Foreign entity received 120 days to file late disregarded-entity election

Plain-English summary

A foreign eligible entity intended to be treated as disregarded from its formation date but did not timely file Form 8832. It represented that the omission occurred despite reasonable, good-faith conduct, that the government would not be prejudiced, and that the request did not rely on hindsight. The IRS granted 120 days from the ruling date to file the entity-classification election with the requested retroactive effective date. Relief was conditioned on the owners filing all required returns for open years consistently with disregarded-entity treatment. The ruling also limited any effect the election could have on section 965 amounts.

Ruling snapshot

• Question: May the foreign entity file a late Form 8832 election to be treated as disregarded from its formation date?
• Outcome: approved, with 120 days to file the election and consistent open-year returns
• Key authorities: Treas. Reg. §§ 301.7701-3 and 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: 202004006                                               Third Party Communication: None
Release Date: 1/24/2020                                         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:B01
---------------------------------------------------------------- PLR-106717-19
-----------------------------------------------                    Date:
                                                                   September 23, 2019




LEGEND:

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

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

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


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

This responds to a letter dated March 26, 2019, and subsequent correspondence,
submitted on behalf of X by its authorized representative, 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 U.S.
federal tax purposes.

Facts

According to the information submitted and representations within, X was formed on
Date 1 under the laws of Country. X intended to be treated as a disregarded entity for
federal tax purposes effective Date 1. However, X failed to timely file Form 8832, Entity
Classification Election, to be treated as disregarded 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 further represents that no
hindsight is involved in seeking the relief requested.
PLR-106717-19                                  2

Law and Analysis

Section 301.7701-3(a) provides, in 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 as provided in § 301.7701-3. 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, and 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)(i) provides that, except as provided in § 301.7701-3(b)(3),
unless the entity elects otherwise, a foreign eligible entity is: (A) a partnership if it has
two or more members and at least one member does not have limited liability; (B) an
association if all members have limited liability; or (C) disregarded as an entity separate
from its owner if it has a single owner that does not have limited liability. Section
301.7701-3(b)(2)(ii) provides, in part, that for purposes of § 301.7701-3(b)(2)(i), 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, in part, that, except as provided in § 301.7701-
3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as provided
under § 301.7701-3(b), or to change its classification, by filing Form 8832 with the
service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides, in part, 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 such date is specified on the election form. The effective date specified
on Form 8832 cannot be more than 75 days prior to the date on which the election is
filed and cannot be more than 12 months after the date on which the election is filed.

Section 301.7701-3(g)(1)(iii) provides that if an eligible entity classified as an
association elects under § 301.7701-3(c)(1)(i) to be disregarded as an entity separate
from its owner, the following is deemed to occur: the association distributes all of its
assets and liabilities to its single owner in liquidation of the association.

Section 301.9100-1(a) provides that §§ 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 a regulatory election.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 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 Code except subtitles E, G,
PLR-106717-19                                  3

H, and I. Section 301.9100-1(b) provides that the term “regulatory election” includes an
election whose due date is prescribed by a regulation published in the Federal Register.

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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be
granted when the taxpayer provides the 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.

Conclusion

Based solely on the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, 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 Date1. X should make
the election by filing a properly executed Form 8832 with the appropriate service center,
and a copy of this letter should be attached to the election. A copy is enclosed for that
purpose.

This ruling is contingent on the owners 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, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities
(FDEs) and Foreign Branches (FBs), such that these forms reflect the consequences of
the relief granted in this letter. A copy of this letter ruling should be attached to any such
returns.

If applicable, this disregarded entity 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.
PLR-106717-19                                  4

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 the 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) 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 X’s authorized representatives.


                                       Sincerely,


                                       Holly Porter
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)


                                       Laura C. Fields
                                       Laura C. Fields
                                       Senior Technician Reviewer, Branch 1
                                       (Passthroughs & Special Industries)


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