Foreign LLC gets 120 days for retroactive disregarded status

Plain-English summary

A foreign limited liability company intended to elect disregarded-entity classification effective from its formation date but did not timely file Form 8832. Its ownership later changed from two U.S. persons to a domestic partnership and ultimately to a domestic corporation. The IRS found that the regulatory-relief requirements were met and granted 120 days to file Form 8832 with the requested effective date. Relief was conditioned on the entity and its owners filing all required open-year returns consistently within the same period, potentially including Forms 5471, 8865, and 8858; the IRS did not rule on eligibility or penalties.

Ruling snapshot

• Question: Could the foreign LLC make a late entity-classification election to be disregarded from its formation date?
• Outcome: Approved, with 120 days to file Form 8832 and all required consistent returns.
• 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: 201949011 Third Party Communication: None
Release Date: 12/6/2019 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00 Person To Contact:
-----------------------, ID No. ----------------
-------------------------------------------------- Telephone Number:
----------------------------------------- ----------------------
---------------------------------------------------------- Refer Reply To:
------------------------------------------ CC:PSI:B03
------------ PLR-105493-19
Date:
September 04, 2019
LEGEND

X: --------------------------------

A: -----------------------------

B: --------------------------

C: ----------------------------------

D: ----------------------------------

Country: ----------

D1: ----------------------------

D2: ----------------------------

Year: -------

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

  This letter responds to a letter dated February 15, 2019, and subsequent

correspondence, 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) of the Internal Revenue Code (Code).
PLR-105493-19 2

                                           FACTS

    The information submitted states that X was formed on D1 as a limited liability

company under the laws of Country. On D1, A and B, both U.S. persons, became
owners of X. On D2, A contributed his interest in X to C, a domestic entity classified as
a partnership for federal tax purposes. In Year, D, a domestic corporation acquired
directly and/or indirectly all of the interests in X from B and C.

   X intended to elect to be classified as disregarded as an entity separate from its

owner for federal tax purposes effective D1. A Form 8832, Entity Classification
Election, electing to be classified as a disregarded entity effective D1 was not timely
filed.

                                            LAW

    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. Under
§ 301.7701-3(a), an eligible entity with at least two members can elect to be classified
as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a
partnership.

   Section 301.7701-3(b)(2)(i)(B) provides that, unless an entity elects otherwise, a

foreign eligible entity is an association if all members have limited liability.

   Section 301.7701-3(b)(2)(ii) provides that a member of a foreign eligible entity

has limited liability if the member has no personal liability for the debts of or claims
against the entity by reason of being a member.

    Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be

classified other than as provided in § 301.7701-3(b), or to change its classification, by
filing a Form 8832 with the service center designated on the Form 8832.

    Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701-

3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the
date filed, if no date is specified on the election form. The effective date specified on
Form 8832 cannot be more than seventy-five (75) days prior to the date on which the
election is filed and cannot be more than twelve (12) months after the date on which the
election 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
PLR-105493-19 3

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 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 301.9100-2 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.

    Under § 301.9100-3, a request for relief will be granted when the taxpayer

provides evidence (including affidavits described in § 301.9100-3(e)) to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of relief will not prejudice the interests of the Government.

                         ANALYSIS AND CONCLUSION

    Based solely on the facts submitted and 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 one hundred-twenty (120) days from the date of this letter to
file Form 8832 with the appropriate service center and elect to be classified as
disregarded as an entity separate from its owner for federal tax purposes effective D1.
The election should be made in a written statement filed with the applicable service
center. A copy of this letter should be attached to the Form 8832.

   This ruling is contingent on X and the owners of X filing within one hundred-

twenty (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) Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, (ii) Form 8865, Return of U.S. Persons With Respect to Certain Foreign
Partnerships, and (iii) Form 8858, Information Return of U.S. Persons With Respect to
Foreign Disregarded Entities and Foreign Branches, 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.

   In addition, we express no opinion concerning the assessment of any interest,

additions to tax, additional amounts, or penalties for failure to file a timely income tax or
information return with respect to any taxable year that may be affected by this ruling.
For example, we express no opinion as to whether a taxpayer is entitled to relief from
any penalty on the basis that the taxpayer had reasonable cause for failure to file timely
any income tax or information returns.
PLR-105493-19 4

   Except as specifically set forth above, no opinion is expressed or implied

concerning the federal tax consequences of the transaction described above under any
other provision of the Code. Specifically, no opinion is expressed or implied as to
whether X is otherwise eligible to make the election.

   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.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code 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,

                                    Associate Chief Counsel
                                    (Passthroughs & Special Industries)


                            By:    ____________________________
                                   Richard T. Probst
                                   Senior Technician Reviewer, Branch 3
                                   Office of Chief Counsel
                                   (Passthroughs & Special Industries)

Enclosures (2)

Copy of this letter
Copy of this letter for § 6110 purposes

cc: