Foreign entity granted extra time to make a late check-the-box election to be a disregarded entity

Plain-English summary

Under the "check-the-box" rules, a single-owner eligible entity can file Form 8832 to elect to be disregarded (treated as part of its owner) instead of being taxed as a corporation. Here a foreign entity was eligible to be treated as a disregarded entity as of a certain date but failed to file Form 8832 on time. It asked the IRS for relief under Treas. Reg. § 301.9100-3, which lets the Commissioner grant more time for a missed regulatory election if the taxpayer acted reasonably and in good faith and the government is not prejudiced. The IRS granted a 120-day extension to file the election effective the requested date, conditioned on the entity and its owner filing all required returns for open years consistent with disregarded-entity treatment (including Form 8858 for foreign disregarded entities). As standard, the election is disregarded to the extent it would change any U.S. shareholder's § 965 transition-tax amount, and granting the extension does not decide whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: May a foreign eligible entity get an extension of time to file a late Form 8832 electing disregarded-entity status?
• Outcome: approved (120-day extension granted, subject to conditions)
• Key authorities: Treas. Reg. § 301.7701-3 (check-the-box); Treas. Reg. §§ 301.9100-1 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: 202220008
Third Party Communication: None
Release Date: 5/20/2022
Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.31-00
Person To Contact:

-------------------------------------------- ----------------------, ID No. -----------------
------------------------------
Telephone Number:
---------------------------------------------------- --------------------
---------------------------------------------------- Refer Reply To:
-------------
CC:PSI:B3
-----------------------------
PLR-120415-21
Date:
February 22, 2022
Re: ----------------------------------------------
--------------------------------------------------

Legend

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

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

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

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

This letter responds to a letter dated September 24, 2021, submitted on behalf of X by its authorized representatives, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an election under § 301.7701-3 to be classified as a disregarded entity for federal tax purposes.

Facts

Based on the information submitted, X was formed under the laws of Country on Date. X represents that it is a foreign entity eligible to elect to be classified as a disregarded entity separate for federal tax purposes. However, X failed to timely file a Form 8832, Entity Classification Election, electing to be classified as a disregarded entity for federal tax purposes effective Date.

Law and Analysis

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. An eligible
PLR-120415-21
2

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 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 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.

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.

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 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 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 Form 8832 with the appropriate service center to elect to be classified as a disregarded entity for federal tax purposes effective Date. A copy of this letter should be attached to the Form 8832.

This ruling is contingent on X and its owner filing, within 120 days from the date of this letter, all required returns for all open years consistent with the requested relief. These returns must include, but are not limited to, Form 8858, Information Return of
PLR-120415-21
3

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.

If applicable, X’s election to be classified as a disregarded entity effective Date is disregarded for purposes of determining the amounts of all § 965 elements of all United States shareholders of X if the election otherwise would change the amount of any § 965 element of any such United States shareholder. See § 1.965-4(c)(2) of the Income Tax Regulations.

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 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 information 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.

Pursuant to a power of attorney on file with this office, we are sending a copy of this letter to X’s authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: _____
Margaret Burow
Senior Counsel, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes

cc: