Foreign entity gets more time to elect corporate ("check-the-box") tax treatment

Plain-English summary

A foreign company wanted to be treated as a corporation for U.S. tax purposes. Under the "check-the-box" rules in Treasury Regulation 301.7701-3, an eligible entity can choose its own classification by filing Form 8832; here the company intended to elect to be an "association taxable as a corporation" as of a specific date but never filed the form on time. It asked the IRS for relief under the Treasury "9100" regulations, which allow a late election when the taxpayer acted reasonably and in good faith and the government is not prejudiced. The IRS granted a 120-day extension to file Form 8832 effective as of the intended date. The relief comes with a condition: the company and its owners must file all required U.S. returns and information returns (including Form 5471 for foreign corporations) consistent with the election within those 120 days. The IRS took no position on whether the company is otherwise eligible to make the election or on any other tax consequences.

Ruling snapshot

• Question: Should the IRS grant an extension of time to file a late Form 8832 electing to be classified as an association taxable as a corporation?
• Outcome: approved (120-day extension, conditioned on consistent return filings)
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202430001                                              Third Party Communication: None
 Release Date: 7/26/2024                                        Date of Communication: Not Applicable
 Index Number: 9100.00-00, 9100.31-00,
                7701.00-00                                      Person To Contact:
                                                                ----------------------------, ID No. ----------
 ------------------------                                       Telephone Number:
 ------------------------------------------------------------   --------------------
 -------------                                                  Refer Reply To:
 -------------------------------------                          CC:PSI:B03
 -----------------------------------                            PLR-121515-23
 ----------                                                     Date:
 ---------------------------------                              April 26, 2024




Legend

 Company = ------------------------
           -------------------------
 Country = ----------
 Date    = -------------------


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

        This letter responds to a letter dated October 24, 2023, and subsequent
correspondence submitted on behalf of Company by its authorized representatives,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for Company to file an election under § 301.7701-3 to be
classified as an association taxable as a corporation for federal tax purposes.

                                                     FACTS

        The information submitted states that Company was formed under the laws of
Country on Date. Company represents that it is a foreign entity eligible to elect to be
classified as an association effective Date. Company further represents that Company
intended to elect to be treated as an association taxable as a corporation effective Date.
However, Company failed to timely file a Form 8832, Entity Classification Election,
electing to be treated as an association taxable as a corporation for federal tax
purposes effective Date.
PLR-121515-23                                  2

      Company represents that it acted reasonably and in good faith. Company also
represents that granting of relief requested will not prejudice the interests of the
government.

                                   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 relevant 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 the Form 8832
or on the date filed if no 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 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 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) defines a regulatory
election to include 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 sets forth the standards the
PLR-121515-23                                 3

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 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 information submitted and the representations made, we
conclude that Company has satisfied the requirements of §§ 301.9100-1 and
301.9100-3. As a result, Company 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 an association taxable as a corporation for federal tax
purposes, effective Date. A copy of this letter should be attached to the Form 8832.

        This ruling is contingent on Company and its owners 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 5471, Information Return of
U.S. Persons With Respect to Certain Foreign Corporations, 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.

         Except as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of any transaction or item discussed or 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.

       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.

      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.
PLR-121515-23                                           4

      In accordance with a power of attorney on file with this office, we are sending a
copy of this letter to Company's authorized representatives.

                                                Sincerely,

                                              Associate Chief Counsel
                                              (Passthroughs & Special Industries)




                                          By:
                                                Robert D. Alinsky
                                                Branch Chief, Branch 3
                                                Office of the Associate Chief Counsel
                                                (Passthroughs & Special Industries)




Enclosure:
      Copy of this letter for section 6110 purposes

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