9100 relief to file a late Form 8832 electing foreign-disregarded-entity treatment

Plain-English summary

A foreign company that had become a wholly owned subsidiary of a U.S. corporation wanted to be treated as a disregarded entity (ignored as separate from its owner) for U.S. federal tax purposes, which an eligible entity does by filing Form 8832, Entity Classification Election. Because of an oversight, the Form 8832 was never filed on time. The company asked the IRS for an extension under the section 301.9100-3 relief rules. The IRS agreed: the company showed it acted reasonably and in good faith and that granting relief would not harm the government, so the IRS gave it 120 days to file the Form 8832 electing disregarded-entity treatment retroactive to the date it became the subsidiary. The relief is conditioned on the company and its owners filing all required returns (which may include Forms 5471, 8865, and 8858) consistent with the election, and it does not decide whether the entity was actually eligible for disregarded-entity treatment.

Ruling snapshot

• Question: Should the IRS grant a late-election extension to file Form 8832 classifying a foreign entity as disregarded from its owner?
• Outcome: approved (120-day extension granted)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 7701

Full text (IRS public release)

 Internal Revenue Service                               Department of the Treasury
                                                        Washington, DC 20224

 Number: 202230004                                      Third Party Communication: None
 Release Date: 7/29/2022                                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-122579-21
 ---------------------------                            Date:
                                                        April 29, 2022




Legend

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

 Y            = --------------
                -----------------------

 Date 1       = -------------------

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

 Country = ------



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

This responds to a letter dated November 1, 2021, and subsequent correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 301.7701-3(c) to
be treated as a foreign disregarded entity for federal tax purposes.
PLR-122579-21                                  2

FACTS

The information submitted states that X was formed on Date 1 under the laws of
Country. On Date 2, X became a wholly owned subsidiary of Y, a domestic corporation.
X represents that it was eligible to elect to be classified as a disregarded entity for
federal tax purposes, and intended to make such election, effective Date 2. However,
due to inadvertence, a Form 8832, Entity Classification Election, was not timely filed for
X to be classified as an entity disregarded from its owner.

X represents that it acted reasonably and in good faith, and that the interests of the
government will not be prejudiced by granting relief. X further represents that no
hindsight is involved in seeking the relief requested.

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 as provided in § 301.7701-3.

Section 301.7701-3(b)(2)(i) provides that, unless it 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(c)(1)(i) provides that an eligible entity may elect to be classified
other than as provided in § 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 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 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 has discretion to 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 Code, except
subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election to include
an election whose due date is prescribed by a regulation published in the Federal
Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 sets forth the standards the
PLR-122579-21                                3

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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 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 (1) the
taxpayer acted reasonably and in good faith, and (2) granting 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, we grant
X an extension of time of one hundred twenty (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 effective Date 2. A copy of this letter should be attached to the Form
8832.

This ruling is contingent on X and its owners filing within 120 days of this letter all
required returns for all open years consistent with the requested relief. These returns
may include, but are not limited to, the following forms: (i) Form 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Form 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) 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, the election to classify X as a disregarded entity 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).

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. Specifically, no opinion is expressed or implied concerning X’s eligibility to be
treated as a disregarded entity for federal tax purposes effective Date 2. 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.

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.

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
PLR-122579-21                                4

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.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter ruling to your authorized representatives.



                                      Sincerely,

                                      Holly Porter
                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                               by:    __/s/____________________________
                                      Joyce C. Spies
                                      Senior Technician Reviewer, Branch 1
                                      (Passthroughs & Special Industries)

Enclosure
      Copy for § 6110 purposes



cc: