Foreign entity received more time to elect disregarded status

Plain-English summary

A foreign eligible entity intended to be disregarded from its owner for federal tax purposes but failed to timely file Form 8832. The IRS concluded that the entity met the standards for regulatory late-election relief and granted 120 days to make the election. The entity and its owner also had to file all open-year federal returns consistently with the relief, including any required Form 8858. Any election that would change a United States shareholder's Section 965 elements would be disregarded for that purpose.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to file Form 8832 and elect disregarded-entity classification?
• Outcome: approved
• Key authorities: IRC §§ 965, 7701; Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202424007                                              Third Party Communication: None
Release Date: 6/14/2024                                        Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
              9100.31-00                                       Person To Contact:
                                                               --------------, ID No. -----------------
-----------------------------------------------------------    Telephone Number:
----------------------------------------------------           --------------------
----------------------------------------                       Refer Reply To:
------------------------------------------------------------   CC:PSI:B03
----------                                                     PLR-118199-23
---------------------------------                              Date:
                                                               March 18, 2024




Legend

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

Country           =        --------

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


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

      This letter responds to a letter dated September 14, 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 election an election under § 301.7701-3 to be classified as a
disregarded entity for federal tax purposes.

                                                    FACTS

      Based on the information submitted, X was formed under the laws of Country. 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 treat X as a
disregarded entity separate from its owner for federal tax purposes effective Date.

PLR-118199-23                                   2

                                   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 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 member that does not have limited liability.
Section 301.7701-3(b)(2)(ii) provides 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.

       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 file
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 automatic extensions of time for making certain
elections. Section 301.9100-3 provides rules for requesting 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 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
taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the
interests of the Government.

PLR-118199-23                                 3

                                     CONCLUSION

       Based solely on the information 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 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 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 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 provided herein, 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.

        Further, we express or imply 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 or imply 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.

      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 information
submitted in support of the ruling request, it is subject to verification on examination.

PLR-118199-23                                 4

     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.

       Pursuant to 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:_______________________________
                                     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




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