An S corporation gets 120 days to make late check-the-box elections for five foreign subsidiaries

Plain-English summary

An S corporation owned five foreign entities and wanted to set how each is classified for U.S. tax purposes. Under the "check-the-box" rules, an eligible entity picks its classification by filing Form 8832 by a deadline. Here one entity intended to be treated as a partnership and the other four intended to be disregarded (not treated as separate from their owner), but none of them filed the form on time. The taxpayer asked the IRS for more time under the section 301.9100-3 relief rules. The IRS concluded the taxpayer acted reasonably and in good faith and that relief would not harm the government, and granted each of the five entities a 120-day extension to file its Form 8832 with the chosen effective date. The relief is conditioned on the entities and their owners filing any tax and information returns (such as Forms 5471, 8865, and 8858) consistent with the elections, and the letter notes the usual limits: it does not decide whether the entities are actually eligible, does not address penalties for late returns, and disregards the elections for certain section 965 purposes.

Ruling snapshot

• Question: Should five foreign eligible entities owned by an S corporation get extensions of time to file late Forms 8832 (one electing partnership, four electing disregarded-entity treatment)?
• Outcome: Approved (120-day extension granted to each entity via section 9100 relief)
• 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: 202232011                                            Third Party Communication: None
Release Date: 8/12/2022                                      Date of Communication: Not Applicable
Index Number: 9100.31-00, 7701.00-00
                                                             Person To Contact:
-----------------------                                      ----------------------, ID No. -----------------
---------------------------------                            Telephone Number:
-------------------------------------                        --------------------
---------------------------                                  Refer Reply To:
-----------------------------                                CC:PSI:B01
                                                             PLR-123849-21
                                                             PLR-123851-21
                                                             PLR-123852-21
                                                             PLR-123853-21
                                                             PLR-123854-21
                                                             Date:
                                                             May 18, 2022



Legend

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

Entity 1           = ------------------------------------------------------------------------------------------
                     ---------------------------

Entity 2           = ------------------------------------------------------------------------------------------
                     ---------------------------

Entity 3           = ------------------------------------------------------------------------------------------
                     ---------------------------

Entity 4           = ------------------------------------------------------------------------------------------
                     ---------------------------

Entity 5           = ------------------------------------------------------------------------------------------
                     ---------------------------

Country 1          = ------

Country 2          = ---------------------

Country 3          = --------

Country 4          = --------------
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 Country 5           = ------------

 Year 1              = -------

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

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

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

 Date 4              = -----------------------

 Date 5              = ------------------

 n                   = ------


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

This responds to a letter dated October 29, 2021, and subsequent correspondence,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to file entity classification elections under § 301.7701-3.


                                                 FACTS

The information submitted states that X is an S corporation. In Year 1, X acquired an n
percent interest in Entity 1 and subsequently formed an additional four entities which X
wholly owns as described below.

Entity 1 was formed under the laws of Country 1 prior to its acquisition by X which
occurred during Year 1. Entity 1 remained inactive prior to Date 1. Entity 1 represents
that it is a foreign entity eligible to elect to be classified as a partnership effective Date

1. However, Entity 1 failed to timely file Form 8832, Entity Classification Election,
electing to classify Entity 1 as a partnership effective Date 1.

Entity 2 was formed under the laws of Country 2 on Date 2. Entity 2 represents that it is
a foreign entity eligible to elect to be classified as a disregarded entity effective Date 2.
However, Entity 2 failed to timely file Form 8832, Entity Classification Election, electing
to classify Entity 2 as a disregarded entity effective Date 2.

Entity 3 was formed under the laws of Country 3 on Date 3. Entity 3 represents that it is
a foreign entity eligible to elect to be classified as a disregarded entity effective Date 3.
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However, Entity 3 failed to timely file Form 8832, Entity Classification Election, electing
to classify Entity 3 as a disregarded entity effective Date 3.

Entity 4 was formed under the laws of Country 4 on Date 4. Entity 4 represents that it is
a foreign entity eligible to elect to be classified as a disregarded entity effective Date 4.
However, Entity 4 failed to timely file Form 8832, Entity Classification Election, electing
to classify Entity 4 as a disregarded entity effective Date 4.

Entity 5 was formed under the laws of Country 5 on Date 5. Entity 5 represents that it is
a foreign entity eligible to elect to be classified as a disregarded entity effective Date 5.
However, Entity 5 failed to timely file Form 8832, Entity Classification Election, electing
to classify Entity 5 as a disregarded entity effective Date 5.


                                   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)(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, 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, 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 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
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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.

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 the election.

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 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
the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result:

Entity 1 is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a partnership for federal tax purposes effective Date 1.

Entity 2 is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a disregarded entity for federal tax purposes effective Date
2.

Entity 3 is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a disregarded entity for federal tax purposes effective Date
3.
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Entity 4 is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a disregarded entity for federal tax purposes effective Date
4.

Entity 5 is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a disregarded entity for federal tax purposes effective Date
5.

Each entity described above must make the election by filing a properly executed Form
8832 with the appropriate service center. A copy of this letter should be attached to the
Form 8832.

This ruling is contingent on each entity described above and its owners filing, within 120
days of the date of this letter, to the extent necessary or appropriate, all required federal
income tax returns and information returns (including amended returns) consistent with
the requested relief granted in this letter. 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 elections made by each entity described above are disregarded for
purposes of determining the amounts of all § 965 elements of all United States
shareholders of each entity described above if the election otherwise would change the
amount of any § 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 described above under any other provision of the
Code and 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 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 on information and representations submitted
by the taxpayer and accompanied by a penalty of perjury statement executed by an
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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 to the taxpayer requesting it. Section 6110(k)(3) provides that it
may not be used or cited as precedent

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



                                       Sincerely,




                                       Holly Porter
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                 By: _____________________________
                                      Jennifer N. Keeney
                                      Senior Counsel, Branch 1
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)

Enclosure
      Copy for § 6110 purposes



cc: