IRS grants a foreign entity extra time to file a late "check-the-box" election to be treated as a disregarded entity

Plain-English summary

Under the "check-the-box" rules, an eligible business entity can choose how it is taxed by filing Form 8832; a foreign entity with a single owner can elect to be "disregarded" so it is treated as a branch of its owner rather than as a separate corporation. This foreign entity intended to be disregarded from a specified date but failed to file Form 8832 on time. It asked the IRS for "9100 relief," a discretionary extension under Treas. Reg. § 301.9100-3. The IRS granted 120 days to file the election effective on the intended date, finding the taxpayer acted reasonably and in good faith and that relief would not prejudice the Government. The relief is conditioned on the entity and its owners filing all required returns for open years consistent with the election (potentially including Forms 5471, 8865, and 8858), and the letter cautions that the late election is disregarded for purposes of computing any § 965 "transition tax" amounts and is not itself a ruling that the entity is eligible to make the election. This is a routine cure that lets a cross-border structure obtain the disregarded-entity treatment it intended.

Ruling snapshot

• Question: Should the IRS grant an extension under § 301.9100-3 to file a late § 301.7701-3(c) election for a foreign entity to be classified as a disregarded entity?
• Outcome: approved (conditioned on consistent return filing; § 965 elements unaffected)
• Key authorities: Treas. Reg. §§ 301.7701-3(a), (c), 301.9100-1, 301.9100-3, 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202048007                                              Third Party Communication: None
 Release Date: 11/27/2020                                       Date of Communication: Not Applicable
 Index Numbers: 9100.00-00, 9100.31-00
                                                                Person To Contact:
 ---------------------------------------------------            ---------------------, ID No. ---------------
 ------------------------------------------------------------   Telephone Number:
 --------------------                                           --------------------
 -------------------------------------------                    Refer Reply To:
 ------------------------------------------------------------   CC:PSI:03
 -----                                                          PLR-106273-20
                                                                Date:
                                                                September 02, 2020




Legend:

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

Country:         --------

Date:             -----------------------


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

        This letter responds to a letter dated February 28, 2020, and subsequent
correspondence submitted on behalf of X by its authorized representatives, 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 classified as a disregarded
entity for federal tax purposes.

                                                     FACTS

       The information submitted states that X was formed under the laws of Country on
Date. X represents that it is a foreign entity eligible to elect to be classified as a
disregarded entity. However, X failed to timely file Form 8832, Entity Classification
Election, electing to be classified as a disregarded entity effective Date.

                                            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. Under
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§ 301.7701-3(a), an eligible entity with a single owner can elect to be classified as an
association (and thus a corporation under § 301.7701-2(b)(2)) or to be disregarded as
an entity separate from its owner.

         Section 301.7701-3(b)(2)(i)(B) provides that, unless an entity elects otherwise, a
foreign eligible entity is an association if all members have limited liability. Section
301.7701-3(b)(2)(ii) provides that 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 that an eligible entity may elect to be
classified other than as provided in § 301.7701-3(b), or to change its classification, by
filing a Form 8832 with the service center designated on the Form 8832.

        Section 301.7701-3(c)(1)(iii) provides 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 date is specified on the election form. The effective date specified on
Form 8832 cannot be more than 75 days prior to the date on which the election is filed
and cannot be more than 12 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
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)
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 301.9100-2 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.

        Under § 301.9100-3, a request for relief will be granted when the taxpayer
provides evidence (including affidavits described in § 301.9100-3(e)) to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good
faith, and (2) the grant of 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 §§ 301.9100-1 and 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 Form 8832
with the appropriate service center to elect to be disregarded as an entity separate from
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its owner for federal tax purposes effective Date. A copy of this letter should be
attached to the Form 8832.

        This ruling is contingent on X and the owners of X filing within 120 days from the
date 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) Form
5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, (ii) Form 8865, Return of U.S. Persons With Respect to Certain Foreign
Partnerships, and (iii) Form 8858, Information Return of U.S. Persons With Respect to
Foreign Disregarded Entities and Foreign Branches, 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.

       If applicable, X’s election to be classified as a disregarded entity effective Date is
disregarded for purposes of determining the amounts of all section 965 elements of all
United States shareholders of X if the election otherwise would change the amount of
any section 965 element of any such United States shareholder. See § 1.965-4(c)(2) of
the Income Tax Regulations.

       Except as specifically set forth above, 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. 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.

       In addition, 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.

       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.
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      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 the power of attorney on file with this office, we are sending a
copy of this letter to your authorized representatives.



                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                 By: __________________________________
                                     Mary Beth Carchia
                                     Senior Technician Reviewer, Branch 3
                                     Office of Associate Chief Counsel
                                     (Passthroughs & Special Industries)



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


cc: