Foreign entity receives late disregarded-entity election relief

Plain-English summary

A foreign eligible entity was indirectly wholly owned by the parent of a consolidated corporate group and intended to be disregarded for federal tax purposes from its formation date. It failed to file Form 8832 on time. The IRS concluded that the requirements for discretionary relief were met and granted 120 days to file the election with the intended effective date. All relevant tax and information returns also had to be filed consistently within 120 days. If that return-filing condition was not met, the ruling would be null and void.

Ruling snapshot

• Question: May the foreign entity file a late Form 8832 election for disregarded-entity status?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201742004                                              Third Party Communication: None
Release Date: 10/20/2017                                       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:B03
                                                               PLR-103031-17
                                                               Date:
                                                               July 25, 2017


LEGEND

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

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

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

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


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

      This letter responds to a letter dated January 5, 2017, and subsequent
correspondence, submitted by Y 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.

       The information submitted states that X was organized under the laws of Country
on Date. X is indirectly owned 100% by Y, the common parent of an affiliated group of
corporations filing a consolidated federal income tax return. Y represents that X is a
foreign entity eligible to elect to be classified as a disregarded entity effective Date.
However, X failed to timely file Form 8832, Entity Classification Election, to be treated
as a disregarded entity for federal tax purposes effective Date.

       Section 301.7701-3(a) provides that a business entity with at least two members
can elect to be classified either as an association (and thus a corporation under §
301.7701-2(b)(2)) or a partnership, and an eligible entity with a single owner can elect to
PLR-103031-17                                 2

be classified as an association or to be disregarded as an entity separate from its
owner.

        Section 301.7701-3(a) further provides that so long as a business entity is not
classified as a corporation under § 301.7701-2(b)(1) or (3)-(8) (an "eligible entity") it
may elect its classification for federal tax purposes.

        Section 301.7701-3(b)(2) provides guidance on the classification of a foreign
eligible entity for federal income tax purposes. Generally, a foreign eligible entity is
treated as an association taxable as a corporation if all members have limited liability,
unless the entity makes an election to be treated otherwise.

        Section 301.7701-3(c) provides that to elect to be classified other than as
provided in § 301.7701-3(b), an eligible entity must file Form 8832 with the designated
service center and 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 twelve months
after the date on which the election is filed.

       Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
6 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 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.

        Section 301.9100-3(a) provides that a request for relief under § 301.9100-3 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.

        Based solely on the information submitted and 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 appropriate service center and elect to be treated as a disregarded entity
effective Date. A copy of this letter should be attached to the Form 8832. A copy is
PLR-103031-17                                  3

enclosed for that purpose.

        This ruling is contingent on all relevant tax and information returns having been
filed consistent with the granted relief with the appropriate service center, within 120
days of the date of this ruling. A copy of this letter should be attached to any such late
or amended returns. If this requirement is not met, this letter ruling will be null and void.

       Except as expressly provided herein, 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.

       Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts discussed above under any other provision of
the Code and the regulations thereunder. In addition, § 301.9100-1(a) provides that the
granting of an extension of time for making an election is not a determination that the
taxpayer is otherwise eligible to make the election.

      This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
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 this 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 ruling will be sent to your authorized representatives.


                                              Sincerely,

                                               Associate Chief Counsel
                                               (Passthroughs & Special Industries)


                                           By:_____________________________
                                              Richard T. Probst
                                              Senior Technician Reviewer, Branch 3
                                              Office of the Associate Chief Counsel
                                              (Passthroughs & Special Industries)


Enclosures: Copy of this letter
            Copy of this letter for § 6110 purposes