Late-election relief for a foreign entity to be a disregarded entity

Plain-English summary

A foreign entity with a single owner was eligible to elect to be disregarded (ignored as separate from its owner) for U.S. federal tax purposes, but it missed the deadline to file Form 8832 making that check-the-box election. It asked the IRS for a late-election extension under Treasury Regulation § 301.9100-3. The IRS concluded the taxpayer acted reasonably and in good faith and that relief would not prejudice the government, so it granted 120 days to file Form 8832 effective the intended date. The relief is conditioned on the entity and its owner filing all required returns, including Form 8858 for foreign disregarded entities, consistent with the election, and the letter notes the election is disregarded for purposes of computing any § 965 amounts of U.S. shareholders if it would change them.

Ruling snapshot

• Question: May a foreign eligible entity get a late-election extension to be treated as a disregarded entity?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Treas. Reg. § 301.7701-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202052007
Release Date: 12/24/2020
Index Numbers: 7701.00-00, 9100.00-00, 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
ID No.
Telephone Number:
Refer Reply To: CC:PSI:B03
PLR-108428-20

Date: September 23, 2020

Legend

X =
A =
Country =
Date =

Dear -------:

   This letter responds to a letter dated March 17, 2020, and subsequent

correspondence submitted on behalf of X by its authorized representative, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations for X to file an election under § 301.7701-3 to be 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 disregarded as an
entity separate from its owner for federal tax purposes as of Date. 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 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. 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, 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 that 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 appropriate service center. Under § 301.7701-3(c)(1)(iii),
the election will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified. The 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 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 (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 301.9100-2 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. Under § 301.9100-3, a
request for relief will be granted when a 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 information submitted and the 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 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 its owner, A, filing, within 120 days from the

date of this letter, all required federal income tax returns 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 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 the facts described 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.

   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.

  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

copies of this letter to X's 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 for § 6110 purposes

cc: