Foreign entity receives late disregarded status election

Plain-English summary

A foreign eligible entity intended to be treated as disregarded from its owner for federal tax purposes but inadvertently failed to timely file Form 8832. The entity represented that it acted reasonably and in good faith, that no hindsight was involved, and that relief would not prejudice the government. The IRS concluded that the requirements for section 301.9100-3 relief were met and granted 120 days to make the election with the requested effective date. The relief is contingent on the entity filing all required federal tax and information returns consistently with disregarded-entity treatment within the same 120-day period, including any necessary Forms 5471 and 8858.

Ruling snapshot

• Question: May the foreign entity make a late election for disregarded-entity treatment?
• Outcome: Yes, with 120 days to file Form 8832 and all required consistent returns.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                    Department of the Treasury
                                                            Washington, DC 20224

Number: 201606010                                           Third Party Communication: None
Release Date: 2/5/2016                                      Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00
                                                            Person To Contact:
-----------------------------                               ------------------, ID No. ----------------
--------------------------------------------                Telephone Number:
---------------------------------                           --------------------
------------------------                                    Refer Reply To:
---------------------                                       CC:PSI:1
                                                            PLR-123588-15
                                                            Date:
                                                            October 19, 2015




LEGEND

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

D                 =        ----------------

Country           =        ---------



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

This is in response to a letter dated June 26, 2015, and subsequent correspondence,
submitted on behalf of X, 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 treated as a disregarded entity for federal tax purposes.

FACTS

According to the information submitted, X was formed on D under the laws of Country.
X represents that it is a foreign entity eligible to elect to be classified as a disregarded
entity for federal tax purposes effective D. X intended to be treated as a disregarded
entity for federal tax purposes effective D. However, X inadvertently failed to timely file
Form 8832, Entity Classification Election, to elect to be treated as a disregarded entity
for federal tax purposes.

X represents that granting relief to allow it to file a late election to be treated as a
disregarded entity will not prejudice the interest of the government. In addition, X
represents that it acted reasonably and in good faith, and that no hindsight is involved.
PLR-123588-15                                  2


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 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) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with a single owner having limited liability
may elect to be treated as a disregarded entity pursuant to the rules of § 301.7701-3(c).
Section 301.7701-3(c) provides that an entity classification election must be filed on
Form 8832 and can be effective up to 75 days prior to the date the form is filed or up to
12 months after the date the form is filed.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time 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, 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 the 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
301.9100-1(a).

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.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides
evidence to establish that the taxpayer acted reasonably and in good faith, and that
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 §§ 301.9100-1 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 make an
election to be treated as a disregarded entity for federal tax purposes effective D. X
PLR-123588-15                                  3

must make the election by filing a properly executed Form 8832 with the appropriate
service center. A copy of this letter should be attached to the form.

This ruling is contingent on X filing within 120 days of this letter all required federal
income tax and information returns (including amended returns) 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, and (ii) Forms 8858, Information Return of U.S. Persons With Respect To
Foreign 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 forms.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                       Sincerely,



                                       Curt G. Wilson
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)


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



Enclosures (2)
      Copy of this letter
      Copy for § 6110 purposes


cc: