Late check-the-box election to be a disregarded entity allowed under 9100 relief

Plain-English summary

A foreign business entity with a single owner can use a "check-the-box" election on Form 8832 to be treated as a disregarded entity (ignored for U.S. tax, so its income flows straight to the owner) instead of its default treatment as a corporation. Here a foreign eligible entity intended to be a disregarded entity from the day it was formed but never filed the Form 8832 on time. It asked the IRS for an extension under the § 301.9100-3 relief rules. The IRS granted 120 days from the date of the letter to file the election effective as of formation, finding the entity acted reasonably and in good faith and that relief would not prejudice the government, conditioned on the entity and its owner filing consistent returns for all open years. The letter adds the standard caveat that the election is disregarded when figuring any § 965 transition-tax amounts under Treas. Reg. § 1.965-4(c)(2). The ruling fixes only the timing; it does not decide that the entity is actually eligible to make the election.

Ruling snapshot

• Question: May a single-owner foreign entity get an extension of time to file a late Form 8832 electing disregarded-entity status effective from formation?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 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: 202201001 Third Party Communication: None
Release Date: 1/7/2022 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
----------------------------------- -------------------, ID No. -----------------
------------------- Telephone Number:
------------------------------------------------------------ ---------------------------
------------------------------------------------------------ Refer Reply To:
------- CC:PSI:B03
-------------------------------- PLR-103306-21
---------------------------- Date:
August 13, 2021

                                        LEGEND

X = ------------------------------------------------------------------------------------------------
----------------------
Date 1 = -----------------
Country = ------------

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

   This letter responds to a letter dated January 28, 2021 submitted on behalf of X

by X's 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 treated as a disregarded entity for U.S. federal income tax purposes.

                                                 FACTS

   According to the information submitted, X was formed on Date 1 under the laws

of Country. X states that under § 301.7701-3(b)(2) it is a foreign eligible entity and its
default classification is an association taxable as a corporation for U.S. federal tax
purposes. X intended to be classified as a disregarded entity for U.S. federal tax
purposes effective Date 1. However, X did not timely file Form 8832, Entity
Classification Election, to elect to be classified as a disregarded entity effective Date 1.

   X represents that it acted reasonably and in good faith. Further, X represents

that the interests of the Government will not be prejudiced for all taxable years affected
by the election by granting the relief sought.
PLR-103306-21 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.

    Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as
an association taxable as a corporation if all members have limited liability, unless the
entity makes an election to be treated otherwise. If the foreign eligible entity has only
one owner, it may elect to be treated as a disregarded entity pursuant to the rules in
§ 301.7701-3(c).

    Section 301.7701-3(c)(1)(i) provides 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 appropriate service center. Under § 301.7701-3(c)(1)(iii),
this election will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified. The 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 301.9100-1(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 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.

   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 an
election. 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.
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 (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.
PLR-103306-21 3

                                  CONCLUSION

    Based solely on the information submitted and the representations made, we

conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. 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 classified as a disregarded
entity for U.S. federal tax purposes, effective Date 1. A copy of this letter should be
attached to the Form 8832.

    This ruling is contingent on X and its owners filing within 120 days of the date of

this letter all required original or amended information and tax returns for all open years
consistent with the requested relief. 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 owners of X if the election otherwise
would change the amount of any section 965 element of any such United States owner.
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 described above under any other provision of
the Code and the regulations thereunder. 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.

   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.
PLR-103306-21 4

  In accordance with the power of attorney on file with this office, we are sending a

copy of this letter to X's authorized representative.

                                 Sincerely,

                                 Associate Chief Counsel
                                 (Passthroughs & Special Industries)




                              By:_________________________
                                 Adrienne M. Mikolashek
                                 Chief, Branch 3
                                 Office of Associate Chief Counsel
                                 (Passthroughs & Special Industries)

Enclosures (2)
A copy of this letter
A copy for § 6110 purposes

cc: