Foreign entity gets extra time to file a late "disregarded entity" classification election

Plain-English summary

A foreign business entity with a single owner wanted to be treated as a
"disregarded entity" for U.S. tax purposes, meaning it is ignored as
separate from its owner. To get that treatment it had to file Form 8832
(the check-the-box election) by a deadline, but it missed the deadline by
inadvertence. It asked the IRS for late relief under the § 301.9100
regulations, which let the Commissioner extend the time for certain
elections when the taxpayer acted reasonably and in good faith and the
government is not harmed. The IRS granted the relief, giving the entity
120 days to file the Form 8832 with the effective date it originally
wanted. The ruling is contingent on the entity and its owners filing any
required (including amended) returns consistent with that effective date.

Ruling snapshot

• Question: Should a foreign eligible entity get an extension of time
  to file a late Form 8832 electing disregarded-entity classification?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. §§ 301.9100-1, 301.9100-3;
  § 301.7701-3(c); § 301.7701-2(b)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202306002
Release Date: 2/10/2023
Index Number: 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------------, ID No. ----------------
Telephone Number:

Refer Reply To:
CC:PSI:01
PLR-107445-21
Date:
November 14, 2022

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

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

d1 = ------------------------

Dear --------:

This letter responds to a letter dated March 31, 2021, and subsequent correspondence,
submitted on behalf of X, 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 an entity disregarded from its owner under §
301.7701-3(c), effective d1.

                                            Facts

Based on the material submitted, X is an entity formed under the laws of Country. X
represents that it is not classified as a corporation under § 301.7701-2(b)(1), (3), (4),
(5), (6), (7) or (8). X intended to be treated as an entity disregarded from its owner for
U.S. federal tax purposes effective d1. However, due to inadvertence, X failed to file a
timely Form 8832, Entity Classification Election.

                                       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.

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) 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.

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

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 to elect to be classified as an entity disregarded from
its owner for federal tax purposes, effective d1. A copy of this letter should be attached
to the Form 8832. A copy is enclosed for that purpose.

This ruling is contingent on X and its owners filing, within 120 days from the date of this
letter, any required returns (including amended returns) consistent with the requested
relief being effective on d1. A copy of this letter should be attached to any such returns
or amended returns. If this condition is not met, then this ruling is null and void. A copy
of this letter should be attached to any such returns.

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.

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).

The ruling contained in this letter is based upon information and representations
submitted by X 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.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter to X's authorized representative.

                                   Sincerely,

                                   Holly Porter
                                   Associate Chief Counsel
                                   (Passthroughs and 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: