Foreign entity receives extra time to elect disregarded status

Plain-English summary

A foreign entity wholly owned by one owner failed to file Form 8832 on time to elect disregarded-entity status. The IRS concluded that the entity satisfied the standards for discretionary relief under Treas. Reg. § 301.9100-3. It granted 120 days to file Form 8832 for the requested effective date. The relief also required all relevant returns to be filed consistently within the same period, with copies of the ruling attached. Failure to meet those conditions would make the ruling void.

Ruling snapshot

• Question: May the foreign entity file a late election to be disregarded as separate from its owner?
• Outcome: Approved with conditions. The entity received 120 days to file Form 8832 and all consistent returns.
• Key authorities: Treas. Reg. §§ 301.7701-2(b), 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: 201722018
Third Party Communication: None
Release Date: 6/2/2017
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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PLR-135986-16
Date: March 1, 2017

LEGEND

X = -----------------------------------------------------
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Y = -----------------------------------

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

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

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

This letter responds to a letter dated November 14, 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.

The information submitted states that X was organized under the laws of Country on Date. X has been and is currently wholly-owned by Y. X represents that it is a foreign entity eligible to elect to be classified as a effective Date. However, X failed to timely file Form 8832, Entity Classification Election, to be treated as a disregarded entity for federal tax purposes 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 to be classified as an association or to be disregarded as an entity separate from its owner.
PLR-135986-16
2

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.
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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.

Except as specifically set forth above, we express or imply no opinion concerning the federal tax consequences of the facts discussed above under any other provision of the Code and the regulations thereunder. 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 who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter ruling will be sent to your authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

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

Enclosures: Copy of this letter
Copy of this letter for § 6110 purposes