Foreign entity received 120 days for late disregarded-entity election

Plain-English summary

A foreign eligible entity intended to elect treatment as an entity disregarded from its owner but did not timely file Form 8832. The IRS concluded that the entity satisfied the standards for discretionary election relief. It granted 120 days from the ruling date to file Form 8832 with a copy of the letter and make the election effective on the requested date. The relief is contingent on the owners filing all required original and amended returns for open years within the same period, including applicable Forms 5471, 8865, and 8858. The election is ignored for Section 965 calculations if it otherwise would change a U.S. shareholder's Section 965 elements, and the IRS expressed no view on penalties for late returns.

Ruling snapshot

• Question: May the foreign entity receive extra time to elect disregarded-entity status on Form 8832?
• Outcome: approved for 120 days, subject to return-filing conditions
• 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: 202417005                                              Third Party Communication: None
 Release Date: 4/26/2024                                        Date of Communication: Not Applicable
 Index Number: 7701.00-00, 9100.00-00,
               9100.31-00                                       Person To Contact:
                                                                -------------------------, ID No. -----------------
 ------------------------------                                 -----------------------------------------------------
 --------------------                                           Telephone Number:
 ------------------------------------------------------------   --------------------
 ----------------------                                         Refer Reply To:
 ---------------------------                                    CC:PSI:B01
 ----------------------------                                   PLR-114923-23
                                                                Date:
                                                                January 24, 2024




                                                     LEGEND

 X                   =    -----------------------------
                          -----------------------
 Date                =    -----------------------
 Country             =    ---------------------------


Dear ---------:

This letter responds to a letter dated July 28, 2023, and subsequent correspondence,
submitted on behalf of X by X's authorized representative, 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 entity disregarded from its owner for federal tax
purposes.

                                                      FACTS

According to the information and representations submitted, X was formed on Date under
the laws of Country. X represents that X was a foreign entity eligible to elect to be
classified as a disregarded entity for federal tax purposes as of Date. However, X failed to
timely file a Form 8832, Entity Classification Election, electing to be classified as a
disregarded entity effective Date.
-
 PLR-114923-23                                   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, in part, 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, 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.

Section 301.7701-3(c)(1)(iii) provides, in part, 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 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 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) defines the term “regulatory election” as an
election whose due date is prescribed by a regulation published in the Federal Register,
or a revenue ruling, revenue procedure, notice, or announcement published in the Internal
Revenue Bulletin.

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.
-
 PLR-114923-23                                 3


Section 301.9100-3(a) provides that a request 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 (1) the taxpayer
acted reasonably and in good fith, 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 the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. 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 make an election under § 301.7701-3 to be disregarded
as an entity separate from its owner effective Date. A copy of this letter should be
attached to the Form 8832.

This ruling is contingent on the owners of X filing within 120 days of this letter all required
returns and amended returns for all open years consistent with the requested relief. These
returns may include, but are not limited to, the following forms: (i) Forms 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
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 should be attached to any such returns.

If applicable, X’s election is disregarded for purposes of determining the amounts of all
section 965 elements of all United States shareholders of X if the election otherwise would
change the amount of any section 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 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.

We express no opinion concerning the assessment of any interest, additions to tax,
additional amounts, or penalties for failure to file a timely tax or information return with
respect to any taxable year that may be affected by this ruling. For example, we express
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 ruling request, it is subject to verification on examination.
PLR-114923-23                                  4


Under a power of attorney on file with this office, we are sending a copy of this letter to
X's authorized representatives.




                                        Sincerely,



                                        Joy C. Spies
                                        Senior Technician Reviewer, Branch 1
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)


Enclosure
      Copy for § 6110 purposes




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