IRS gives three foreign entities 120 more days to elect to be disregarded for U.S. tax purposes

Plain-English summary

A foreign business entity with a single owner can elect, under the "check-the-box" rules, to be disregarded as separate from its owner for U.S. federal tax purposes (so its income and assets are treated as the owner's). That election is made by filing Form 8832 by a deadline. Here three foreign entities (formed in three different countries and owned within the same group) meant to elect disregarded-entity status effective a particular date but failed to file Form 8832 on time. They asked the IRS for an extension under Treas. Reg. § 301.9100-3, the general relief provision for late regulatory elections. The IRS concluded they acted reasonably and in good faith and that relief would not prejudice the government, and granted each entity 120 days from the date of the letter to file Form 8832, conditioned on filing all required consistent returns (including Forms 8858 for foreign disregarded entities). The letter notes the relief does not change any section 965 ("transition tax") amounts of U.S. shareholders if it otherwise would. The IRS expressed no opinion on whether the entities are otherwise eligible to make the election. This is routine 9100 relief covering three related entities in one letter.

Ruling snapshot

• Question: May three foreign entities get an extension under Treas. Reg. § 301.9100-3 to file late Form 8832 elections to be disregarded as separate from their owner?
• Outcome: Approved (120-day extension granted to each)
• Key authorities: Treas. Reg. § 301.7701-3(a), (b)(2), (c)(1); Treas. Reg. §§ 301.9100-1 and 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: 202332006                                              Third Party Communication: None
 Release Date: 8/11/2023                                        Date of Communication: Not Applicable

 Index Numbers: 7701.00-00, 9100.00-00,                         Person To Contact:
               9100.31-00                                       ----------------------, ID No. -----------------
                                                                Telephone Number:
 --------------------------------                               --------------------
 ---------------------------------------                        Refer Reply To:
 ------------------------------------------------------------   CC:PSI:B3
 -----------------------                                        PLR-122233-22
 ------------------------------------------                     PLR-122234-22
 ------------------                                             PLR-122235-22
 -------------------------------------
 ----------------------------------                             Date:
                                                                May 15, 2023



Legend

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

Y                 =         ----------------------------------------------
--------------------------------------------------

Z                 =         ---------------------------------------------------
--------------------------------------------------

A                 =         ---------------------
----------------------------------------------------

Country 1         =        ---------------------------

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

Country 3         =        ---------------

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

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

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

Date 4            =        ----------------------
PLR-122233-22 through PLR-122235-22




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

       This letter responds to a letter dated November 11, 2022, and subsequent
correspondence, submitted on behalf of X, Y, and Z by their authorized representatives,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for each of X Y, and Z 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 1
on Date 1, Y was formed under the laws of Country 2 on Date 2, and Z was formed
under the laws of Country 3 on Date 3. Each of X, Y and Z represents that it is a foreign
entity eligible to elect to be disregarded as an entity separate from its owner for federal
tax purposes effective Date 4. However, each of X, Y and Z failed to timely file Form
8832, Entity Classification Election, electing to be disregarded as an entity separate
from its owner for federal tax purposes effective Date 4.

                                      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
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

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PLR-122233-22 through PLR-122235-22
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 in exercising the
Commissioner's discretion may 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 not more than 6 months except in the case of a taxpayer who is abroad),
under all subtitles of the Internal Revenue Code (Code), except subtitles E, G, H, and I.

       Section 301.9100-1(b) provides that the term “regulatory election” includes an
election whose due date is prescribed by a regulation published in the Federal Register.

       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, Y and Z have satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a
result, each of X, Y, and Z 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 disregarded
as an entity separate from its owner for federal tax purposes effective Date 4. A copy of
this letter should be attached to each Form 8832.

        This ruling is contingent on X, Y, Z, and A 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
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, the election to classify each of X, Y, and Z as a disregarded entity
effective Date 4 is disregarded for purposes of determining the amounts of all § 965
elements of all United States shareholders of each of X, Y, and Z 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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PLR-122233-22 through PLR-122235-22
       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.

        Further, we express or imply no opinion concerning the assessment of any
interest, additions to tax, additional amounts, or penalties for failure to file a timely
income tax or information return with respect to any taxable year that may be affected
by this ruling. For example, we express or imply 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 taxpayers 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 taxpayers 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, Y’s, and Z’s authorized representatives.


                                          Sincerely,


                                           Associate Chief Counsel
                                          (Passthroughs & Special Industries)



                                      By: _______________________
                                          Mary Beth Carchia
                                          Senior Technician Reviewer, Branch 3
                                          Office of the Associate Chief Counsel
                                          (Passthroughs & Special Industries)


Enclosure:
      Copy of this letter for § 6110 purposes

cc:

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