Foreign entity received 120 days for late corporate classification election

Plain-English summary

A foreign eligible entity intended to elect association status, making it taxable as a corporation for U.S. federal tax purposes, but failed to file Form 8832 for the intended effective date. Based solely on the submitted facts and representations, the IRS found that the regulatory-relief requirements were met and granted 120 days to file the election. The relief is conditioned on the entity and its owners filing all required returns for open years consistently with the election, potentially including Forms 5471, 8865, and 8858. If applicable, the election is disregarded in calculating U.S. shareholders' Section 965 elements when it otherwise would change those amounts. The ruling did not decide whether the entity was otherwise eligible to elect or whether penalties applied to late returns.

Ruling snapshot

• Question: May the foreign entity receive more time to file Form 8832 electing to be classified as an association taxable as a corporation?
• Outcome: approved, with conditions
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 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: 202416008                              Third Party Communication: None
 Release Date: 4/19/2024                        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:B03
                                                PLR-114875-23
                                                Date:
                                                January 18, 2024




 LEGEND


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

 Country = --------

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




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

       This letter responds to a letter dated July 27, 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 for X to file an election under § 301.7701-3 to be classified as an
association taxable as a corporation for federal tax purposes.

                                          FACTS

       According to the information submitted, X was formed on Date under the laws of
Country. X represents that it is a foreign entity eligible to elect to be classified as an
association taxable as a corporation for federal tax purposes effective Date. However,
X failed to file Form 8832, Entity Classification Election, electing to be classified as an
association taxable as a corporation for federal tax purposes effective Date.
PLR-114875-23                                   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 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 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 the 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 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 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) defines a regulatory
election to include an election whose due date is prescribed by a regulation published in
the Federal Register.

      Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections.

      Section 301.9100-3 sets forth 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 request for relief will be
granted when the taxpayer provides evidence (including affidavits described in
PLR-114875-23                                 3

§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the
taxpayer acted reasonably and in good faith, and (2) 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. As a result, 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 be classified as an association taxable as a
corporation for federal tax purposes effective Date. A copy of this letter should be
attached to the Form 8832.

        This ruling is contingent on X and the owners of X filing within 120 days from 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, the following forms: (i) Form
5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, (ii) Form 8865, Return of U.S. Persons With Respect to Certain Foreign
Partnerships, and (iii) 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, X’s election to be classified as an association taxable as a
corporation 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 set forth above, we express or imply no opinion concerning
the facts of this case under any other provision of the Code. 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 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.
PLR-114875-23                                             4


       This ruling is directed only to the taxpayer that requested 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 Associate Chief Counsel
                                                 (Passthroughs & Special Industries)




------------------------------------------------------
---------------------------
Enclosure:



cc:
         ---------------------------------------------------