Foreign entity receives extension for disregarded-entity election

Plain-English summary

A wholly owned foreign entity intended to be treated as a disregarded entity from its formation date but failed to file Form 8832 on time. The entity represented that it acted reasonably and in good faith, while its owner filed returns consistently with the requested classification and did not use hindsight. The IRS granted 120 days to make the entity-classification election effective from formation. The owner also had to file all required returns for open years consistently with the relief within the same 120-day period. Those filings could include Forms 5471 and 8858.

Ruling snapshot

• Question: Could the foreign entity make a late election to be treated as a disregarded entity from its formation date?
• Outcome: Approved; the entity received 120 days to file Form 8832, subject to consistent open-year return filings by its owner.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201822001 Third Party Communication: None
Release Date: 6/1/2018 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
----------------------------------- -------------------, ID No. ----------------
------------------------------------------------------ Telephone Number:
------------------------------ --------------------
------------------------------------------------------------ Refer Reply To:
------------- CC:PSI:B01
---------------------------------------------------------- PLR-103433-18
Date:
February 22, 2018

LEGEND

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

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

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

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

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

This is in response to a letter dated January 26, 2018, 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
foreign disregarded entity for federal tax purposes.

FACTS

According to the information submitted, X, Y’s wholly-owned foreign entity, was formed
on D1 under the laws of Country. X was intended to be treated as a foreign
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 Y filed tax
returns consistently with the requested relief and that no hindsight is involved in seeking
the relief requested.

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 shall 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 owner of X filing within 120 days of this letter all required
returns for all open years consistent with the requested relief such that these forms
reflect the consequences of the relief granted in this letter. 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, and (ii) Forms 8858, Information
Return of U.S. Persons With Respect to Disregarded Entities. A copy of this letter
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 representative.

                                   Sincerely,

                                   Holly Porter
                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                                      Laura C. Fields
                              By: _____________________________
                                  Laura C. Fields
                                  Senior Technician Reviewer
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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