Foreign entity received 120 days for a late corporate classification election

Plain-English summary

A foreign eligible entity was formed through an amalgamation and intended from formation to be treated as an association taxable as a corporation for U.S. federal tax purposes. It failed to file Form 8832 because of inadvertence. Its indirect domestic parent and the parent of the U.S. consolidated group consistently treated the entity as a foreign corporation, including by filing Forms 5471 for the relevant years. The IRS found the late-election standards satisfied and granted 120 days to file Form 8832 with the intended effective date. The ruling did not determine whether the entity otherwise qualified to make the election.

Ruling snapshot

• Question: Could the foreign eligible entity make a late election to be classified as an association taxable as a corporation from its formation date?
• Outcome: approved, 120-day extension
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202249008                                             Third Party Communication: None
 Release Date: 12/9/2022                                       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-106122-22
                                                               Date:
                                                               September 15, 2022



                                                    LEGEND

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

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

 Z               =       ---------------------------------------
                         --------------------------

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

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


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

This responds to a letter dated March 21, 2022, submitted on behalf of X, requesting an
extension of time under § 301.9100-3 of the Procedure and Administration Regulations,
to make an entity classification election to be treated as an association taxable as a
corporation under § 301.7701-3.

                                                       Facts

According to the information submitted and representations made, X is an entity
organized under the laws of Country. X is a foreign entity eligible to elect to be classified
as an association taxable as a corporation for federal tax purposes.

X is wholly but indirectly owned by Y, a domestic corporation. Y is wholly owned by Z. Z
is the common parent of a group of domestic corporations that file a U.S. consolidated
PLR-106122-22                                   2

federal income tax return. X was formed on Date 1 as the result of an amalgamation
under the laws of Country. X intended that it be classified as foreign association taxable
as a corporation for federal tax purposes. However, due to inadvertence, X failed to file
Form 8832, Entity Classification Election, to be classified as a corporation effective Date

1. X is requesting an extension of time to make an election to be classified as an
association taxable as a corporation effective Date 1.

X represents that all relevant parties have treated X as a foreign corporation for federal
tax purposes effective Date 1 and thereafter. In particular, Z filed Form 5471,
Information Return of U.S. Persons With Respect to Certain Foreign Corporations, with
respect to X for each relevant taxable year.

                                      Law and Analysis

Section 301.7701-3(a) provides that a business entity that is not classified as a
corporation under section 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible
entity), can elect its classification for federal tax purposes.. 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) provides a default classification for an eligible entity that does not
make an election. Section 301.7701-3(b)(2)(i) provides that, unless the entity elects
otherwise, a foreign eligible entity is (A) a partnership if it has two 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, in part, that an eligible entity may elect to be
classified other than as provided under section 301.7701-3(b), or to change its
classification, by filing Form 8832, Entity Classification Election, with the applicable
service center.

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) of the Procedure and Administration Regulations provides that
the Commissioner may grant a reasonable extension of time 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 Code except subtitles E, G, H, and I.
PLR-106122-22                                3

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 an election. Section
301.9100-2 provides the rules governing automatic extensions of time for making
certain elections. Section 301.9100-3 provides 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.

Under § 301.9100-3, a request for relief 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) the grant of relief will not prejudice the interests of the Government.

                                        Conclusion

Based solely on the facts submitted and 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 to elect to
treat X as an association taxable as a corporation, effective Date 1. The election should
be filed with the appropriate service center. A copy of this letter should be attached to
the election.

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
Internal Revenue 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 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
by an appropriate party. While this office has not verified an of the material submitted in
support of the ruling request, it is subject to verification on examination.
PLR-106122-22                                  4

In accordance with the power of attorney on file with this office, we are sending copies
of this letter to X's authorized representatives.


                                  Sincerely,

                                  Holly Porter
                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries )


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




Enclosure
      Copy for § 6110 purposes




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