Late relief to elect disregarded-entity status for a foreign company

Plain-English summary

A foreign company wholly owned by a single owner wanted to be treated as a disregarded entity for U.S. federal tax purposes, meaning it would be ignored as separate from its owner. To get that treatment it had to file a Form 8832 check-the-box election by a deadline, but because of an oversight the form was never filed on time. The company asked the IRS for an extension under the "9100" relief rules in Treasury Regulation § 301.9100-3. The IRS found the company acted reasonably and in good faith and that granting relief would not harm the government, so it gave the company 120 days to file the late election. The relief is conditioned on the company and its owner filing all required returns (such as Forms 5471, 8865, and 8858) consistent with the disregarded-entity treatment. This matters because check-the-box classification drives how a foreign entity's income flows to its U.S. owner, and a missed election can otherwise lock in an unwanted tax result.

Ruling snapshot

• Question: Should the company get an extension of time to file a late Form 8832 electing to be a disregarded entity?
• Outcome: Approved (120-day extension granted, conditioned on consistent return filing)
• Key authorities: Treas. Reg. § 301.9100-1 and § 301.9100-3; Treas. Reg. § 301.7701-3 (check-the-box); Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202234005                                             Third Party Communication: None
 Release Date: 8/26/2022                                       Date of Communication: Not Applicable
 Index Number: 9100.00-00
                                                               Person To Contact:
 ----------------------------                                  --------------, ID No. -----------------
 ------------------------------                                Telephone Number:
 -------------------------------------                         --------------------
 ----------------------------------------------                Refer Reply To:
 ---------------------------                                   CC:PSI:B01
                                                               PLR-124821-21
                                                               Date:
                                                               May 31, 2022



Legend

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

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

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

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


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

This letter responds to a letter dated November 30, 2021, and supplemental
information, 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 to 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.

                                                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. An eligible
PLR-124821-21                                   2

entity with at least two members may elect to be classified as either an association (and
thus a corporation under § 301.7701-2(b)(2)) or as 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 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 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 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 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. 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 regulator 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 (1) the taxpayer acted reasonably and in good faith, and (2)
granting relief will not prejudice the interests of the government.
PLR-124821-21                                  3

                                         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.

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
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.
PLR-124821-21                                4


In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to Company’s authorized representative.




                                      Sincerely,

                                      Holly Porter
                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                      __________________________
                                      Laura C. Fields
                                      Chief, Branch 1
                                      (Passthroughs & Special Industries)




Enclosure:
Copy for 6110 purposes



cc: