120-day extension to file a late check-the-box election treating a foreign entity as disregarded

Plain-English summary

A foreign entity with a single owner wanted to be treated as a disregarded entity (ignored as separate from its owner) for U.S. federal tax purposes. That requires filing Form 8832, the entity-classification "check-the-box" election, by a deadline, and the entity missed it. It asked the IRS for extra time under the Section 301.9100-3 relief rules. The IRS concluded the entity met the standards for relief and granted 120 days from the date of the letter to file Form 8832 with the intended effective date. The relief is conditioned on the entity and its owner filing all required returns (including Form 8858 for foreign disregarded entities) for open years consistent with the election. The IRS cautioned that granting more time to elect is not a finding that the entity actually qualifies to make the election.

Ruling snapshot

• Question: Should the IRS grant more time to file a late Form 8832 electing foreign disregarded-entity treatment?
• Outcome: Approved (120-day extension granted under Treas. Reg. § 301.9100-3)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1 through 301.9100-3; § 965; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202427003
Third Party Communication: None
Release Date: 7/5/2024
Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.31-00,
7701.00-00
Person To Contact:
--------------, ID No. --------
[Taxpayer name and address redacted]
Telephone Number:
--------------
Refer Reply To:
CC:PSI:B03
PLR-120375-23
Date:
April 10, 2024

Legend

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

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

This letter is in response to a letter dated October 11, 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 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 a Form 8832, Entity Classification Election, electing to be disregarded as an entity separate from its owner for federal tax purposes effective Date.

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 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 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) 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 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.

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.

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 one hundred twenty (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 the Form 8832.

This ruling is contingent on X and its owner filing, within 120 days from the date of this letter, all required federal income tax returns and information returns (including amended returns) for all open years consistent with the requested relief. These returns must include, but are not limited to, 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 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 set forth above, we express or imply no opinion concerning the federal tax consequences of 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.

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 request for rulings, it is subject to verification on examination.

We are directing the ruling only to the taxpayer who requested 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, we are sending a copy of this letter to X's authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By:
Robert D. Alinsky
Branch Chief, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure:
Copy of this letter for § 6110 purposes
cc: --------------
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