Extension granted for foreign entity's disregarded status election

Plain-English summary

A foreign eligible entity intended to be treated as disregarded from its owner for U.S. federal tax purposes but did not timely file Form 8832. The IRS found that the entity satisfied the standards for late-election relief under Treasury Regulations sections 301.9100-1 and 301.9100-3. It granted 120 days to file Form 8832 for the requested effective date. The entity and its owner must also file all required open-year income and information returns, including applicable Forms 8858, consistently with the relief during that period. If the election would change a U.S. shareholder's section 965 elements, the election is disregarded for calculating those amounts.

Ruling snapshot

• Question: May the foreign eligible entity file a late Form 8832 election to be disregarded from its owner from the requested effective date?
• Outcome: Approved, subject to a 120-day return-filing condition
• Key authorities: IRC § 965; Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3, and 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                 Department of the Treasury
                                                          Washington, DC 20224

 Number: 202347007                                        Third Party Communication: None
 Release Date: 11/24/2023                                 Date of Communication: Not Applicable
 Index Numbers: 7701.00-00, 9100.00-00,
               9100.31-00                                 Person To Contact:
                                                          ----------------------, ID No. -----------------
 -----------------------------                            Telephone Number:
 -------------------------------------------              ---------------------
 ------------------------------------------               Refer Reply To:
 ---------------------------------------                  CC:PSI:B03
 ----------------------------------                       PLR-104680-23
 ----------------------------------                       Date:
                                                          August 30, 2023




                                                 Legend

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

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

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



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

       This letter responds to a letter dated March 1, 2023, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations for X to file an election under § 301.7701-3 to be classified as a
disregarded entity for federal tax purposes.

                                                 Facts

        Based on the material submitted, X was formed under the laws of Country on
Date. X represents that it is a foreign entity eligible to elect to be disregarded as an
entity separate from its owner for federal tax purposes effective Date. However, X failed
to timely file a Form 8832, Entity Classification Election, electing to be disregarded as
an entity separate from its owner for federal tax purposes effective Date.
PLR-104680-23                                  2

                                     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.

        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 no 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
PLR-104680-23                                 3

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 §§ 301.9100-1 and 301.9100-3. As a result, X
is granted 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 disregarded as
an entity separate from its owner for federal tax purposes effective Date. A copy of this
letter should be attached to the Form 8832.

        This ruling is contingent on X and its owner filing, within 120 days from the date
of this letter, all required federal income tax returns and information returns (including
amended returns) for all open years consistent with the requested relief. These returns
must include, but are not limited to, Form 8858, Information Return of U.S. Persons
With Respect to Foreign Disregarded Entities and Foreign Branches, 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, X’s election to be classified as a disregarded entity effective Date is
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) of the
Income Tax Regulations.

       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.

      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.
PLR-104680-23                               4

       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,
                                         Associate Chief Counsel
                                        (Passthroughs & Special Industries)


                                     By: ___________________________
                                         Mary Beth Carchia
                                         Senior Technician Reviewer, Branch 3
                                         Office of the Associate Chief Counsel
                                         (Passthroughs & Special Industries)


Enclosure:
      Copy of this letter for § 6110 purposes




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