Foreign entity receives time to elect disregarded status

Plain-English summary

A foreign eligible entity failed to timely file Form 8832 to elect treatment as an entity disregarded from its owner. The IRS found that the regulatory-election relief requirements were satisfied and granted 120 days to file the election with the requested effective date. The relief was conditioned on the entity and its owner filing all required returns for open years consistently with disregarded-entity treatment, including applicable Forms 8858. The IRS also stated that the election would be disregarded in calculating Section 965 elements if it otherwise changed those amounts.

Ruling snapshot

• Question: Could the foreign eligible entity receive an extension to elect disregarded-entity status?
• Outcome: Approved, subject to consistent filings within 120 days.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; IRC § 965

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202120011 Third Party Communication: None
Release Date: 5/21/2021 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
------------------------------------ --------------------ID No. -----------------
------------------------------------------ Telephone Number:
------------------ --------------------
------------------------------ Refer Reply To:
CC:PSI:B03
PLR-121319-20
Date:
February 23, 2021

Legend

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

A = --------------------

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

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

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

   This letter responds to a letter dated September 25, 2020, submitted on behalf of

X by its authorized representative, 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 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 effective Date. However, X failed to timely file Form 8832, Entity
Classification Election, electing to classify X as a disregarded entity effective Date.
PLR-121319-20 2

                               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),
this 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 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 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 an
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 the taxpayer provides 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.
PLR-121319-20 3

                                  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
its owner effective Date. A copy of this letter should be attached to the election.

    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 expressly provided herein, 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.

  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.
PLR-121319-20 4

  In accordance with a 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 for § 6110 purposes

cc: