Foreign entity receives extra time to elect disregarded status

Plain-English summary

A foreign eligible entity with one owner intended to be treated as disregarded for federal tax purposes but did not timely file a valid Form 8832. Its owner consistently filed U.S. tax returns reflecting that treatment, and the entity represented that the request did not involve hindsight, prejudice the government, or reduce aggregate tax liability for the affected years. The IRS found that the requirements for discretionary relief were satisfied and granted 120 days to file the election effective as of the requested date. The relief was contingent on the entity and its owner filing all required, consistent federal income tax and information returns within the same period, including required Forms 8858.

Ruling snapshot

• Question: May the foreign eligible entity receive extra time to elect disregarded-entity status effective as of its requested date?
• Outcome: approved
• Key authorities: IRC § 6110(k)(3); Treas. Reg. §§ 301.7701-3, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201741003                                            Third Party Communication: None
Release Date: 10/13/2017                                     Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
                                                             Person To Contact:
-------------------------------                              -----------------------, ID No. --------------
----------------------------------                           Telephone Number:
---------------------------------------------                ----------------------
----------------------------                                 Refer Reply To:
                                                             CC:PSI:B01
                                                             PLR-101755-17
                                                             Date:
                                                             July 06, 2017




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

Y            = ----------------------------------------------------------------------------------------------------------------------

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

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

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

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

This responds to a letter dated December 27, 2016, and subsequent information,
submitted on behalf of X by its authorized representative, requesting an extension of
time under § 301.9100 of the Procedure and Administration Regulations to file an
election under § 301.7701 to be treated as a disregarded entity for federal tax purposes.

Facts

The information submitted states X is an entity organized on Date 1, under the laws of
Country. Y is the sole owner of X. X represents that, as of Date 2, it was a foreign entity
eligible to elect to be disregarded as an entity separate from its owner. However, X
failed to timely file a valid Form 8832, Entity Classification Election, electing to treat X as
a disregarded entity for federal tax purposes effective Date 2.

X represents that Y has consistently filed U.S. tax returns consistent with the treatment
of X as a disregarded entity. X also represents that granting relief will not prejudice the
interests of the government and that hindsight is not involved in seeking relief to file a
late election. X further represents that such relief will not lower X’s aggregate tax
liability for the tax years affected by the election.
PLR-101755-17                                  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 as provided in § 301.7701-3.

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)(1)(i) provides that an eligible entity may elect to be classified
other than as provided under § 301.7701-3(b) by filing Form 8832, Entity Classification
Election, with the appropriate campus. Under § 301.7701-3(c)(1)(iii), this election will
be effective on the date specified by the entity on Form 8832 or on the date filed if no
such date is specified. The date specified on the Form 8832 cannot be more than 75
days prior to 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 Code, except
subtitles E, G, H, and I. Section 301.9100-1(b) defines the term “regulatory election” as
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 the Commissioner will
use to determine whether to grant an extension of time to make the election. 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.

Under § 301.9100-3, a request for relief will be granted when the taxpayer provides
evidence 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 interests of the
government.

Conclusion

Based solely on 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 file a Form 8832 with the
PLR-101755-17                                  3

appropriate service center and elect to be treated as a disregarded entity for federal tax
purposes effective Date 2. A copy of this letter should be attached to the Form 8832. A
copy is enclosed for that purpose.

This ruling is contingent upon X and its owner filing within 120 days of this letter any and
all required Federal income tax and information returns consistent with the requested
relief being effective Date 2. These returns must include, but are not limited to, all
required Forms 8858, Information Return of U.S. Persons with Respect to Disregarded
Entities.

Except as specifically set forth above, no opinion is expressed concerning the federal
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling is directed only to the taxpayer(s) 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 your taxpayer representatives.


                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)


                                      Laura C. Fields
                                  By: ____________________________
                                      Laura C. Fields
                                      Senior Technician Reviewer, Branch 1
                                      (Passthroughs & Special Industries)


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



cc: