Late disregarded-entity election receives a 120-day extension

Plain-English summary

A foreign eligible entity failed to file Form 8832 on time to be treated as a disregarded entity from its intended effective date. It represented that it had acted reasonably and in good faith and that relief would not prejudice the government's interests. The IRS found that the requirements of Treasury Regulation section 301.9100-3 were met and granted 120 days from the ruling date to file the election. The relief was conditioned on the entity's owner and former owners filing all required returns for open years within the earlier of 120 days or the applicable limitations-period closing date. Those filings included an administrative adjustment request and amended partner returns for the specified year.

Ruling snapshot

• Question: Could a foreign eligible entity receive additional time to elect disregarded-entity status under Treasury Regulation section 301.7701-3(c)?
• Outcome: approved, with 120 days to file Form 8832 and subject to specified return-filing conditions
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 6501(a)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201649011                                              Third Party Communication: None
Release Date: 12/2/2016                                        Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
                                                               Person To Contact:
----------------------------------------                       ----------------------------,
-----------------                                              ID No. ------------------
---------------------                                          Telephone Number:
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----------------                                               Refer Reply To:
 -----------------------------                                 CC:PSI:B01
                                                               PLR-116464-16
                                                               Date:
                                                               August 09, 2016




LEGEND

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

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

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

D1                =        -------------------

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

Year              =        ----------

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

       This responds to a letter dated May 19, 2016, 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 organized under the laws of
Country on D1. X represents that it is a foreign entity eligible to elect to be classified as
a disregarded entity. X failed to timely file Form 8832, Entity Classification Election, to
be treated as a disregarded entity for federal tax purposes effective D2.

PLR-116464-16                                  2

       X represents that it acted reasonably and in good faith. X also represents that
granting the relief requested will not prejudice the interests of the government.

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. An eligible entity with at least two
members can elect to be classified as either an association 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) 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 member 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 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 making 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 been satisfied. As a result, X is granted an
extension of time of 120 days from the date of this letter to make an election to be
treated as a disregarded entity for federal tax purposes effective D2. X should make the

PLR-116464-16                                  3

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 the owner and former owners of X filing within the
sooner of 120 days following the date of this letter or the date any year will close under
§ 6501(a), all required returns, including amended returns, for all open years consistent
with the requested relief. Specifically, Y must file an Administrative Adjustment Request
for Year and each of its direct and indirect partners must file amended returns for Year.
These returns may include, but are not limited to, the following forms: (i) Forms 5471,
Information Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii)
Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, and
(iii) Forms 8858, Information Return of U.S. Persons With Respect to 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 as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code.

      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 the 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 & Special Industries)




                                      By: Laura C. Fields
                                          Laura C. Fields
                                          Senior Technician Reviewer, Branch 1
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)

Enclosures (2)

       Copy of this letter
       Copy of this letter for section 6110 purposes