Three foreign entities received 120 days for late disregarded-entity elections

Plain-English summary

Three foreign eligible entities intended to be disregarded as separate from their common owner from their respective formation dates but failed to timely file Forms 8832. The IRS found that all three met the discretionary late-election standards and granted 120 days to file their elections. The entities and their owner also had to file all required returns for open years consistently with the relief, including Forms 5471 and 8858 where applicable. Each election would be disregarded for section 965 calculations if recognizing it would change a U.S. shareholder’s section 965 elements. The IRS did not determine whether the entities otherwise qualified to make the elections.

Ruling snapshot

• Question: Could three foreign eligible entities make late elections to be disregarded from their formation dates?
• Outcome: approved, subject to filing the elections and consistent open-year returns within 120 days
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3, and 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202248007                                              Third Party Communication: None
 Release Date: 12/2/2022                                        Date of Communication: Not Applicable
 Index Number: 9100.00-00, 9100.31-00
                                                                Person To Contact:
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 ------------------------------------------------------------   Telephone Number:
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 ------------------------------------------------------------   Refer Reply To:
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 -----------------------------                                  Date:
                                                                September 08, 2022
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Legend


X                 =        -----------------------------------------------------------------------------
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Y                 =        ------------------------------------------------------------------------------------------
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Z                 =        ------------------------------------------------------------------------------------------
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                           ----------
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Country           =        ----------

Date 1            =        ------------------

Date 2            =        -------------------------

Date 3            =        -------------------

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

       This letter is in response to your request dated May 17, 2022, submitted on
behalf of X, Y, and Z by their authorized representatives, requesting an extension of
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time under § 301.9100-3 of the Procedure and Administration Regulations for X, Y, and
Z to each file to an election under § 301.7701-3 to be classified as a disregarded entity
for federal tax purposes.
                                          FACTS

        Based on the information submitted, X, Y, and Z were each formed under the
laws of Country on Date 1, Date 2, and Date 3, respectively. X, Y, and Z represent that,
as of Date 1, Date 2, and Date 3, each was a foreign eligible entity eligible to elect to be
classified as a disregarded entity for federal tax purposes. However, X, Y, and Z each
failed to timely file a Form 8832, Entity Classification Election, electing to be classified
as a disregarded entity for federal tax purposes effective Date 1, Date 2, and Date 3,
respectively.

                                   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. 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 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 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
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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 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 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 representations made, we conclude that
X, Y, and Z have satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a
result, X, Y, and Z are granted an extension of time of 120 days from the date of this
letter to each file a Form 8832 with the appropriate service center to elect to be
classified as a disregarded entity for federal tax purposes effective Date 1, Date 2, and
Date 3, respectively. A copy of this letter should be attached to each Form 8832.

        This ruling is contingent on X, Y, and Z and their owner 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, 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, Y’s and Z’s election to be classified as a disregarded entity
effective Date 1, Date 2, and Date 3, respectively, is disregarded for purposes of
determining the amounts of all § 965 elements of all United States shareholders of X, Y,
and Z 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 tax consequences of the facts of these cases 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 taxpayers
are otherwise eligible to make the election.

      The rulings contained in this letter are based upon information and
representations submitted by the taxpayers and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of the
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material submitted in support of the ruling requests, it is subject to verification on
examination.

      This ruling is directed only to the taxpayers 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, Y’s, and Z’s authorized representatives.


                                                     Sincerely,


                                                     Associate Chief Counsel
                                                     (Passthroughs and Special Industries)


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

Enclosure
      Copy for § 6110 purposes



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