Late check-the-box election allowed for a foreign entity to be disregarded

Plain-English summary

Under the "check-the-box" rules, an eligible business entity can choose
how it is taxed by filing Form 8832. A single-owner entity can elect to
be "disregarded," meaning it is ignored as separate from its owner for
federal tax purposes. Here a foreign entity intended to make that
disregarded-entity election effective on a specific date but missed the
deadline to file Form 8832. It asked the IRS for "9100" relief (Treas.
Reg. § 301.9100-3), which lets the IRS extend a missed election deadline
when the taxpayer acted reasonably and in good faith and the government
is not harmed. The IRS granted a 120-day extension to file the election.
As a condition, the entity's owner must also file the required Forms 8858
(the information return for foreign disregarded entities) for all affected
years. The IRS warned that granting the extension does not decide whether
the entity is actually eligible to make the election, and that the
election is ignored for certain Section 965 "transition tax" calculations
if it would change those amounts.

Ruling snapshot

• Question: May a foreign eligible entity get more time to file a late Form 8832 electing to be a disregarded entity?
• Outcome: Approved (9100 relief granted; 120 days to file Form 8832, conditioned on filing Forms 8858)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; § 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202246003                                            Third Party Communication: None
 Release Date: 11/18/2022                                     Date of Communication: Not Applicable
 Index Number: 7701.00-00, 9100.00-00,
               9100.31-00                                     Person To Contact:
                                                              --------------------, ID No. -----------------
 -------------------------------------                        Telephone Number:
 -----------------------------------------                    --------------------
 --------------------------------------                       Refer Reply To:
 -------------------------------------------------------      CC:PSI:B01
 ---------                                                    PLR-104138-22
 ----------------------------                                 Date:
                                                              August 22, 2022




                                                   LEGEND

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

 Y            = ------------------------------------------------------------------------------------------------
                -----------------------

 Country = ---------

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

 Year         = -------


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

       This letter responds to a letter dated January 7, 2022, and subsequent
correspondence, submitted on behalf of X by its authorized representative, requesting a
ruling under §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration
Regulations that X be granted an extension of time to file an election to be classified as
a disregarded entity under § 301.7701-3 effective Date.

                                                     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-104138-22                                  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 (and thus a
corporation under § 301.7701-2(b)(2)) or to be disregarded as an entity separate from
its owner.

         Section 301.7701-3(b)(2)(i) provides that, unless it 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(c)(1)(i) provides that an eligible entity may elect to be
classified other than as provided in § 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 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 has discretion to 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 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.

       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 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.

        Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3
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.

                                       CONCLUSION
PLR-104138-22                                  3


       Based on the facts submitted and the representations made, we conclude that
the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. 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 and 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. A copy is enclosed for that purpose.

        As a condition for this late election relief, Y must file, within 120 days of the date
of this letter, Form 8858, Information Return of U.S. Persons With Respect to Foreign
Disregarded Entities, for all tax periods affected by this ruling, through Year, consistent
with X having made a timely entity classification election. Copies of this letter should be
attached to such forms.

       Except as expressly set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts discussed above 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. If applicable, X's election to be treated as a disregarded entity
separate from its owner effective on Date is disregarded for purposes of determining the
amounts of all section 965 elements of all United States shareholders of X if the election
otherwise would change the amount of any section 965 element of any United States
shareholder. See §1.965-4(c)(2) of the Income Tax Regulations.

      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.

      In accordance with 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:     Caroline Hay
                                        Caroline Hay
                                        Senior Technician Reviewer, Branch 1
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)

Enclosures (1)
      Copy for § 6110 purposes


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