Foreign entity receives 120 days to file a late classification election

Plain-English summary

A foreign eligible entity intended to elect disregarded-entity status for federal tax purposes but inadvertently failed to file Form 8832 on time. The IRS concluded that the entity satisfied the standards in Treas. Reg. § 301.9100-3 and granted 120 days to file the election with the requested effective date. The relief is conditional on the owners filing all required original and amended returns for open years consistently with the election, including any applicable Forms 5471, 8865, and 8858. The election is disregarded when calculating section 965 elements if recognizing it would otherwise change a United States shareholder's section 965 amount. The ruling does not determine whether the entity otherwise qualifies to make the election.

Ruling snapshot

• Question: May the foreign eligible entity receive extra time to file Form 8832 and elect disregarded-entity status?
• Outcome: approved, with 120 days to file and subject to consistent-return and section 965 conditions
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-2, 301.9100-3, and 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202020018 Third Party Communication: None
Release Date: 5/15/2020 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
-------------------------------------- ---------------------------, ID No. ---------------
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------------------------------------------------- Telephone Number:
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------------------------------------------------------------ Refer Reply To:
-- CC:PSI:B01
PLR-125826-19

                                                           Date:
                                                           January 21, 2020

LEGEND

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

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

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

Date 2 = -----------------------

Date 3 = -----------------------

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

This responds to a letter dated October 15, 2019, 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 under
§ 301.7701-3(c) to be treated as a disregarded entity for federal tax purposes.

FACTS

The information submitted states that X was formed as an entity under the laws of
Country on Date 1. X represents that, as a foreign eligible entity, X was able to elect to
be treated as a disregarded entity effective Date 2. However, X inadvertently failed to
timely file Form 8832, Entity Classification Election, electing to treat X as a disregarded
entity effective Date 3.
PLR-125826-19 2

LAW AND ANALYSIS

Section 301.7701-3(a) of the income tax regulations 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. An
eligible entity with at least two members can elect to be classified as either an
association 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) provides, in part, that unless an election is made a foreign
eligible entity 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.

Section 301.7701-3(c)(2) provides that such an election must be signed by either (A)
each member of the electing entity who is an owner at the time the election is filed; or
(B) any officer, manager, or member of the electing entity who is authorized (under local
law or the entity's organization documents) to make the election and who represents to
having such authorization under penalties of perjury.

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.
PLR-125826-19 3

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 information 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 an association treated as a
disregarded entity for federal tax purposes effective Date 3. A copy of this letter should
be attached to the Form 8832 filed for X.

This ruling is contingent on the owners of X filing within 120 days of this letter all
required returns and amended 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
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, we express or imply no opinion concerning the
federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. In addition, § 301.9100-1(a) provides that the granting of an
extension of time for making an election is not a determination that the taxpayer is
otherwise eligible to make the election.

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
PLR-125826-19 4

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.

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,


                                   Holly Porter
                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)



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

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

   cc: