IRS grants 120 days to file a late check-the-box election making a foreign entity a disregarded entity

Plain-English summary

Under the "check-the-box" rules (Treas. Reg. § 301.7701-3), an eligible business entity elects how it is taxed by filing Form 8832. A single-owner entity can elect to be "disregarded," meaning it is treated as not separate from its owner. Here a foreign entity intended to elect disregarded status effective a specific date but failed to file the Form 8832 on time. It asked the IRS for more time under § 301.9100-3, which lets the Commissioner grant late-election relief when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS concluded those standards were met and granted 120 days to file the election effective the intended date, conditioned on the entity and its owner filing all required returns (such as Form 8858 for foreign disregarded entities) consistent with the relief. As usual, the IRS noted the election is disregarded for any § 965 amounts under Treas. Reg. § 1.965-4(c)(2), and that granting the extension does not decide whether the entity is actually eligible to make the election.

Ruling snapshot

• Question: Will the IRS grant more time under § 301.9100-3 to file a late Form 8832 electing to classify a foreign entity as disregarded?
• Outcome: Approved (120-day extension granted, subject to consistent-return conditions)
• Key authorities: Treas. Reg. §§ 301.7701-3, 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: 202225003                                              Third Party Communication: None
 Release Date: 6/24/2022                                        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:01
 -----------------------                                        PLR-119720-21
 ------------------------------------------                     Date:
 -------------------------                                      March 23, 2022
  -




                                                     Legend

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

Country          =        ------

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



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

      This letter responds to a letter dated September 28, 2021, 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 for X to file an election under § 301.7701-3 to be classified as a
disregarded entity for federal income tax purposes.

                                                      Facts

       Based on the information submitted, X was formed under the laws of Country on
Date. X represents that it is a foreign eligible entity eligible to elect to be classified as a
disregarded entity for federal tax purposes. However, X failed to timely file a Form
8832, Entity Classification Election, electing to be classified as a disregarded entity for
federal tax purposes effective Date.
PLR-119720-21                                  2

                                     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
eligible entity) can elect its classification for federal tax purposes as provided in §
301.7701-3. 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, except as provided in § 301.7701-
3(b)(3), 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 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, in part, 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 service center designated on Form 8832.

         Section 301.7701-3(c)(1)(iii) provides, in part, 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 such 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 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 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) 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 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.

        Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3
will be granted when the taxpayer provides the evidence (including affidavits described
PLR-119720-21                                 3

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.

                                        Conclusion

       Based solely on the facts submitted and the representations made, we conclude
that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. 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 classified as a disregarded entity 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 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, Form 8858, Information Return of U.S.
Persons With Respect to Foreign Disregarded Entities, 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 § 965 elements of all United
States shareholders of X if the election otherwise would change the amount of any
§ 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 of this case 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.

      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-119720-21                                  4

        Pursuant to a power of attorney on file with this office, we are sending a copy of
this letter to X's authorized representatives.


                                         Sincerely,

                                         Holly Porter
                                         Associate Chief Counsel
                                         (Passthroughs & Special Industries)



                                   By:       /s/
                                         Caroline E. Hay
                                         Senior Counsel, Branch 1
                                         Office of the Associate Chief Counsel
                                         (Passthroughs & Special Industries)

Enclosure
      Copy of this letter for section 6110 purposes



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