Late Form 8832 relief follows foreign reorganization

Plain-English summary

After a corporate reorganization, a foreign eligible entity became wholly owned by another foreign entity whose owners included a member of a U.S. consolidated group. The subsidiary failed to timely file Form 8832 for intended disregarded-entity treatment. The IRS granted 120 days to make the retroactive election, conditioned on the subsidiary and owner filing all required original and amended returns for open years consistently with the relief, including Forms 8858 where required. The ruling did not determine whether the subsidiary was otherwise eligible for the election.

Ruling snapshot

• Question: Should the foreign subsidiary receive an extension to make a retroactive disregarded-entity election after the reorganization?
• Outcome: Approved, subject to consistent-return conditions
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201442024
Release Date: 10/17/2014
Index Numbers: 7701.00-00, 9100.31-00

------------------------ Person To Contact:
--------------------------------- -------------------------------------------------
------------------------------------------------------------ Telephone Number:
-------------------------- --------------------
------------------------------------------------ Refer Reply To:
--------------------------------------------------- CC:PSI:B03 – PLR-142931-13
------------------------------- Date:
March 18, 2014

                                                   LEGEND

Sub = ------------------------

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

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

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

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

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

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

  This letter responds to a letter dated August 20, 2013, and subsequent

correspondence, submitted on behalf of Sub requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations to file an election under
§ 301.7701-3(a) to be classified as a disregarded entity for federal tax purposes.

                                                    FACTS

  The information submitted discloses that Sub was formed under the laws of

Country. After a corporate reorganization, Sub is wholly owned by X, which is equally
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owned by Y and an unrelated foreign third party. Y’s ultimate owner is Z, the common
parent corporation of an affiliated group that files a U.S. consolidated return. Sub failed
to file timely a Form 8832, Entity Classification Election, to be classified as a
disregarded entity for federal tax purposes, effective a.

                                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
that the term “regulatory election” includes an election whose due date is prescribed by
a regulation published in the Federal Register.
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   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, we conclude that the

requirements of §§ 301.9100-1 and 301.9100-3 are satisfied. Consequently, Sub 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. Sub
must file Form 8832 within the extension period with the appropriate service center, with
a copy of this letter attached.

    This ruling is contingent on Sub and its owner filing within 120 days of the date of

this letter all required federal income tax and information returns (including amended
returns) for all open years consistent with the requested relief. These returns must
include, but are not limited to, Form 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 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 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 Sub’s authorized representatives.
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   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: /s/
                                        Holly Porter
                                        Chief, Branch 3
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)

Enclosures: Copy of this letter
Copy for § 6110 purposes