Foreign entity received 120 days for late disregarded-entity election

Plain-English summary

A foreign eligible entity intended to elect disregarded-entity treatment from a specified date but inadvertently failed to file Form 8832 on time. The IRS found that the requirements for discretionary late-election relief were satisfied and granted 120 days to file the election. The relief required the entity’s owner to file all required original or amended returns consistently, including applicable Forms 8858. The election would be ignored for section 965 calculations if it otherwise changed any U.S. shareholder’s section 965 elements.

Ruling snapshot

• Question: May the foreign entity make a late election to be treated as a disregarded entity?
• Outcome: approved, with 120 days to file Form 8832 and consistent returns
• 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: 201938008                                              Third Party Communication: None
Release Date: 9/20/2019                                        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-135879-18
                                                               Date:
                                                               May 29, 2019




LEGEND

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

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

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



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

This responds to a letter dated December 6, 2018, and subsequent information,
provided on behalf of X, requesting that the Service grant X an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations to file an election to be
treated as a disregarded entity.

FACTS

The information submitted states that X was formed as an entity under the laws of
Country. X represents that as a foreign eligible entity, X was eligible to elect to be
treated as a disregarded entity effective Date. However, X inadvertently failed to timely
file Form 8832, Entity Classification Election, electing to treat X as a disregarded entity
effective Date.

LAW AND ANALYSIS

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Section 301.7701-3(a) of the income tax regulations provides, in relevant part, 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 at 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, in part, that unless a foreign eligible entity elects
otherwise, it will be classified as a “corporation” for U.S. income tax purposes if it offers
its members limited liability. Section 301.7701-3(c)(1)(i) provides, in part, that an entity
may elect to be classified other than as provided under section 301.7701-3(b) by filing
Form 8832, Entity Classification Election, with the IRS Service Center designated on the
form.

Section 301.7701-3(c)(1)(iii) 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 two or more members having limited
liability may elect to be treated as a partnership 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.

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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 Date. 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 and amended income tax returns consistent with the requested relief being
effective Date. To the extent appropriate, these returns must include, but are not limited
to, 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.

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 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.

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

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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)



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



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