Foreign entity gets 120 extra days to elect to be treated as a disregarded entity

Plain-English summary

A foreign business entity with a single owner wanted to be treated as a "disregarded entity" for U.S. tax purposes, meaning it is ignored as a separate taxpayer and its activities are reported directly on the owner's return. Under the "check-the-box" rules of Treas. Reg. § 301.7701-3, an eligible entity makes that choice by filing Form 8832, but this entity missed the filing deadline. It asked the IRS for "9100 relief," the discretionary extension available under Treas. Reg. § 301.9100-3 when a regulatory-election deadline is missed but the taxpayer acted reasonably and in good faith. The IRS concluded the requirements were met and granted 120 days from the date of the letter to file Form 8832 electing disregarded status effective the intended date. The relief is conditioned on the entity and its owner filing all required returns for open years consistent with disregarded treatment, including Form 8858 for foreign disregarded entities. The IRS cautioned that granting the extension does not decide whether the entity is actually eligible to make the election, and it expressed no view on any late-filing penalties. Anyone who missed a check-the-box election deadline would care because this is the routine cure.

Ruling snapshot

• Question: Should the foreign entity get more time to file a late check-the-box election to be treated as a disregarded entity?
• Outcome: Approved (120-day extension granted to file Form 8832, contingent on conforming returns)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 7701

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201852010                                             Third Party Communication: None
Release Date: 12/28/2018                                      Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.00-00,
              9100.31-00                                      Person To Contact:
                                                              ----------------------, ID No. ------------------
----------------------------------------------                Telephone Number:
------------------------------------------------              ----------------------
--------------------------------                              Refer Reply To:
--------------------------------------                        CC:PSI:B03
                                                              PLR-110220-18
                                                              Date: September 20, 2018

LEGEND

X           = -------------------------------------------------------------------
----------
Y           = ---------------------------------------------------
---------------------------------------

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

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

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

This letter responds to a letter dated March 7, 2018, 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 to be
classified as a disregarded entity for federal tax purposes.

                                                     FACTS

The information submitted states that X was formed on Date under the laws of Country.
X's owner, Y, intended X to be classified as a disregarded entity for federal tax
purposes. However, X failed to timely file Form 8832, Entity Classification Election, to
be classified as a disregarded entity for federal tax purposes effective Date.

                                   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 as provided in § 301.7701-3. An eligible
entity with at least two members can elect to be classified as either 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 be classified as an association or to be disregarded as an
entity separate from its owner.

Section 301.7701-3(b)(2)(i) provides that, except as provided in § 301.7701-3(b)(3),
unless the entity elects otherwise, a foreign eligible entity is: (A) A partnership if it has
two or more members and at least one member does not have limited liability; (B) An
association if all members have limited liability; or (C) Disregarded as an entity separate
from its owner if it has a single owner that does not have limited liability. Section
301.7701-3(b)(2)(ii) provides, in part, that for purposes of § 301.7701-3(b)(2)(i), a
member of a foreign eligible entity has limited liability if the member has no personal
liability for the debts of or claims against the entity by reason of being a member.

Section 301.7701-3(c)(1)(i) provides, in part, that, except as provided in § 301.7701-
3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as provided
under § 301.7701-3(b), or to change its classification, by filing Form 8832 with the
service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under § 301.7701-
3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified on the election form. The effective date specified
on Form 8832 can not be more than 75 days prior to the date on which the election is
filed and can not be more than 12 months after the date on which the election 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 (Code) except subtitles E, G, H, and I. Section 301.9100-1(b) provides that the
term "regulatory election" includes 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 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 regulatory elections that do not meet the
requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be
granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.

                                      CONCLUSION

Based solely on the information submitted and representations made, we conclude that
X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. 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. X must file Form 8832 within the extension period with the appropriate
service center, with a copy of this letter attached. A copy of this letter should be
attached to the Form 8832. A copy is enclosed for that purpose.

This ruling is contingent on X and its owner filing within 120 days of the date of this
letter all required federal income tax and information returns (including amended
returns) for all open years consistent with the requested relief. These returns must
include, but are not limited to, Form 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 returns.

We express no opinion concerning the assessment of any interest, additions to tax,
additional amounts, or penalties for failure to file a timely income tax or information
return with respect to any taxable year that may be affected by this ruling. For example,
we express no opinion as to whether a taxpayer is entitled to relief from any penalty on
the basis that the taxpayer had reasonable cause for failure to file timely any income tax
or information returns.

Except for the specific ruling above, we express or imply no opinion concerning the
federal tax consequences of the facts of this case 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) of the
Code 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 a power of attorney on file with this office, we are sending a
copy of this letter ruling to your authorized representatives.

                                            Sincerely,

                                            Associate Chief Counsel
                                            (Passthroughs & Special Industries)

                                         By:_____________________________
                                            Stacy L. Short
                                            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