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 (which may include Form 5471 for foreign corporations and 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: 202221004 Third Party Communication: None
Release Date: 5/27/2022 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:03
----------------------- PLR-119722-21
------------------------------------------ Date:
------------------------- March 02, 2022
-

      Re: ----------------------------------------------
      --------------------

Legend

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

Country = ------

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

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

   This ruling is in response to your request dated September 28, 2021, and

subsequent correspondence 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 income 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 eligible entity eligible to elect to be classified as a
disregarded entity 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.
PLR-119722-21 2

                                  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
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
PLR-119722-21 3

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 may include, but are not limited to, Form 5471, Information Return of U.S.
Persons With Respect to Certain Foreign Corporations, and 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, 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.

  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)

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

Enclosure
Copy for § 6110 purposes
PLR-119722-21 4

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