Seven foreign entities receive 120 days for late disregarded-entity elections

Plain-English summary

Seven foreign eligible entities failed to timely file Forms 8832 electing disregarded-entity status. Based solely on the submitted facts and representations, the IRS concluded that each entity met the requirements for discretionary relief under the Section 301.9100 regulations and granted 120 days to file the election for its requested effective date. The relief is conditioned on the entities and their owners filing all required returns for open years consistently with the elections within the same period, including Forms 5471 or 8858 where required. An election is disregarded when determining Section 965 elements if recognizing it would change a U.S. shareholder's Section 965 amounts. The ruling grants time to file but does not independently determine that any entity is otherwise eligible to make its election.

Ruling snapshot

• Question: Should seven foreign eligible entities receive extensions to make late elections to be treated as disregarded entities?
• Outcome: approved; each entity received a 120-day extension
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202327007                                              Third Party Communication: None
Release Date: 7/7/2023                                         Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.31-00
                                                               Person To Contact:
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Legend

A                         =      ----------------------------------------------
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C                         =      ----------------------------------------------------------------------------
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 F                       =       -----------------------------------------------------
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 G                       =       --------------------------------
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 Country 1               =       ------------

 Country 2               =       ------------------

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

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

 Date 3                  =       ----------------

 Date 4                  =       --------------------------

 Date 5                  =       ----------------

 Date 6                  =       ------------------


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

       This letter is in response to your request dated September 26, 2022, submitted
on behalf of A, B, C, D, E, F and G by their authorized representatives, requesting an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations
for each of A, B, C, D, E, F and G to file an election under § 301.7701-3 to be classified
as a disregarded entity for federal tax purposes.
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                                            FACTS

       The information submitted states that A was formed on Date 1 under the laws of
Country 1; B was formed Date 2 under the laws of Country 1; C, D, and E, were formed
on Date 3 under the laws of Country 1; F was formed on Date 4 under the laws of
Country 1; and G was formed on Date 5 under the laws of Country 2. A, B, C, D, E, and
F represent that as of Date 6, each was a foreign entity eligible to elect to be classified
as a disregarded entity for federal tax purposes. G represents that as of Date 5, it was a
foreign entity eligible to elect to be classified as a disregarded entity for federal tax
purposes. However, A, B, C, D, E, F and G failed to timely file a Form 8832, Entity
Classification Election, electing to be classified as a disregarded entity for federal tax
purposes for Date 6 and Date 5, respectively.

                                    LAW AND ANALYSIS

        Section 301.7701-3(a) 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 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 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, 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 appropriate 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 date specified on Form 8832 cannot be more than 75 days prior to the date on
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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 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), 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 facts submitted and the representations made, we conclude
that A, B, C, D, E, F and G have satisfied the requirements of §§ 301.9100-1 and
301.9100-3. As a result, A, B, C, D, E, F and G are granted an extension of time of 120
days from the date of this letter to each file Form 8832 with the appropriate service
center to elect to be classified as a disregarded entity effective Date 6 and Date 5,
respectively. A copy of this letter should be attached to each Form 8832.

         This ruling is contingent on A, B, C, D, E, F and G and their respective owner
filing, within 120 days 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 5471,
Information Return of U.S. Persons With Respect to Certain Foreign Corporations and
Form 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 ruling should be attached to any such returns.

       If applicable, A’s, B’s, C’s, D’s, E’s, F’s, and G’s election to be classified as a
disregarded entity effective Date 6 and Date 5, respectively, is disregarded for purposes
of determining the amounts of all § 965 elements of all United States shareholders of A,
B, C, D, E, F and G 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.
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       Except as specifically set forth above, we express or imply no opinion 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.

      The rulings contained in this letter are based upon information and
representations submitted by the taxpayers 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 request for rulings, it is subject to verification on
examination.

       These ruling are directed only to the taxpayers requesting it. Section 6110(k)(3)
of the Code provides that they may not be used or cited as precedent.
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        Pursuant to a power of attorney on file with this office, we are sending a copy of
this letter to A’s, B’s, C’s, D’s, E’s, and F’s authorized representatives.


                                         Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)


                                            /s/ Margaret Burow
                                   By:
                                         Margaret Burow
                                         Senior Counsel, Branch 3
                                         Office of the Associate Chief Counsel
                                         (Passthroughs & Special Industries)


Enclosure:
      Copy for § 6110 purposes
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