Foreign entity received late disregarded-entity election relief

Plain-English summary

A foreign entity with one owner intended to be treated as a disregarded entity from its formation date but did not timely file Form 8832. It represented that the omission was inadvertent, that it acted reasonably and in good faith, that the government would not be prejudiced, and that no hindsight was involved. The IRS found the Section 301.9100-3 standards satisfied and granted 120 days to file the entity-classification election with the intended effective date. Relief was conditioned on the owners filing all required returns for open years consistently with that treatment within the same 120-day period. The letter specifically notes that those filings could include Forms 5471, 8865, and 8858.

Ruling snapshot

• Question: Could the foreign eligible entity make a late election to be treated as a disregarded entity from its formation date?
• Outcome: Approved, with a 120-day filing period and consistent-return condition.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201815015
Third Party Communication: None
Release Date: 4/13/2018
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-135096-17 Date:
January 05, 2018

LEGEND

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

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

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

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

This is in response to a letter dated November 8, 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 D1 under the laws of Country. X intended to be treated as a disregarded entity for federal tax purposes effective D1. However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to be treated as a disregarded entity for federal tax purposes.

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 represents that all of its tax returns will be filed consistently with the requested relief. X further represents that no hindsight is involved in seeking the relief requested.

PLR-135096-17
2

LAW AND ANALYSIS

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 owner 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 that the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory 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 D1. 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,

PLR-135096-17
3

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.

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,

Holly Porter
Associate Chief Counsel
(Passthroughs & Special Industries)

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

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

cc: