Foreign entity receives 120 days for late disregarded-entity election

Plain-English summary

A foreign eligible entity intended to be treated as disregarded from its owner for federal tax purposes but failed to file Form 8832 on time. It asked for relief under the regulatory-election extension rules. The IRS found that the entity met the reasonable-cause standards and granted 120 days to file the election with the requested effective date. The relief is conditioned on the owners filing all required returns for open years consistently with disregarded-entity treatment, including any required Forms 8858. The ruling does not decide whether the entity otherwise qualifies for the election or excuse penalties for late tax or information returns.

Ruling snapshot

• Question: May the foreign eligible entity file a late election to be disregarded as separate from its owner?
• Outcome: Approved, with a 120-day extension and consistent-return condition
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202326007                                            Third Party Communication: None
 Release Date: 6/30/2023                                      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-118965-22
 ------------                                                 Date:
 ----------------------------------                           April 03, 2023




                                                   LEGEND

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

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

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

 Date 2       = -----------------


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

      This letter responds to a letter dated September 27, 2022, and subsequent
correspondence, submitted on behalf of X by X’s authorized representative, requesting
an extension of time under § 301.9100-3(c) 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 1 under the laws
of Country. X represents that it is a foreign entity eligible to elect to be disregarded as
an entity separate from its owner effective Date 2. However, X inadvertently failed to
timely file Form 8832, Entity Classification Election, to be treated as a disregarded entity
for federal tax purposes.
PLR-118965-22                                  2

                                     LAW & 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
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 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. Under
§ 301.7701-3(c)(1)(iii), this election will be effective on the date specified by the entity
on Form 8832 or on the date filed if no such date is specified. 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 the election 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 (including affidavits described in § 301.9100-3(e)) to establish that
the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government.
PLR-118965-22                                 3

                                      CONCLUSION

        Based solely 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 make
an election to be treated as a disregarded entity for federal tax purposes effective Date

2. 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.

       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 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.
PLR-118965-22                                  4

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



Enclosure:
      Copy of this letter for section 6110 purposes


cc: