Foreign entity received late disregarded-entity election relief

Plain-English summary

A foreign eligible entity with one owner intended to elect treatment as an entity disregarded from that owner but inadvertently failed to file Form 8832 on time. The IRS concluded that the entity met the good-faith and no-prejudice standards for regulatory-election relief. It granted 120 days to file the election with the requested effective date, conditioned on timely filing all required federal income-tax and information returns from the stated year through the present consistently with the requested treatment.

Ruling snapshot

• Question: Could a foreign eligible entity obtain extra time to elect disregarded-entity status after inadvertently missing the Form 8832 deadline?
• Outcome: Approved; the entity received 120 days to file, subject to the ruling's return-filing condition.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201926004                                             Third Party Communication: None
Release Date: 6/28/2019                                       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:B03
--------------------------------                              PLR-127624-18
                                                              Date:
                                                              March 18, 2019
LEGEND

X:                   --------------------------------------
      --------------------------------------------------
                     -------
                     ------------------------

Country:               ----------

Date 1:                ----------------------------

Date 2:                -----------------------

Year:                  -------


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

       This letter responds to your letter dated September 14, 2018, and subsequent
correspondence, submitted on behalf of X by X's authorized representative, requesting
a ruling under § 301.9100-3 of the Procedure and Administration Regulations that X be
granted an extension of time to file an election under § 301.7701-3(c).

                                                      Facts

       According to the information submitted, X was formed on Date 1 under the laws
of Country as a foreign entity. X represents that X is a foreign entity eligible to elect to
be treated as a disregarded entity. However, X inadvertently failed to timely file a Form
8832, Entity Classification Election, electing to treat X as a disregarded entity effective
Date 2.
PLR-127624-18                                  2

                                     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 taxable as a corporation if all members have limited liability, unless the
entity makes an election to be treated otherwise. If the foreign eligible entity has only
one owner, it may elect to be treated as a disregarded entity pursuant to the rules in
§ 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 seventy-five (75) days prior to the date the
form is filed or up to twelve (12) months after the date on which the form 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) 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 the
election.

        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 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 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 entity classification
election to be treated as disregarded as an entity separate from its owner by filing a
Form 8832, effective Date 2, with the appropriate service center. A copy of this letter
should be attached to the election. A copy of this letter is attached for this purpose.

       This ruling is contingent upon the filing within 120 days of this letter any and all
required Federal income tax and information returns from Year to the present consistent
with the requested relief.
PLR-127624-18                                3

       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) of the
Code provides that it may not be used or cited as precedent.

      In accordance with a power of attorney on file with this office, we are sending a
copy of this letter to your authorized representative.

       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.


                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)




                                   By:__________/s/_______________
                                      Richard T. Probst
                                      Senior Technician Reviewer, Branch 3
                                      (Passthroughs & Special Industries)




Enclosures (2)
A copy of this letter
A copy for § 6110 purposes