IRS grants a foreign entity extra time to elect disregarded-entity status

Plain-English summary

A foreign business entity with a single owner wanted to be treated as a "disregarded entity" (ignored as separate from its owner) for U.S. federal tax purposes, effective from a specific date. To do that, it had to file a Form 8832 check-the-box election under Treas. Reg. § 301.7701-3, but it missed the deadline. It asked for relief under Treas. Reg. § 301.9100-3, which lets the IRS extend the time to make a regulatory election when the taxpayer acted reasonably and in good faith and relief won't hurt the government. The IRS granted 120 days to file the Form 8832, conditioned on the entity and its owner filing all required returns (including Form 8858 for foreign disregarded entities) for open years consistent with the election.

Ruling snapshot

• Question: Should the foreign eligible entity get an extension of time to file a Form 8832 electing disregarded-entity status?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202245002
Release Date: 11/11/2022
Index Numbers: 7701.00-00, 9100.00-00, 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
------------, ID No. -----------------
Telephone Number:
--------------------
Refer Reply To:
CC:PSI:B03
PLR-104194-22
Date:
August 17, 2022

LEGEND

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

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

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

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

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

This letter responds to a letter dated February 15, 2022, and subsequent correspondence submitted on behalf of Company by its authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for Company 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 was formed under the laws of Country on Date. Company represents that it is a foreign entity eligible to elect to be disregarded as an entity separate from its owner for federal tax purposes effective Date. However, Company failed to timely file a Form 8832, Entity Classification Election, electing to be disregarded as an entity separate from its owner for federal tax purposes 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 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 relevant 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 the Form 8832 or on the date filed if no 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.

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 six 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) defines a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections.

Section 301.9100-3 sets forth 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 (1) the taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice the interests of the Government.

CONCLUSION

Based solely on the information submitted and the representations made, we conclude that Company has satisfied the requirements of §§ 301.9100-1 and 301.9100-

3. As a result, Company 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 disregarded as an entity separate from its owner for federal tax purposes effective Date. A copy of this letter should be attached to Company's Form 8832.

   This ruling is contingent on Company and its owner, A, filing, within 120 days
   

   from the date of this letter, all required federal income tax returns and information returns (including amended returns) for all open years consistent with the requested relief. These returns must include, but are not limited to, Form 8858, Information Return of 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.

   Except as expressly provided herein, we express or imply no opinion concerning
   

   the federal tax consequences of any transaction or item discussed or referenced in this letter. 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.

   Further, 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.

   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. According to
   § 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.

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

                                 Sincerely,
   
                                 Associate Chief Counsel
                                 (Passthroughs & Special Industries)
   
                                          /S/
                             By:_________________________
                                Mary Beth Carchia
                                Senior Technician Reviewer, Branch 3
                                Office of Associate Chief Counsel
                                (Passthroughs & Special Industries)
   

Enclosure:
Copy of this letter for § 6110 purposes

cc: