Foreign entity received late classification election relief

Plain-English summary

A foreign eligible entity and its owner intended the entity to be treated as disregarded for federal tax purposes from its formation date, but Form 8832 was not filed on time. The IRS found that the standards for discretionary election relief were satisfied. It granted 120 days from the ruling date to file the election. Relief was conditioned on the entity and owner filing all required original or amended federal tax and information returns for open years within that period, including any required Form 8858.

Ruling snapshot

• Question: Could the foreign eligible entity receive extra time to elect disregarded-entity status?
• Outcome: Approved, subject to filing the election and consistent returns within 120 days.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201820005
Third Party Communication: None
Release Date: 5/18/2018
Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
Person To Contact:
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-----------------------, ID No. --------------
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Telephone Number:
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Refer Reply To:
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CC:PSI:B01
PLR-124176-17
Date:
February 02, 2018

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

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

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

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

Dear --------------

This responds to a letter dated August 4, 2017, and subsequent information, submitted on behalf of X by its authorized representative, requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations to file an election under
§ 301.7701-3 to be classified as a disregarded entity for federal tax purposes.

Facts

The information submitted discloses that X was formed on Date under the laws of Country. X’s owner, Y, represents that X is an eligible entity intended to be classified as a disregarded entity for federal tax purposes effective Date. However, X failed to timely file a Form 8832, Entity Classification Election, to be classified as a disregarded entity.

Law and Analysis

Section 301.7701-2 provides that a business entity is any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under § 301.7701-3) that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Code. A business entity with two or more members is classified for federal tax purposes as either

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a corporation or a partnership.

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 as provided in § 301.7701-3. 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) by filing Form 8832, Entity Classification Election, with the appropriate campus. 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 the Form 8832 cannot be more than 75 days prior to the date on which the election is filed.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3, 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 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.

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.

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Conclusion

Based solely on facts submitted and the representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Consequently, 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 a disregarded entity for U.S. income tax purposes effective Date. A copy of this letter should be attached to the Form 8832.

This ruling is contingent upon X and its owner filing within 120 days of this letter all required federal income tax and information returns (including amended returns) for all open years consistent with the requested relief. These returns must include, but are not limited to, Form 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 for the specific ruling above, we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the Code. 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(s) requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter ruling to your authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

Faith P. Colson
By: ____
Faith P. Colson
Senior Counsel, Branch 1
(Passthroughs & Special Industries)

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