Foreign entity received 120 days for a late corporate-classification election

Plain-English summary

A foreign eligible entity had initially elected disregarded-entity status and
later intended to be classified as an association taxable as a corporation, but
it did not timely file Form 8832 for the change. Based on the submitted facts and
representations, the IRS found that the entity satisfied the requirements for
regulatory-election relief. It granted 120 days to file Form 8832 with the
intended effective date. The relief was conditioned on the entity and its U.S.
owner filing all required returns for open years consistently with the election,
including Forms 5471 reflecting its consequences. The IRS expressed no view on
penalties or on whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: May the foreign entity receive additional time to elect classification as an association taxable as a corporation?
• Outcome: Approved for 120 days, subject to consistent return filing
• 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: 202409006 Third Party Communication: None
Release Date: 3/1/2024 Date of Communication: Not Applicable
Index Numbers: 9100.31-00, 7701.00-00
Person To Contact:
------------------------------------------------------------ --------------, ID No. -----------------
---------------- Telephone Number:
------------------------------------------- --------------------
--------------------------------------------- Refer Reply To:
-------------------------------- CC:PSI:B03
---------------------------------- PLR-112498-23
Date:
December 1, 2023

LEGEND

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

Country = ----------------------
Date 1 = -----------------------
Date 2 = ------------------------------

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

   This letter responds to a letter dated June 16, 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 an association
taxable as a corporation for federal tax purposes.

                                                 FACTS

    The information submitted states that X was formed under the laws of Country on

Date 1. X initially elected to be disregarded as an entity separate from its owner
effective Date 1. X represents that it is a foreign entity eligible to elect to change its
entity classification and that it intended to elect to change its entity classification to be
an association taxable as a corporation for federal tax purposes effective Date 2.
However, X failed to timely file Form 8832, Entity Classification Election, electing to be
classified as an association taxable as a corporation for federal tax purposes effective
Date 2.
PLR-112498-23 2

                              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 at least two members can elect to be classified as
either an association (and thus a corporation under § 301.7701-2(b)(2)) or a
partnership, and 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. Elections are
necessary only when an eligible entity chooses to be classified initially as other than its
default classification or when an eligible entity chooses to change its classification.

   Section 301.7701-3(b)(1) 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 it if 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 except as provided in § 301.7701-

3(c)(1)(iv) and (v), 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 on which the election is filed.

    Section 301.7701-3(c)(1)(iv) provides that if an eligible entity makes an election

under § 301.7701-3(c)(1)(i) to change its classification, the entity cannot change its
classification by election again during the sixty months succeeding the effective date of
the election. An election by a newly formed eligible entity that is effective on the date of
formation is not considered a change for purposes of § 301.7701-3(c)(1)(iv).

   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 (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.
PLR-112498-23 3

   Sections 301.9100-1 through 301.9100-3 provide the 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 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 under § 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 in good faith, and the grant of relief will not prejudice the interests of
the Government.

                                  CONCLUSION

   Based solely on the facts submitted and representations made, we conclude that

X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Consequently, we
grant X 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 classified as an association taxable as
a corporation for federal tax purposes effective Date 2. A copy of this letter should be
attached to the Form 8832.

    This ruling is contingent on X and its U.S. owner filing, within 120 days from the

date of this letter, all required returns (including amended returns) for all open years
consistent with the granted relief. These returns must include, but are not limited to,
Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, 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.

     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 material submitted
in support of the requested ruling, it is subject to verification on examination.

     Except as expressly provided herein, we express or imply no opinion concerning

the tax consequences of any aspect 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.
PLR-112498-23 4

  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.

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to your 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: