Foreign entity gets 120 days to elect disregarded status

Plain-English summary

A foreign eligible entity with a single owner intended to be treated as a disregarded entity from its formation date. It inadvertently failed to file Form 8832 on time. The entity represented that it acted reasonably and in good faith, that relief would not prejudice the government, and that it was not using hindsight. The IRS granted 120 days to file Form 8832 with disregarded-entity status effective on the intended date. As a condition of relief, the owners must also file all required returns for open years consistently with that treatment within the same 120-day period. Those filings may include Forms 5471, 8865, and 8858.

Ruling snapshot

• Question: May the foreign entity make a late election to be treated as a disregarded entity from its formation date?
• Outcome: Approved, with Form 8832 and consistent open-year returns due within 120 days
• Key authorities: Treas. Reg. §§ 301.7701-3(b)(2), 301.7701-3(c), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201903008                                              Third Party Communication: None
Release Date: 1/18/2019                                        Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
              9100.31-00                                       Person To Contact:
                                                               ------------------------------,
------------------------------------------------------------   ID No. ----------------
-------                                                        Telephone Number:
-------------------------------                                ----------------------
-------------------                                            Refer Reply To:
--------------------------------                               CC:PSI:B01
                                                               PLR-112771-18
                                                               Date:
                                                               October 11, 2018


LEGEND

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

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

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


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

       This responds to a letter dated April 10, 2018, 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
foreign disregarded entity for federal tax purposes.

Facts

        According to the information submitted, X was formed on Date 1 under the laws
of Country. X intended to be treated as a disregarded entity for federal tax purposes
effective Date 1. However, X inadvertently failed to timely file Form 8832, Entity
Classification Election, to be treated as a disregarded entity for federal tax purposes.

       X represents that it acted reasonably and in good faith, and that the interests of
the government will not be prejudiced by granting relief. X further represents that no
hindsight is involved in seeking the relief requested.

Law and Analysis

         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
treated as a disregarded entity for federal tax purposes effective Date 1. 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 owners 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 ruling 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 your authorized representatives.


                                           Sincerely,

                                           Holly Porter
                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)


                                           Joy C. Spies
                                    By:    _____________________________
                                           Joy C. Spies
                                           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


cc: