Foreign entity receives late disregarded-entity election relief

Plain-English summary

A foreign eligible entity intended to be disregarded as separate from its owner beginning on its formation date, but it inadvertently missed the Form 8832 deadline. The entity represented that it acted reasonably and in good faith, that the government would not be prejudiced, and that no hindsight was involved. The IRS granted 120 days to file the election with the intended effective date. The owners also had to file all required open-year returns consistently with the relief, including any applicable Forms 5471, 8865, or 8858.

Ruling snapshot

• Question: May the foreign eligible entity file a late election to be treated as a disregarded entity?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201742018                                              Third Party Communication: None
Release Date: 10/20/2017                                       Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
                                                               Person To Contact:
------------------------------------------------------------   ----------------, ID No. ------------------
-----------------------------------------------------          Telephone Number:
------------------------------                                 ----------------------
------------------------------------------------------------   Refer Reply To:
--------                                                       CC:PSI:B01
------------------------------------------------------------   PLR-116753-17
--------------------------                                     Date:
                                                               July 12, 2017




LEGEND

X                 =         -----------------------------------------------------------------------------------------
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--
                           -----------------
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D                 =        -------------------------

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



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

This is in response to a letter dated May 19, 2017, 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 formed on D under the laws of Country.
X intended to be treated as a disregarded entity for federal tax purposes effective D.
However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to
be treated as a disregarded entity for federal tax purposes.
PLR-116753-17                                  2

X represents that it acted reasonably and in good faith, and that the interests of the
government will not be prejudiced by granting relief. X further represents that no
hindsight is involved in seeking the relief requested.

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 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)(1)(i) provides that an eligible entity may elect to be classified
other than as provided under § 301.7701-3(b)(2) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and no more than 12 months after the date the
election 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) provides
that the term “regulatory election" means 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 that 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 the regulatory elections that
do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief
will be granted when a taxpayer provides the evidence to the satisfaction of the
PLR-116753-17                                3

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 make an election to be
treated as a disregarded entity for federal tax purposes effective D. X should make the
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 owners of X filing within 120 days of this letter all
required returns for all open years consistent with the requested relief. 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 ruling should be attached to any such returns.

Except as expressly provided herein, 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 requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.
PLR-116753-17                                  4

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

                                       Sincerely,

                                       John P. Moriarty
                                       Acting Associate Chief Counsel
                                       (Passthroughs & Special Industries)

                                           David R. Haglund

                                  By: _____________________________
                                      David R. Haglund
                                      Branch Chielf, Branch 1
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)


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