IRS grants a foreign entity extra time to elect disregarded-entity status on a late Form 8832

Plain-English summary

A single-owner foreign business entity wanted to be treated as a "disregarded
entity" for U.S. tax purposes, meaning it is ignored as separate from its owner
and its income flows straight onto the owner's return. Under the check-the-box
rules, a foreign entity whose owner has limited liability is treated as a
corporation by default unless it files Form 8832 to elect otherwise. This entity
meant to elect disregarded status from formation but never filed the form on
time. It asked for relief under the "9100" regulations, which allow extra time to
make a missed election when the taxpayer acted reasonably and in good faith and
relief won't harm the government. The IRS granted a 120-day extension to file
Form 8832, conditioned on the entity filing all consistent U.S. returns and
information returns (such as Forms 5471 and 8858) reflecting the relief.

Ruling snapshot

• Question: Should the foreign entity get an extension of time under Treas. Reg. § 301.9100-3 to file a late election to be treated as a disregarded entity?
• Outcome: Approved (120-day extension to file Form 8832 granted, subject to conditions)
• Key authorities: Treas. Reg. § 301.7701-3 (entity classification); Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201845023
Release Date: 11/9/2018
Index Numbers: 7701.00-00; 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
----------------, ID No. ------------------
Telephone Number:

Refer Reply To:
CC:PSI:B01
PLR-108198-18

Date:
July 26, 2018

LEGEND

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

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

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

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

This is in response to a letter dated October 11, 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 represents that it is a foreign entity eligible to elect to be classified as a disregarded
entity for federal tax purposes effective D1. 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 elect to be treated as a disregarded entity
for federal tax purposes.

PLR-108198-18 2

X represents that granting relief to allow it to file a late election to be treated as a
disregarded entity will not prejudice the interest of the government. In addition, X
represents that it acted reasonably and in good faith, and that no hindsight is involved.

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 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 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, or the 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
301.9100-1(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 §§ 301.9100-1 and 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

PLR-108198-18 3

election to be treated as a disregarded entity for federal tax purposes effective D1. X
must 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 X filing within 120 days of this letter all required federal
income tax and information returns (including amended returns) 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, and (ii) Forms 8858, Information Return of U.S. Persons With Respect To
Foreign 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 forms.

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,

                                   Curt G. Wilson
                                   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: