Foreign entity receives late disregarded-entity election relief

Plain-English summary

A foreign eligible entity wholly owned by a U.S. corporation intended to be treated as a disregarded entity but failed to timely file Form 8832. The IRS found that the entity met the standards for discretionary election relief under section 301.9100-3. It granted 120 days to file the entity classification election with the requested effective date. The relief was conditioned on the owner filing all required returns for open years consistently with disregarded-entity treatment, including any required Forms 5471, 8865, or 8858. Copies of the ruling had to accompany the election and relevant returns.

Ruling snapshot

• Question: Could the foreign single-owner entity make a late election to be disregarded for federal tax purposes?
• Outcome: Approved, subject to filing Form 8832 and consistent open-year returns within 120 days.
• 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: 201641015 Third Party Communication: None
Release Date: 10/7/2016 Date of Communication: Not Applicable
7701.00-00, 9100.31-00
Person To Contact:
------------------------------------ --------------------, ID No. ------------------
--------------------------------- Telephone Number:
---------------------------------------------------- ----------------------
------------------------------- Refer Reply To:
----------------------------------------------- CC:PSI:B01
PLR-117484-16
Date: July 1, 2016

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

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

Z = --------------------------------------------------------------------------------------

Date 1 = --------------------------------------------------------------------------------------

Date 2 = --------------------------

Dear-------------------

This responds to a letter dated May 31, 2016, 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 under the laws of Country on
Date 1. As of Date 2, X was 100% owned by Z, a U.S. corporation. X intended to be
treated as a disregarded entity for federal tax purposes effective Date 2, however, X

PLR-117484-16 2

inadvertently failed to timely file Form 8832, Entity Classification Election, to be treated
as a disregarded entity for federal tax purposes

Law

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.

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 § 301.9100-3 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

PLR-117484-16 3

treated as a disregarded entity for federal tax purposes effective Date 2. 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 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 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 X's authorized representative.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: David R. Haglund

David R. Haglund
Branch Chief, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

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