Foreign entity receives late disregarded-entity election relief

Plain-English summary

A foreign entity with one owner failed to file Form 8832 on time to elect disregarded-entity status from a redacted effective date. The IRS concluded that the entity met the standards for discretionary filing relief under Treasury Regulations sections 301.9100-1 and 301.9100-3. It granted 120 days from the ruling date to file Form 8832 and required the entity and its owner to file all required open-year returns consistently with the election, including any required Forms 8858. The relief does not determine whether the entity otherwise qualifies for the election. The ruling also states that the election is ignored for section 965 calculations if recognizing it would change a United States shareholder's section 965 elements.

Ruling snapshot

• Question: May the foreign single-owner entity file a late Form 8832 electing disregarded-entity status?
• Outcome: Approved, with a 120-day filing period and consistent-return conditions
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-2, 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: 202314005                                              Third Party Communication: None
 Release Date: 4/7/2023                                         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:B3
 ------------------------------                                 PLR-113076-22
 ---------------------------                                    Date:
                                                                January 6, 2023
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Legend


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

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

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


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

        This letter responds to a letter dated June 22, 2022, submitted on behalf of X by
its authorized representatives, 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. X represents that it is a foreign entity eligible to elect to be classified as a
disregarded entity separate from its owner 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.

                                              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. An eligible
PLR-113076-22                                  2

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 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 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.

        Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3
will be granted when the taxpayer provides the 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 Form 8832
with the appropriate service center to elect to be classified as a disregarded entity for
federal tax purposes effective Date. 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 from the date
of this letter, all required returns for all open years consistent with the requested relief.
These returns must include, but are not limited to, Form 8858, Information Return of
PLR-113076-22                                 3

U.S. Persons With Respect to Foreign Disregarded Entities and Foreign Branches, 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 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 federal 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 information
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) 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: _______________________
                                           Richard T. Probst
                                           Senior Technician Reviewer, Branch 3
                                           Office of the Associate Chief Counsel
                                           (Passthroughs & Special Industries)

Enclosure
      Copy for § 6110 purposes

cc: