Foreign subsidiary receives relief for a late corporate classification election

Plain-English summary

A foreign entity wholly owned by another association intended to be classified as an association taxable as a corporation for federal tax purposes but did not timely file Form 8832. The IRS accepted the entity's representations that it acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days to file the entity-classification election effective as of the intended date. The relief is conditioned on the owner filing, within the same period, all required returns or amended returns for open years consistent with the election.

Ruling snapshot

• Question: May the foreign entity file a late Form 8832 electing corporate classification effective as of its intended date?
• Outcome: Approved. The entity received 120 days to file Form 8832, subject to consistent return filings by its owner.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201724016
Third Party Communication: None
Release Date: 6/16/2017
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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CC:PSI:01
PLR-131978-16
Date:
March 13, 2017

Legend

X = ---------------------------------------------------------------------------------------------------
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Y = ---------------------------------------------------------------------------------------------------
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State = --------------
Country = -----------------
Date 1 = ------------------------

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

This letter responds to your letter dated October 11, 2016, submitted on behalf of X by X's representative, 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 an association taxable as a corporation for federal tax purposes.

FACTS

According to the information submitted, X is a wholly owned subsidiary of Y, an association formed under the laws of State. X was formed under the laws of Country. X intended to be treated as an association taxable as a corporation for federal tax purposes effective Date 1. However, Form 8832, Entity Classification Election, was not timely filed.

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.

PLR-131978-16
2

LAW AND ANALYSIS

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 at least two members can elect to be classified as either an association taxable as a corporation or a partnership.

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 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 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.

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. Under § 301.9100-3, a request for relief 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.

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 file a Form 8832 with the appropriate service center to elect to be treated as an association taxable as a corporation for federal tax purposes effective Date 1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

This ruling is contingent on the owner of X filing within 120 days of this letter all required returns or amended returns for all open years consistent with the requested relief. These returns may include, but are not limited to, Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. A copy of this letter should be attached to any such returns.

PLR-131978-16
3

Except as specifically set forth above, 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(s) 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)

Laura C. Fields
By: _______
Laura C. Fields
Senior Technician Reviewer, Branch 1
(Passthroughs & Special Industries)

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