S4, S5, S6,
and S7 are granted an extension of 120 days from the date of this letter to elect to be
classified as a corporation for federal tax purposes effective Date 7. The elections
should be made by filing Form 8832 with the appropriate service center. A copy of this
letter should be attached to each election. Seven copies are enclosed for that purpose.

PLR-129834-13 4

This ruling is contingent on the owner of S1, S2, S3, S4, S5, S6, and S7 filing within 120
days of this letter all required returns, affected returns, and amended income tax returns
consistent with the requested relief in this letter. To the extent appropriate these returns
must include, but are not limited to Form 5471, Information Return of U.S. Persons With
Respect to Certain Foreign Corporations, such that these forms and returns reflect the
consequences of the relief granted in this letter. A copy of this letter should be attached to
any such returns

Except as expressly provided herein, 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)
of the Internal Revenue Code 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 will
be sent to X's authorized representatives.

                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)




                                By:      ________________________________
                                         Melissa C. Liquerman
                                         Chief, Branch 2
                                         Office of Associate Chief Counsel
                                         (Passthroughs & Special Industries)

Enclosure (8)
Seven copies of this letter
Copy for § 6110 purposes