Foreign entity received more time to elect disregarded status

Plain-English summary

A foreign single-owner eligible entity became relevant for U.S. tax purposes with a default classification as an association taxable as a corporation. It intended to change to disregarded-entity status but did not timely file Form 8832. The IRS granted 120 days to file the election with the ruling attached. The entity and its owner must also file all required original or amended income-tax and information returns consistently with the retroactive classification, including Form 8858. If the election would change a U.S. shareholder's Section 965 elements, the election is disregarded for calculating those amounts.

Ruling snapshot

• Question: Could the foreign entity make a late Form 8832 election to be disregarded from the intended effective date?
• Outcome: approved, subject to election and consistent returns within 120 days
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                   Department of the Treasury
                                                            Washington, DC 20224

 Number: 202411006                                          Third Party Communication: None
 Release Date: 3/15/2024                                    Date of Communication: Not Applicable
 Index Numbers: 7701.00-00, 9100.31-00
                                                            Person To Contact:
                                                            -----------------------------------, ID No. -------
                                                            -----------------
                                                            Telephone Number:
                                                            --------------------
                                                            Refer Reply To:
                                                            CC:PSI:B03
                                                            PLR-112155-23
                                                            Date:
                                                            December 18, 2023

LEGEND

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

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

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

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

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


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

       This letter responds to a letter dated June 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 to be classified as a disregarded entity for federal
tax purposes.

                                                    FACTS

        The information submitted states that X was formed under the laws of Country on
Date 1 and that its classification became relevant for United States tax purposes on
Date 2. When X became relevant, its default classification was an association taxable
as a corporation. X represents that it is a foreign entity eligible to elect to change its
classification and that it intended to elect to change its classification from an association
to a disregarded entity for federal tax purposes effective Date 3. However, X failed to

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timely file Form 8832, Entity Classification Election, electing to be disregarded as an
entity separate from its owner for federal tax purposes effective Date 3.

                                   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. 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. Elections are
necessary only when an eligible entity chooses to be classified initially as other than its
default classification or when an eligible entity chooses to change its classification.

        Section 301.7701-3(b)(2)(i) provides that, except for certain existing eligible
entities described in § 301.7701-3(b)(3), unless a foreign eligible entity elects otherwise,
the 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 member 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 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. Under
§ 301.7701-3(c)(1)(iii), this election 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.

       Section 301.7701-3(d)(1)(i) provides that a foreign eligible entity’s classification is
relevant when its classification affects the liability of any person for federal tax or
information purposes.

        Section 301.7701-3(d)(2) provides that if the classification of a foreign eligible
entity has never been relevant (as defined in § 301.7701-3(d)(1)), then the entity’s
classification will initially be determined pursuant to the default classification provisions
of § 301.7701-3(b)(2) when the classification of the entity first becomes relevant (as
defined in § 301.7701-3(d)(1)(i)).

      Section 301.7701-3(g)(1)(iii) provides that if an eligible entity classified as an
association elects under § 301.7701-3(c)(1)(i) to be disregarded as an entity separate

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from its owner, the following is deemed to occur: the association distributes all of its
assets and liabilities to its single owner in liquidation of the association.

       Section 301.9100-1(c) 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
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 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.

        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 (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 the representations made, we conclude
that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly,
we grant X an extension of time of 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 3. A copy of this letter should
accompany X’s 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 and information returns (including amended
returns) for all years consistent with the granted relief (including the application of
§ 301.7701-3(g)(1)(iii)). 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 3
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 any aspect of any transaction or item discussed or

PLR-112155-23                                  4

referenced in this letter. 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 not be used or cited as precedent.

       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 appropriate party. While this office has not verified any of the material submitted
in support of the requested ruling, 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 to your authorized representatives.

                                      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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