120-day extension for a foreign entity to elect disregarded (check-the-box) status

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. It could do that by filing a "check-the-box" election on Form 8832, but it inadvertently missed the filing deadline. Under the Section 301.9100-3 regulations, the IRS can grant more time for a missed regulatory election if the taxpayer acted reasonably and in good faith and letting it elect late will not prejudice the government. The IRS concluded those conditions were met and gave the entity 120 days to file Form 8832 effective on the originally intended date. The relief is conditioned on the entity and its owner filing all consistent U.S. returns and information returns (including Forms 8858 and 5471); if they do not, the ruling is void.

Ruling snapshot

• Question: Should a foreign single-owner entity that missed the deadline get an extension to elect disregarded status under § 301.7701-3?
• Outcome: approved (120-day extension granted)
• Key authorities: Treas. Reg. § 301.7701-3(b), (c); Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202438013 Third Party Communication: None
Release Date: 9/20/2024 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00 Person To Contact:
--------------------, ID No. -----------------
------------------------------------- Telephone Number:
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--------------------- Refer Reply To:
---------------------------- CC:PSI:B01
PLR-124838-23
Date:
June 24, 2024

                                              LEGEND

X = -----------------------------------------------------------
------------------------------
A = -----------------------------------------------------------
-------------------------
Country = ---------------------------

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

Dear ---------:

This letter responds to a letter submitted December 19, 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(c) to be classified as a disregarded
entity for federal tax purposes, effective Date.

                                               FACTS

According to the information submitted, X was formed under the laws of Country on
Date as a foreign eligible entity for federal tax purposes. Since Date, all shares in X
have been owned by A. X inadvertently failed to timely file Form 8832, Entity
Classification Election, to elect to be treated as a disregarded entity 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 income tax purposes. An eligible entity with at least
two members can elect to be classified as either an association (and thus taxed as 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 provided under § 301.7701-3(b), or to change its classification, by
filing Form 8832 with the IRS Service Center designated on the form.

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 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 has discretion to 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
the term "regulatory election" as including 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 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 rules for requesting extensions of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

Section 301.9100-3(a) provides that a request for relief will be granted when the
taxpayer provides 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 faith, and (2) granting relief will not prejudice the government.

                                  CONCLUSION

Based solely on the information submitted and the 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 elect under § 301.7701-3 to be treated
as a disregarded entity for federal tax purposes effective Date. A copy of this letter
should be attached to the Form 8832 filed for X.

This ruling is contingent upon 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) consistent with the requested relief granted in this letter. These
returns include, but are not limited to, Forms 8858, Return of U.S. Persons with Respect
to Foreign Disregarded Entities and Foreign Branches, and Forms 5471, Return of U.S.
Persons with Respect to Certain Foreign Corporations, for all required taxable years
such that these forms reflect the consequences of the relief granted in this letter. 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 election 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) of the Income Tax Regulations.

Except as specifically set forth above, we express or imply no opinion concerning the
federal 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 the
extension of time for making an election is not a determination that 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.

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.

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 the office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

In accordance with the 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/______________
                                       Christiaan T. Cleary
                                       Assistant to the Branch Chief, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

Enclosure
Copy of Letter for § 6110 purposes

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