The IRS grants extra time to file a late check-the-box election so a foreign entity can be treated as disregarded

Plain-English summary

A foreign entity with a single owner wanted to be a "disregarded entity" for U.S. federal tax purposes, meaning it would be ignored as separate from its owner (its income and assets treated as the owner's directly). To do that, it had to file a Form 8832 "check-the-box" election by a deadline, but it missed the deadline by mistake. It asked the IRS for an extension of time under the section 301.9100 relief rules, representing that it acted reasonably and in good faith, that it would have elected on time but for the oversight, that the government is not prejudiced, and that it is not using hindsight (including that it would have elected regardless of the Tax Cuts and Jobs Act changes). The IRS agreed the 9100 standards were met and gave the entity 120 days from the date of the letter to file the Form 8832, effective as of the originally intended date. The relief is conditioned on the owner filing all required returns for open years consistent with disregarded status (for example, Form 8858). The IRS cautioned that granting an extension is not a ruling that the entity is otherwise eligible to make the election, and it expressed no opinion on section 367, the section 965 elements, or any penalties. (This is a companion to a same-day ruling for a related entity; the terms are identical.)

Ruling snapshot

• Question: Should the foreign single-owner entity get an extension of time under Treas. Reg. § 301.9100-3 to file a late Form 8832 election to be treated as a disregarded entity?
• Outcome: approved (120-day extension to file Form 8832, effective as of the intended date)
• Key authorities: Treas. Reg. §§ 301.7701-3(b)(2), (c), 301.9100-1 through -3; § 1.965-4(c)(2); § 367 (no opinion expressed)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202305007 Third Party Communication: None
Release Date: 2/3/2023 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
Person To Contact:
-------------------------------------------------------- --------------------------, ID No. ----------------
--------------------------------------------------- -----------------
------------------------- Telephone Number:
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------------------------ Refer Reply To:
---------------------------------- CC:PSI:B01
PLR-109842-22
Date:
November 08, 2022

                                               LEGEND

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

Country = -------

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

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

  This responds to a letter dated March 12, 2022, and subsequent

correspondence, submitted on behalf of X by X's authorized representatives, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to file an election under § 301.7701-3(c) to be treated as a foreign
disregarded entity for federal tax purposes.

                                                 FACTS

    According to the information submitted, X was formed on Date under the laws of

Country. X intended to be treated as a disregarded entity for federal tax purposes
effective Date. However, X inadvertently failed to timely file Form 8832, Entity
Classification Election, to be treated as a disregarded entity for federal tax purposes.

   X represents that it acted reasonably and in good faith, and that the interests of

the government will not be prejudiced by granting relief. X further represents that no
hindsight is involved in seeking the relief requested. X also represents that, if not for
inadvertence, X would have made a timely filed election to be treated as a disregarded
entity regardless of the enactment of the Tax Cuts and Jobs Act (TCJA) and the
issuance of regulations related to TCJA.

                                   LAW & ANALYSIS

     Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as
an association if all members have limited liability, unless the entity makes an election
to be treated otherwise. A foreign eligible entity with a single owner having limited
liability may elect to be treated as a disregarded entity pursuant to the rules of §
301.7701-3(c). Section 301.7701-3(c) provides that an entity classification election must
be filed on Form 8832 and can be effective up to 75 days prior to the date the form is
filed or up to 12 months after the date the form is filed.

   Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of

time 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, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term
"regulatory election" as including an election whose due date is prescribed by a
regulation published in the Federal Register.

   Sections 301.9100-1 through 301.9100-3 provide standards that the

Commissioner will use to determine whether to grant an extension of time to make an
election.

   Section 301.9100-2 provides automatic extensions of time for making certain

elections. Section 301.9100-3 provides rules for requesting extensions of time for
regulatory elections that do not meet the requirements of § 301.9100-2.

   Requests for relief under § 301.9100-3 will be granted when the taxpayer

provides evidence to establish that the taxpayer acted reasonably and in good faith, and
that granting relief will not prejudice the interests of the government.

                                     CONCLUSION

   Based solely on the facts submitted and the representations made, we conclude

that the requirements of § 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 make an election to be
treated as a disregarded entity for federal tax purposes effective Date. X should make
the election by filing a properly executed Form 8832 with the appropriate service center.
A copy of this letter should be attached to the form.

    This ruling is contingent on the owners of X filing within 120 days of the date 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 8858, Information Return of U.S.
Persons With Respect to Disregarded Entities, such that these returns reflect the
consequences of the relief granted in this letter. A copy of this letter ruling should be
attached to any such returns.

    If applicable, X's election to be treated as disregarded as an entity separate from

its owner effective on Date is disregarded for the purpose 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 such United States
shareholder of X. See § 1.965-4(c)(2).

   Except as expressly provided herein, no opinion is expressed or implied concerning

the federal tax consequences of the facts described above under any other provision of the
Code and the regulations thereunder. In particular, no opinion is expressed or implied
regarding the application of section 367 or its underlying regulations to any step in the
transaction. 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.

   We express no opinion concerning the assessment of any interest, additions to

tax, additional amounts, or penalties for failure to file a timely 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. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

                                               Sincerely,

                                                /s/______________

                                               Laura C. Fields
                                               Branch Chief, Branch 1
                                               Office of Associate Chief Counsel
                                               (Passthroughs & Special Industries)

Enclosure

Copy of this letter for section 6110 purposes

cc: