Foreign entity received 120 days to make a late disregarded-entity election

Plain-English summary

A foreign eligible entity failed to timely file Form 8832 to be treated as disregarded from its single owner for federal tax purposes. The IRS found that the entity satisfied the standards for discretionary late-election relief and granted 120 days to file the election with the intended effective date. Relief was conditioned on the entity and its owner filing all required income tax and information returns for open years consistently with the election, including Form 8858 where required. The IRS also stated that the election would be ignored for Section 965 calculations if recognizing it would change any U.S. shareholder's Section 965 elements.

Ruling snapshot

• Question: Could the foreign eligible entity make a late Form 8832 election to be disregarded as separate from its owner?
• Outcome: approved, subject to consistent return filings within 120 days
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3, 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202421001                                              Third Party Communication: None
 Release Date: 5/24/2024                                        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-110110-23
                                                                Date:
 -------------------------
                                                                February 23, 2024
 ------------------------------------




                                                    LEGEND

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

A       = ------------------------------------------------------------------------------------------------
          ------------------------------------------------------------------------------------------------
          ------------------------------------------------------------------------------------------------
Country = ---------------------
          ------------------------------------------------------------------------------------------------
Date    = -------------------


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

       This responds to a letter dated March 3, 2023, and subsequent correspondence,
submitted on behalf of X by its authorized representative, requesting an extension of
time under § 301.9100-3 of the Procedure and Administration Regulations to file an
election under § 301.7701-3 to be classified as a disregarded entity for federal tax
purposes.
PLR-110110-23                                   2

                                            FACTS

        The information submitted discloses that X was organized on Date under the
laws of Country. X represents that it is a foreign entity eligible to elect to be classified
as a disregarded entity for federal tax purposes effective Date. However, X failed to
timely file Form 8832, Entity Classification Election, to be classified as a disregarded
entity for federal tax purposes effective Date.

                                    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, except as provided in
§ 301.7701-3(c)(1)(iv) and (v), 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, in part, 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.

       Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of
time 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 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.
PLR-110110-23                                 3


       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 automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions 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 under § 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 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 and representations submitted, we conclude that X has
satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Consequently, 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 effective Date. A copy of this letter should be attached
to the election.

        This ruling is contingent on X and its owner, A, filing within 120 days from the
date of this letter all required federal income tax 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 this form
reflects 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 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.

        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.

       Except for the specific ruling above, we express or imply no opinion concerning
the federal tax consequences of the facts of this case under any other provision of the
PLR-110110-23                                           4

Code. 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. According to
§ 6110(k)(3) of the Code, this ruling may not 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 any of the material submitted
in support of the ruling request, it is subject to verification on examination.

        Under a power of attorney on file with this office, we are sending a copy of this
letter to X's authorized representative.


                                                        Sincerely,

                                                        Associate Chief Counsel
                                                        (Passthroughs & Special Industries)



                                                    By:_____________________________
                                                       Richard T. Probst
                                                       Senior Technician Reviewer, Branch 3
                                                       Office of the Associate Chief Counsel
                                                       (Passthroughs & Special Industries)



Enclosure:
       Copy of this letter for § 6110 purposes




cc:     ------------------------
       --------------------------------------------------
       -------------------------------------------------------------------------------------
       --------------------------------------------------
       -------------