Foreign entity receives late disregarded status election

Plain-English summary

A foreign eligible entity failed to timely file a properly executed Form 8832 electing to be disregarded from its owner for federal tax purposes. The entity represented that it acted reasonably and in good faith and that relief would not prejudice the government. The IRS found that the requirements of section 301.9100-3 were satisfied and granted 120 days to file the election with the requested effective date. The relief is contingent on the owner filing all required returns for open years consistently with disregarded-entity treatment, including any necessary Forms 5471, 8865, and 8858.

Ruling snapshot

• Question: May the foreign eligible 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: 201607007                                                 Third Party Communication: None
Release Date: 2/12/2016                                           Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
                                                                  Person To Contact:
----------------------                                            ----------------------------,
---------------------------------------------                     ID No. ------------------
----------------------------                                      Telephone Number:
-------------------------                                         ----------------------
-------------                                                     Refer Reply To:
                                                                  CC:PSI:B01
                                                                  PLR-117081-15
                                                                  Date:
                                                                  October 28, 2015




LEGEND

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

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

D1                =        ----------------------

D2                =        ------------------




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

       This responds to a letter dated May 11, 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 organized under the laws of
Country on D1. X represents that it is a foreign entity eligible to elect to be classified as

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a disregarded entity effective D2. X failed to timely file a properly executed Form 8832,
Entity Classification Election, to be treated as a disregarded entity for federal tax
purposes effective D2.

       X represents that it acted reasonably and in good faith. X also represents that
granting the relief requested will not prejudice the interests of the government.

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. 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) 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 member 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.

        Section 301.7701-3(c)(2)(i) provides that an entity classification election must be
signed by (A) each member of the electing entity who is an owner at the time the
election is filed; or (B) any officer, manager, or member of the electing entity who is
authorized (under local law or the entity's organizational documents) to make the
election and who represents to having such authorization under penalties of perjury.
Section 301.7701-3(c)(2)(ii) provides that, if an entity classification election is to be
effective for any period prior to the time that it is filed, each person who was an owner
between the date the election is to be effective and the date the election is filed, and
who is not an owner at the time the election is filed, must also sign the election. Section
301.7701-3(c)(2)(iii) generally provides that if an entity classification election is made to
change the classification of an entity, each person who was an owner on the day before
the effective date of the election, and who is not an owner at the time the election is
filed, must also sign the election.

       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

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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 an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making 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 D2. X
should 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 the owner of X filing within 120 days of this letter all
required returns, including 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.

       Except as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code.

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      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.

         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to X’s authorized representatives.


                                           Sincerely,

                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)




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


Enclosures (2)

       Copy of this letter
       Copy of this letter for section 6110 purposes