Foreign entity granted extra time to make a late check-the-box election to be 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 single-owner entity can elect to be disregarded (treated as part of its owner) rather than taxed as a corporation. The election must generally be filed within a set window. Here a foreign entity was eligible to be treated as a disregarded entity as of a certain date but failed to file Form 8832 on time. It asked the IRS for relief under Treas. Reg. § 301.9100-3, which lets the Commissioner grant more time for a missed regulatory election if the taxpayer acted reasonably and in good faith and the government is not harmed. The IRS granted a 120-day extension to file the election effective the requested date, conditioned on the entity and its owner filing all required returns for open years consistent with disregarded-entity treatment (including Form 8858 for foreign disregarded entities). The letter also notes the standard § 1.965-4(c)(2) limit: the election is disregarded to the extent it would change any § 965 transition-tax amount of a U.S. shareholder. Granting the extension does not decide whether the entity was otherwise eligible to make the election.

Ruling snapshot

• Question: May a foreign eligible entity get an extension of time to file a late Form 8832 electing disregarded-entity status?
• Outcome: approved (120-day extension granted, subject to conditions)
• Key authorities: Treas. Reg. § 301.7701-3 (check-the-box); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202220007 Third Party Communication: None
Release Date: 5/20/2022 Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.31-00
Person To Contact:

-------------------------- -------------------, ID No. -----------------
-------------------------------- Telephone Number:
------------------------------- --------------------
--------------------------------- Refer Reply To:
------------------------ CC:PSI:B03
------------------ PLR-119554-21
--------------------------------------- Date:
February 22, 2022

                                                LEGEND

X = ---------------------------
------------------------
Date = ------------------
Country = ---------------------------

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

    This letter responds to a letter dated August 20, 2021, and subsequent

correspondence submitted on behalf of X by X's 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

    According to the information submitted, X was formed on Date under the laws of

Country. X represents that it is a foreign entity eligible to elect to be classified as a
disregarded entity for federal tax purposes effective 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, in part, 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
PLR-119554-21 2

eligible entity) can elect its classification for federal tax purposes as provided in
§ 301.7701-3. 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 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.

    Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of

time under the rules set forth in §§ 301.9100-2 and 301.9100-3 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
an election whose due date is prescribed by a regulation published in the Federal
Register, or a revenue ruling, revenue procedure, notice, or announcement published in
the Internal Revenue Bulletin.

   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 automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

    Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be

granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (i) the
taxpayer acted reasonably and in good faith, and (ii) the grant of relief will not prejudice
the interests of the Government.

                                   CONCLUSION

PLR-119554-21 3

    Based solely on the facts 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 election.

     This ruling is contingent on X and its owner filing within 120 days from the date of

this letter all required returns for all open years consistent with the requested relief.
These returns 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 returns reflect the consequences of the relief granted in this letter. A copy of this
letter ruling 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 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 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-119554-21 4

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to your authorized representative.

                                  Sincerely,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)


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

Enclosure:
Copy of this letter for § 6110 purposes

cc: