Foreign entity may make a late disregarded-entity election

Plain-English summary

A foreign entity intended to be treated as disregarded from its owner for U.S. federal tax purposes but failed to timely file Form 8832. Its indirect corporate owner filed U.S. tax and information returns consistently with that intended treatment. The IRS concluded that the entity satisfied the standards for discretionary late-election relief. It gave the entity 120 days to file Form 8832 with the intended effective date.

Ruling snapshot

• Question: Could the foreign entity make a late election to be disregarded as separate from its owner?
• Outcome: Approved, with 120 days to file Form 8832.
• 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: 201610001                                           Third Party Communication: None
Release Date: 3/4/2016                                      Date of Communication: Not Applicable
Index Number: 9100.31-00
                                                            Person To Contact:
---------------------------------------------------------   -------------------, ID No. ----------------
------------------------                                    Telephone Number:
---------------------                                       ------- ------------
----------------------------                                Refer Reply To:
                                                            CC:PSI:03
                                                            PLR-111863-15, et al.

                                                            Date:
                                                            September 30, 2015


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

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

Date              =        ----------------------

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

Dear -------------

       This responds to a letter dated April 1, 2015, 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.

                                                       FACTS

        The information submitted states that X was formed under the laws of Country.
X is indirectly owned 100% by Y, the common parent of an affiliated group of
corporations filing a consolidated federal income tax return. X represents that, as of
Date, 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 valid Form 8832,
Entity Classification Election, electing to treat X as a disregarded entity effective Date.
X further represents that Y filed all U.S. tax and information returns consistent with X
being treated as a disregarded entity effective Date.

                                            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
PLR-111863-15, et al.

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 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.

       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 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 (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the
PLR-111863-15, et al.

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 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. A copy of this letter should be attached to the Form 8832.

       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. 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) 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:    _______________
                                                  Holly Porter
                                                  Chief, Branch 3
                                                  Office of Associate Chief Counsel
                                                  (Passthroughs & Special Industries)

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


cc: