120-day extension to file check-the-box elections disregarding six foreign subsidiaries

Plain-English summary

Under the "check-the-box" rules of Treas. Reg. § 301.7701-3, an eligible business entity can choose how it is taxed, and a single-owner entity can elect to be disregarded (treated as part of its owner) by filing Form 8832. Here an S corporation owned six foreign entities and intended, from the dates it acquired them, to treat all of them as disregarded, but it never filed the Forms 8832 on time. It asked the IRS for relief under the section 301.9100-3 late-election rules. Finding that the S corporation acted reasonably and in good faith and that relief would not prejudice the government, the IRS granted a 120-day extension to file the six elections effective the original intended dates, conditioned on filing consistent original or amended returns for all open years. The letter notes the usual caveats, including that the relief does not decide whether the entities are actually eligible to make the elections and that the elections are disregarded for certain section 965 purposes.

Ruling snapshot

• Question: May a taxpayer get more time to file Form 8832 check-the-box elections to treat six foreign subsidiaries as disregarded entities?
• Outcome: approved
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 202229027                                             Third Party Communication: None
Release Date: 7/22/2022                                       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:B01
                                                              PLR-121757-21,
                                                              PLR-121758-21, PLR-121759-21,
                                                              PLR-121760-21, PLR-121761-21,
                                                              PLR-121762-21
                                                              Date:
                                                              April 19, 2022



LEGEND
 X               =     ----------------------------------------------------------------------
                       -----------------------
A                =     ----------------------------------------------------------------------
                       -----------------------
B                =     ----------------------------------------------------------------------
                       -----------------------
C                =     ----------------------------------------------------------------------
                       -----------------------
D                =     ----------------------------------------------------------------------
                       -----------------------
E                =     ----------------------------------------------------------------------
                       -----------------------
F                =     ----------------------------------------------------------------------
                       -----------------------
Date 1           =     -------------------

Date 2           =     -----------------------

Date 3           =     -------------------

State            =     -----------

Country 1        =     ------

Country 2        =     ----------------------
PLR-121757-21                                  2


 Country 3       =   ------------

 Country 4       =   ----------


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

This letter responds to a letter dated October 11, 2021, 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 elections under § 301.7701-3 to treat
A, B, C, D, E, and F as disregarded as entities separate from their owners for federal
tax purposes.

                                            Facts

Based on the material submitted, X is an S corporation organized under the laws of
State. X is the ultimate owner of A, B, C, D, E, and F. A was formed in Country 1 and
was acquired by X on Date 1. B was formed in Country 1 and was acquired by X on
Date 2. C was formed in Country 2 and was acquired by X on Date 2. D was formed in
Country 3 and was acquired by X on Date 2. E was formed in Country 1 and was
acquired by X on Date 3. F was formed in Country 4 and was acquired by X on Date 3.
From the dates of acquisition, X intended that A, B, C, D, E, and F be treated as
disregarded as entities separate from their owners for U.S. federal tax purposes.
However, due to inadvertence, X failed to file a timely Forms 8832, Entity Classification
Election, electing A, B, C, D, E, and F to be treated as disregarded as entities separate
from their owners for federal tax purposes.

X represents that X (as well as A, B, C, D, E, and F) have filed consistently with the
relief requested. X represents that granting the requested relief will not prejudice the
interests of the government. X further represents that no hindsight is involved in
seeking the requested relief and that X has acted reasonably and in good faith.

                                     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 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) provides that except as provided in § 301.7701-3(b)(3), unless
the entity elects otherwise, a foreign eligible entity is (i) a partnership if it has two or
PLR-121757-21                                 3

more members and at least one member does not have limited liability, (ii) an
association if all members have limited liability, or (iii) disregarded as an entity separate
from its owner if it has a single owner that does not have limited liability.
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, Entity Classification Election, with the service center designated on
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 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. If an
election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

Section 301.9100-1(c) provides that the Commissioner in exercising the
Commissioner's discretion 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 not 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.

Section 301.9100-2 provides the standards the Commissioner will use to determine
whether to grant an automatic extension of time for making certain elections.

Section 301.9100-3 provides the guidelines for granting extensions of time for making
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 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 § 301.9100-3. As a result, we grant X an extension of
time of one hundred twenty (120) days from the date of this letter to file Forms 8832
with the appropriate service center to elect on behalf of A, B, C, D, E, and F to be
classified as disregarded as entities separate from their owners for federal tax
purposes, effective Date 1, Date 2, and Date 3, as appropriate. A copy of this letter
should be attached to the Forms 8832.
PLR-121757-21                                4


This ruling is contingent on X and its owners filing within 120 days of the date of this
letter all required original or amended information and tax returns for all open years
consistent with the requested relief. A copy of this letter should be attached to any such
returns.

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.

If applicable, these elections to be classified as disregarded as an entity separate from
its owner for federal tax purposes are 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).

We are directing the ruling only to the taxpayer who requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

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

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.

                                      Sincerely,

                                      Holly Porter
                                      Associate Chief Counsel (Passthroughs & Special
                                      Industries)



                                                               /s/

                                      Laura C. Fields, Chief
                                      Branch 1
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)
PLR-121757-21                              5

Enclosure:
      Copy of this letter for § 6110 purposes




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