Foreign entity received 120 days for a late disregarded-entity election

Plain-English summary

A foreign single-owner eligible entity intended to be disregarded for federal tax purposes from its formation date but failed to file Form 8832 on time. The IRS concluded that the regulatory-extension requirements were satisfied and gave the entity 120 days to file the election. Its owner also had to file all required returns for open years consistently with the relief, potentially including Forms 5471 and 8858. If relevant, the election would be ignored when determining section 965 elements if it otherwise changed those amounts. The ruling did not address any other federal tax consequences.

Ruling snapshot

• Question: May the foreign entity make a late election to be classified as a disregarded entity from its formation date?
• Outcome: approved, with 120 days to file Form 8832 and consistent returns for open years
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through 301.9100-3; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201936006                                              Third Party Communication: None
Release Date: 9/6/2019                                         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-131616-18
                                                               Date:
                                                               May 07, 2019




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

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

Date 1           =     --------------------

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

This ruling is in response to your request dated October 22, 2018, submitted on behalf
of X, requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to elect to be treated as a disregarded entity for federal
income tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country on Date

1. X represents that it is a foreign eligible entity eligible to elect to be classified as a
disregarded entity for federal tax purposes. X intended to be treated as a disregarded
entity for federal tax purposes effective Date 1. However, X failed to timely file a Form
8832, Entity Classification Election, to elect to be treated as a disregarded entity for
federal tax purposes.
PLR-131616-18                                  2

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 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) 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.

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) 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.

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 file a Form 8832 with the
appropriate service center to elect to be treated as a disregarded entity for federal tax
purposes effective Date 1. A copy of this letter should be attached to the Form 8832.
PLR-131616-18                                  3

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. 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 returns.

If applicable, this election is disregarded for purposes of determining the amounts of all
section 965 elements of all United States shareholders of X if the election otherwise
would change the amount of any section 965 element of any such United States
shareholder. See § 1.965-4(c)(2).

Except as specifically set forth above, 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(s) requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, we are sending a copy of this
letter to X’s authorized representatives.




                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                  By: Wendy L. Kribell
                                      Wendy L. Kribell
                                      Senior Counsel, Branch 3
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)


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