Foreign entity receives more time for disregarded-entity election

Plain-English summary

A wholly owned foreign eligible entity intended to be treated as disregarded from its owner but failed to timely file a valid Form 8832. The IRS concluded that the entity satisfied the requirements for regulatory election relief. It granted 120 days to file Form 8832 with the intended effective date. The entity also had to file all relevant tax and information returns consistently with the relief within 120 days, or the ruling would become void.

Ruling snapshot

• Question: Could the foreign eligible entity make a late election for disregarded-entity treatment?
• Outcome: Approved, with 120 days to file Form 8832 and all consistent returns.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201638006                                                 Third Party Communication: None
Release Date: 9/16/2016                                           Date of Communication: Not Applicable
Index Number: 9100.31-00
                                                                  Person To Contact:
--------------------------------------------------                -------------------, ID No. -----------------
------------------------------------------------------------      Telephone Number:
-------                                                           ------- -------------
-----------------------------------------------                   Refer Reply To:
---------------------------------------------                     CC:PSI:03
-----------------                                                 PLR-104951-16

                                                                  Date:
                                                                  June 13, 2016




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

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

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

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

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

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

        This responds to a letter dated January 25, 2016, 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
and is wholly-owned by Y. Y is wholly-owned by Z. 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.

       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
PLR-104951-16

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
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. A copy of this letter should be attached to the Form 8832. A copy is
enclosed for that purpose.
PLR-104951-16

       This ruling is contingent on X having filed all relevant tax and information returns
consistent with the granted relief 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.

      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 representatives.

                                                  Sincerely,

                                                  Associate Chief Counsel
                                                  (Passthroughs and Special Industries)



                                           By:    _______________
                                                  Richard T. Probst
                                                  Senior Technician Reviewer, Branch 3
                                                  Office of Associate Chief Counsel
                                                  (Passthroughs and Special Industries)

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

cc: