Foreign entity received an extension for a late disregarded-entity election

Plain-English summary

A foreign eligible entity wanted to be treated as disregarded from its owner for federal tax purposes but failed to file Form 8832 on time. It asked the IRS for discretionary relief under the rules for late regulatory elections. The IRS concluded from the submitted facts and representations that the entity satisfied the applicable standards. It gave the entity 120 days to file Form 8832 with the requested effective date. The ruling also states that the election may be ignored in determining section 965 elements if recognizing it would change a United States shareholder's section 965 amounts.

Ruling snapshot

• Question: Could the foreign entity receive an extension to file Form 8832 and elect disregarded-entity status with its intended effective date?
• Outcome: approved, with 120 days to file Form 8832
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202401012                                            Third Party Communication: None
 Release Date: 1/5/2024                                       Date of Communication: Not Applicable
 Index Number: 9100.31-00
                                                              Person To Contact:
 --------------------------------------                       ----------------------, ID No. -----------------
 -------------------                                          Telephone Number:
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 ------------------------                                     Refer Reply To:
 -------------------------------------                        CC:PSI:B03
 ----------------------------------                           PLR-108517-23
                                                              Date:
                                                              October 10, 2023




Legend

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

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

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




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

        This letter responds to a letter dated April 19, 2023, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations 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 disregarded as an
entity separate from its owner for federal tax purposes effective Date. However, X 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.

PLR-108517-23                                  2

                                   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
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.

PLR-108517-23                                 3


                                      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 disregarded as an entity separate from
its owner for federal tax purposes effective Date. A copy of this letter should be
attached to X’s Form 8832.

       If applicable, the election to classify X 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 provided herein, we express or imply no opinion
concerning the federal tax consequences of any transaction or item discussed or
referenced in this letter. 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 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.

PLR-108517-23                                            4

        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)


                                                Mary Beth Carchia
                                       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


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