IRS grants a foreign entity extra time to file a late "check-the-box" election to be a disregarded entity

Plain-English summary

Under the "check-the-box" rules, an eligible business entity chooses how it is taxed by filing Form 8832; a foreign entity with a single owner can elect to be "disregarded," meaning it is treated as a branch of its owner rather than as a separate corporation. This foreign entity, wholly owned by another company, intended to be disregarded as of a specific date but inadvertently never filed Form 8832 on time. It asked the IRS for "9100 relief," a discretionary extension under Treas. Reg. § 301.9100-3. The IRS granted 120 days to file the election effective on the intended date, finding the taxpayer acted reasonably and in good faith and that relief would not prejudice the Government. The relief is conditioned on the entity and its owner filing all required returns for open years consistent with the election (potentially including Forms 5471, 8865, and 8858), and the letter notes the late election is disregarded for computing any § 965 "transition tax" amounts and is not itself a determination that the entity is eligible to make the election. This is a routine cure letting a cross-border structure obtain the disregarded-entity treatment it intended.

Ruling snapshot

• Question: Should the IRS grant an extension under § 301.9100-3 to file a late § 301.7701-3 election for a foreign entity to be classified as a disregarded entity?
• Outcome: approved (conditioned on consistent return filing; § 965 elements unaffected)
• Key authorities: Treas. Reg. §§ 301.7701-3(a), (b), (c), 301.9100-1, 301.9100-3, 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202048002                                            Third Party Communication: None
 Release Date: 11/27/2020                                     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:01
                                                              PLR-105479-20
                                                              Date:
                                                              August 13, 2020




 Legend

 Company            = ---------------------------------------------------------------------------------------------
                      ------------------------

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

 A                  = -----------------------
                      -------------------------

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



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

This letter responds to a letter dated December 13, 2020, submitted on behalf of
Company 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 to be classified as a disregarded entity for federal tax purposes.

FACTS

The information submitted states that Company, a foreign eligible entity wholly owned
by X and formed under the laws of Country, intended to be classified as a disregarded
entity effective Date. However, due to inadvertence, a Form 8832, Entity Classification
Election, was not timely filed for Company to be classified as a disregarded entity
effective Date.
PLR-105479-20                                  2

LAW

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 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 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. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

Section 301.9100-1(c) provides that the Commissioner in exercising the
Commissioner’s discretion 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 not more than 6 months except in the case of a taxpayer who is abroad),
under all subtitles of the Internal Revenue Code (Code), except subtitles E, G, 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 standards the Commissioner will use to determine
whether to grant an automatic extension of time for making certain elections.
PLR-105479-20                                  3

Section 301.9100-3 provides the guidelines for granting extensions of time for making
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 evidence (including affidavits described in § 301.9100-3(e)) to
establish to the satisfaction of the Commissioner that the taxpayer acted reasonably
and in good faith, and the grant of relief will not prejudice the interests of the
Government.

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that
Company has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result,
we grant Company an extension of time of one hundred twenty (120) days from the date
of this letter to file Form 8832 with the appropriate service center to elect to be classified
as a disregarded entity effective Date. A copy of this letter should be attached to the
Form 8832.

This ruling is contingent on Company and 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) 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,
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, the election to classify Company as a disregarded entity is disregarded for
purposes of determining the amounts of all section 965 elements of all United States
shareholders of Company 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 the facts of this case under any other provision of the
Code. 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.

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-105479-20                                 4

We are directing the ruling only to the taxpayer who requested it. Section 6110(k)(3) of
the Code 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.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter ruling to your authorized representatives.


                                      Sincerely,

                                      HOLLY PORTER
                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)


                                      Laura C. Fields

                                      By Laura C. Fields
                                      Senior Technician Reviewer, Branch 1
                                      Office of Associate Chief Counsel
                                      (Passthroughs & Special Industries)



Enclosures: Copy of this letter

Copy of this letter for § 6110 purposes

cc: