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

Plain-English summary

A foreign entity wanted to elect to be treated as an "association taxable as a corporation" for U.S. federal tax purposes, the opposite of the disregarded-entity choice. That election is made by filing Form 8832, the "check-the-box" form, by a deadline, and the entity 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 and that granting relief would not prejudice the government. The IRS found the 9100 standards satisfied and gave the entity 120 days from the date of the letter to file the Form 8832 electing corporate treatment, effective as of the originally intended date. The relief is conditioned on the owners filing all required returns and amended returns for open years consistent with the election (for example, Forms 5471, 8865, or 8858). As usual, the IRS noted that granting an extension does not decide whether the entity is otherwise eligible to make the election, and it expressed no opinion on the section 965 elements or on any penalties. This is routine but important cleanup for cross-border tax structuring when an entity-classification election is filed late.

Ruling snapshot

• Question: Should the foreign entity get an extension of time under Treas. Reg. § 301.9100-3 to file a late Form 8832 election to be treated as an association taxable as a corporation?
• Outcome: approved (120-day extension to file Form 8832, effective as of the intended date)
• Key authorities: Treas. Reg. §§ 301.7701-3(a), (b)(2), (c)(1), 301.9100-1 through -3; § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202305008 Third Party Communication: None
Release Date: 2/3/2023 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-109897-22
Date:
November 08, 2022

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

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

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

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

This responds to a letter dated April 26, 2022, provided on behalf of X by X's authorized
representative, requesting that the Service grant X 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 an association taxable as a corporation for federal tax
purposes, effective Date.

                                                 FACTS

According to the information submitted, X was formed under the laws of Country on
Date. X represents that it is a foreign entity eligible to elect to be classified as a
association taxable as a corporation. However, X inadvertently failed to timely file Form
8832, Entity Classification Election, to elect to be treated as an association taxable as a
corporation for federal tax purposes effective Date.

X represents that it acted reasonably and in good faith. X also represents that granting
the relief requested will not prejudice the interests of the government.

LAW AND ANALYSIS

Section 301.7701-3(a) of the income tax regulations 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. An
eligible entity with at least two members can elect to be classified as either an
association 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, 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 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 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 IRS Service Center designated on the form.

Section 301.7701-3(c)(1)(iii) provides, in part, 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. If
an election specifies an effective date more than 75 days prior the date it was filed, it
will be effective 75 days prior the date it was filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
6 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 an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

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.

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) granting relief will not prejudice the interests of the government.

                                  CONCLUSION

Based solely on the information 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 a
Form 8832 with the appropriate service center to elect to be treated as an association
taxable as a corporation for federal tax purposes effective Date. A copy of this letter
should be attached to the Form 8832 filed for X.

This ruling is contingent on the owners of X filing within 120 days of this letter all
required returns and amended returns for all open years consistent with the requested
relief. These returns may include, but are not limited to, the following forms: (i) Forms
5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, (ii) Forms 8865, Return of U.S. Persons With Respect to Certain Foreign
Partnerships, and (iii) Forms 8858, Information Return of U.S. Persons With Respect to
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, this election 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 such United States
shareholder. See § 1.965-4(c)(2).

Except as specifically set forth above, we express or imply no opinion concerning the
federal tax consequences of any aspect 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.

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.

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.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                   Sincerely,


                                   Holly Porter
                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)



                                By: ____________/s/_____________
                                    Laura Fields
                                    Chief, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs and Special Industries)

Enclosure
Copy for § 6110 purposes

cc: