Foreign entity receives 120 days for late disregarded-entity election

Plain-English summary

A single-owner foreign eligible entity intended to be treated as disregarded from its formation date but failed to file Form 8832 on time. The IRS concluded that the entity satisfied the standards for late regulatory-election relief. It granted 120 days to file Form 8832 electing disregarded-entity status retroactive to the formation date. The relief is contingent on the entity filing all relevant tax and information returns consistently with that status, including Forms 8858, within the same 120-day period. Failure to meet that condition makes the ruling null and void.

Ruling snapshot

• Question: May the foreign eligible entity make a late election to be disregarded from its formation date?
• Outcome: Approved. The entity received 120 days, subject to consistent return filing.
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 201438002
Third Party Communication: None
Release Date: 9/19/2014
Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
------------------------------------------------------- -------------------, ID No. ----------------
---------------------------------------------------------- Telephone Number:
-----------------------------

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Refer Reply To:
CC:PSI:02
PLR-101164-14
Date:
April 11, 2014

X = ----------------------------------------------------------
-------------------------------------------------
Country = -----------
Date 1 = ------------------

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

This responds to a letter dated December 16, 2013, 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 make an entity classification election to be classified as a disregarded entity for federal tax purposes.

The information submitted states that X was formed under the laws of Country on Date 1. X represents that, as of Date 1, X was a foreign entity eligible to elect to be treated as a disregarded entity for federal tax purposes. However, X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to treat X as a disregarded entity effective Date 1.

Section 301.7701-3(a) provides that a business entity with at least two members can elect to be classified either as 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(a) further provides that so long as a business entity is not classified as a corporation under § 301-7701-2(b)(1) or (3)-(8) (an “eligible entity”) it may elect its classification for federal tax purposes.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity for federal income tax purposes. Generally, a foreign eligible entity is
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treated as an association taxable as a corporation if all members have limited liability, unless the entity makes an election to be treated otherwise.

Section 301.7701-3(c) provides that to elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated service center and 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 twelve months after the date on which the election 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.

Section 301.9100-3(a) provides that a request for relief under § 301.9100-3 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 information submitted and 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 and elect to be treated as a disregarded entity effective Date 1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

This ruling is contingent on X having filed all relevant tax and information returns consistent with the granted relief, including Forms 8858, with the appropriate service center, within 120 days of the date of this ruling. A copy of this letter should be attached to any such late or amended returns. If X fails to comply with this requirement, this letter ruling will be null and void.

Except as expressly provided herein, 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.
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This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, a copy of this letter is being sent to X’s authorized representative.

Sincerely,

Associate Chief Counsel
(Passthroughs and Special Industries)

By: ___
Bradford R. Poston
Senior Counsel, Branch 2
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2):
Copy of this letter
Copy for § 6110 purposes

cc: