Foreign entity received more time to elect disregarded status

Plain-English summary

A foreign entity with one shareholder intended to be disregarded from its owner for federal tax purposes but inadvertently failed to timely file Form 8832. The IRS concluded that the regulatory late-election requirements were satisfied and granted 120 days to file the election. The relief was conditioned on filing all required open-year returns consistently with disregarded status. Any election that would change a United States shareholder's Section 965 elements would be disregarded for that purpose.

Ruling snapshot

• Question: Could the foreign single-owner entity receive more time to file Form 8832 and elect disregarded status?
• Outcome: approved
• Key authorities: IRC §§ 965, 7701; Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202423003                                            Third Party Communication: None
 Release Date: 6/7/2024                                       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-117760-23
 -----------------------------                                Date:
 --------------------------------------                       March 13, 2024




                                                  LEGEND

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

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

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


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



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

This letter responds to a letter dated September 5, 2023, submitted on behalf of X by its
authorized representative, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for X to file an entity classification election to
be classified as a foreign disregarded entity for federal tax purposes.
PLR-117760-23                                  2

                                           FACTS

The information submitted states that X was formed under the laws of Country on Date
with A as the sole shareholder. Due to inadvertence, X failed to timely file Form 8832,
Entity Classification Election, electing foreign disregarded entity status effective Date.

                                    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. An eligible entity with at least two
members can elect to be classified as either an association 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 that an eligible entity may elect to be classified
other than as provided under § 301.7701-3(b) or 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 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 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 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 rules governing automatic extensions of time for making certain
PLR-117760-23                                 3

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.

Under § 301.9100-3, a request for relief will be granted when the taxpayer provides
evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted
reasonably and in good faith, and (2) granting relief will not prejudice the interests of the
government.

                                      CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that
the requirements of § 301.9100-3 have been satisfied. Accordingly, X is granted an
extension of 120 days from the date of this letter to file Form 8832 with the appropriate
service center to elect under § 301.7701-3 to be classified as a foreign disregarded
entity for federal tax purposes effective Date. A copy of this letter should be attached to
the Form 8832.

This ruling is contingent upon X filing, within 120 days from the date of this letter, all
required federal income tax returns and information returns (including amended returns)
consistent with the relief granted in this letter. These returns include, but are not limited
to, Forms 8858, Returns for US Persons with Respect to Foreign Disregarded Entities,
and Forms 8865, Return of U.S. Persons with Respect to Certain Foreign Partnerships,
for all open taxable years consistent with X having made a timely election effective
Date. If this condition is not met, then this ruling is null and void. A copy of this letter
should be attached to any such returns.

If applicable, this entity classification election to classify X as a foreign disregarded
entity 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 United States shareholder. See § 1.965-4(c)(2).

Except as specifically set forth above, we express or imply no opinion concerning the
federal tax consequences of the facts described above under any other provision of the
Code. Specifically, we express or imply no opinion regarding whether 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.
PLR-117760-23                                       4

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.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent
to X’s authorized representative.

                                                 Sincerely,


                                                 Holly Porter
                                                 Associate Chief Counsel
                                                 (Passthroughs & Special Industries)


                                                 By:__/s/ Joy C. Spies______________
                                                 Joy C. Spies
                                                 Senior Technician Reviewer, Branch 1
                                                 Office of the Associate Chief Counsel
                                                 (Passthroughs & Special Industries)

Enclosure
      Copy of letter for § 6110 purposes



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