Foreign entity received 120 days to file a late disregarded-entity election

Plain-English summary

A foreign entity wanted to be treated as disregarded from its single owner for U.S. federal tax purposes beginning when its classification first became relevant, but it missed the deadline to file Form 8832. The entity asked for an extension under Treasury Regulation § 301.9100-3. The IRS concluded that it acted reasonably and in good faith and that relief would not prejudice the government, so it granted 120 days to file the election. The relief also required the entity and its owner to file all required returns for open years consistently with disregarded-entity treatment. The ruling warned that the election would be ignored when calculating a U.S. shareholder's section 965 elements if recognizing it would change those amounts.

Ruling snapshot

• Question: Should the foreign eligible entity receive extra time to file Form 8832 electing disregarded-entity status effective when its U.S. tax classification became relevant?
• Outcome: approved (120-day extension, subject to consistent return filing)
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 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: 202251007                                               Third Party Communication: None
 Release Date: 12/23/2022                                        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-109222-22
                                                                 Date:
                                                                 September 06, 2022

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

Legend

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

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

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

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


Dear ---------:

      This ruling is in response to your request dated April 28, 2022, subsequent
correspondence submitted on behalf of X by its authorized representative, 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 tax purposes.

                                                     FACTS

       Based on the information submitted, X was formed under the laws of Country on
Date 1 and became relevant for U.S. tax purposes on Date 2. 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
2.
PLR-109222-22                                  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. 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.

      Section 301.7701-3(d)(1)(i) provides that a foreign eligible entity's classification is
relevant when its classification affects the liability of any person for federal tax or
information purposes.

        Section 301.7701-3(d)(2) provides that if the classification of a foreign eligible
entity the classification has never been relevant (as defined in § 301.7701-3(d)(1)), then
the entity's classification will initially be determined pursuant to the default classification
provisions of § 301.7701-3(b)(2) when the classification of the entity first becomes
relevant (as defined in § 301.7701-3(d)(1)(i)).

       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 regulatory
elections that do not meet the requirements of § 301.9100-2.
PLR-109222-22                                  3

        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 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 a Form 8832
with the appropriate service center to elect to be classified as a disregarded entity for
federal tax purposes effective Date 2. 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 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 2
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 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.

       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-109222-22                                           4

      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)



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



Enclosure
      Copy for § 6110 purposes

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