Late disregarded-entity election allowed from a later date

Plain-English summary

A foreign eligible entity with one owner was treated by default as an association taxable as a corporation. It inadvertently failed to file Form 8832 on time and asked to elect disregarded-entity status from a date before a later redacted date. The IRS concluded that the entity did not satisfy the requirements for discretionary filing relief for any earlier effective date. It did grant 45 days to make the election effective from the later date, subject to filing the form and all required returns consistently with the relief. The ruling therefore grants only part of the requested retroactive period.

Ruling snapshot

• Question: May the foreign single-owner entity make a late election to be disregarded from a date before the later redacted date?
• Outcome: Mixed, relief was denied for earlier dates but granted from the later date
• Key authorities: Treas. Reg. §§ 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: 201446014
Third Party Communication: None
Release Date: 11/14/2014
Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:PSI:1
PLR-127117-13
Date:
July 18, 2014

LEGEND

X = -----------------------------
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D1 = ---------------------

D2 = ---------------------

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

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

This is in response to a letter dated June 17, 2013, and subsequent correspondence, submitted on behalf of X, 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

According to the information submitted, X was formed on D1 under the laws of Country. X has one owner. X’s default status was as an association taxable as a corporation for federal tax purposes. Due to inadvertence, X failed to timely file Form 8832, Entity Classification Election, to be treated a disregarded entity for federal tax purposes. X requested an extension of time to make an entity classification election to be treated as a disregarded entity effective for a date prior to D2.

LAW AND ANALYSIS
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Section 301.7701-3(a) provides 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 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 owner 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.

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, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term “regulatory election” as including an election whose due date is prescribed by a regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have not been satisfied for any effective date prior to D2. As a result, X is not granted an extension of time to make an election to be treated as a disregarded entity for federal tax purposes for an effective date prior to D2.

However, based solely on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied for an effective date of D2. As a result, X is granted an extension of time 45 days from the date of this letter
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to make an election to be treated as a disregarded entity for federal tax purposes effective D2. X must make the election by filing a properly executed Form 8832 with the appropriate service center. A copy of this letter should be attached to the form.

This ruling is contingent on X and the owner of X filing all required Federal income tax and informational returns (including amended returns) consistent with the requested relief granted in this letter. A copy of this letter should be attached to any such return.

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) 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 is being sent to your authorized representative.

Sincerely,

David R. Haglund
By: David R. Haglund
Branch Chief, Branch 1
Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: