Foreign entity gets late-election relief to be taxed as a corporation

Plain-English summary

A foreign business entity meant to be treated as a corporation for U.S. tax purposes from the day it was formed, which requires filing Form 8832 (an "entity classification" or "check-the-box" election). It never filed the form on time. In practice, though, everyone involved had treated the entity as a foreign corporation all along, including filing the annual Form 5471 information returns for it. The entity asked the IRS for more time under the § 301.9100-3 relief rules. The IRS agreed, finding the taxpayer acted reasonably and in good faith and that relief would not harm the government, and gave the entity 120 days from the date of the letter to file the Form 8832 electing corporate treatment retroactive to formation. The IRS noted that granting more time does not itself decide whether the entity was actually eligible to make the election.

Ruling snapshot

• Question: May a foreign eligible entity get an extension of time under § 301.9100-3 to file a late Form 8832 electing to be classified as a corporation, effective from its formation date?
• Outcome: Approved (120-day extension granted).
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202317009
Third Party Communication: None
Release Date: 4/28/2023
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00
Person To Contact:
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Refer Reply To:
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PLR-115138-22
Date:
January 30, 2023

LEGEND

X = ------------------------------------------------------------------------------------------------
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Country = ---------

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

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

This responds to a letter dated August 2, 2022, submitted on behalf of X by X's authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an entity classification election under § 301.7701-3 to be classified as a corporation for federal tax purposes.

FACTS

The information submitted states that X is a foreign eligible entity formed under the laws of Country on Date 1. X is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8). X intended to be classified as a corporation effective on Date 1. However, X did not timely file Form 8832, Entity Classification Election, electing to be treated as a corporation.

X represents that all relevant parties have treated X as a foreign corporation for federal tax purposes effective Date 1 and thereafter and have filed Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, with respect to X for each relevant taxable year.
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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 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 that 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 to elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Under § 301.7701-3(c)(1)(iii), the effective date specified on the Form 8832 can not be more than seventy-five (75) days prior to the date the form is filed and can not be more than twelve (12) months after the date on which the form is 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
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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 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 corporation for federal tax purposes effective Date 1. X must 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 directed only to the taxpayer requesting it. Section 6110(k)(3) of the Internal Revenue Code (Code) provides that it may not be used or cited as precedent.

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 is accompanied by a penalty of perjury statement executed by the 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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X's authorized representatives.

Sincerely,

Holly Porter
Associate Chief Counsel
(Passthroughs & Special Industries)

By:
Caroline E. Hay
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes
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