IRS grants a single-owner foreign entity extra time to elect disregarded-entity status

Plain-English summary

A foreign entity wholly owned by a single member wanted to be treated as a
disregarded entity (ignored as separate from its owner) for U.S. federal tax
purposes from the date it was formed. That requires a timely Form 8832
check-the-box election under Treas. Reg. § 301.7701-3, but the entity
inadvertently missed the deadline. It sought relief under Treas. Reg.
§ 301.9100-3, which allows the IRS to extend the time for a regulatory election
when the taxpayer acted reasonably and in good faith and relief will not
prejudice the government. The IRS granted 120 days to file the Form 8832,
conditioned on the owner filing Form 8858 for all affected periods consistent
with the entity having made a timely election.

Ruling snapshot

• Question: Should the single-owner foreign eligible entity get an extension of time to file a Form 8832 electing disregarded-entity status?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202245001
Release Date: 11/11/2022
Index Number: 7701.00-00, 9100.00-00, 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------, ID No. -----------------
Telephone Number:

Refer Reply To:
CC:PSI:B01
PLR-102873-22
Date:
August 02, 2022

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

Member = -------------------------

A = ---------------------------

Country = ------------

Year = -------

d1 = -------------------------

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

    This letter responds to a letter dated January 14, 2022, submitted on behalf of X,

by its authorized representative, requesting a ruling under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations that X be granted an
extension of time to file an election to be classified as a disregarded entity under
§ 301.7701-3 effective d1.

FACTS

   The information submitted states that X was formed on d1 as a A under the laws

of Country. X was formed and wholly owned by Member. Member intended that X be
treated as a disregarded entity for federal tax purposes effective d1. However, due to
inadvertence, X failed to file a timely Form 8832, Entity Classification Election.

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. An eligible
entity with a single owner can elect to be classified as an association (and thus a
corporation under § 301.7701-2(b)(2)) or to be disregarded as an entity separate from
its owner.

     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
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 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 and to elect to be classified as a disregarded entity
for federal tax purposes effective d1. A copy of this letter should be attached to the
Form 8832. A copy is enclosed for that purpose.

   As a condition for this late election relief, Member must file, within 120 days of

the date of this letter, Form 8858, Information Return of U.S. Persons With Respect to
Foreign Disregarded Entities, for all tax periods affected by this ruling, through Year,
consistent with X having made a timely entity classification election. Copies of this letter
should be attached to such forms.

   Except as expressly set forth above, we express or imply no opinion concerning

the federal tax consequences of the facts discussed above under any other provision of
the Code.

  This ruling is directed only 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 to X's authorized representatives.

                                  Sincerely,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)

                           By:    Joy C. Spies
                                  Joy C. Spies
                                  Senior Technician Reviewer, Branch 1
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: