Foreign entity granted late corporate election

Plain-English summary

A foreign entity converted from an entity classified as a corporation into an eligible entity for U.S. federal tax purposes. It intended to continue corporate treatment but inadvertently failed to file Form 8832 on time. The IRS found that the entity satisfied the discretionary relief standards and granted it 120 days to elect association status effective on the conversion date. The relief is contingent on the entity and its owners filing all required returns for open years consistently with corporate treatment. The election is disregarded for section 965 calculations if recognizing it would change a United States shareholder's section 965 elements.

Ruling snapshot

• Question: May the foreign eligible entity file a late Form 8832 electing corporate classification?
• Outcome: Approved, with 120 days to file the election and consistent returns
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 965

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202433007 Third Party Communication: None
Release Date: 8/16/2024 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:B01
--------------------------------------------------- PLR-122964-23
------------------------------ Date:
May 17, 2024

                                                    LEGEND

X = -------------------------------------------------------
---------------------------
Country = ---------

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

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

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

This letter responds to a letter submitted November 3, 2023, submitted on behalf of X
by X’s authorized representatives, requesting an extension of time under § 301.9100-3
of the Procedure and Administration Regulations to file an election under § 301.7701-
3(c) to be classified as an association taxable as a corporation for federal tax purposes,
effective Date 2.

                                                    FACTS

According to the information submitted, X was formed under the laws of Country on
Date 1 under a prior name as an entity classified as a corporation for US federal tax
purposes. On Date 2, X converted to an eligible entity for US federal tax purposes.
PLR-122964-23 2

However, X inadvertently failed to timely file Form 8832, Entity Classification Election, to
elect to be treated as an association taxable as a corporation effective Date 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 income tax purposes. An eligible entity with at least
two members can elect to be classified as either an association (and thus taxed as 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 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 provided under § 301.7701-3(b), or to change its classification, by
filing Form 8832 with the IRS Service Center designated on the form.

Section 301.9100-1(c) provides that the Commissioner has discretion to 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
the term “regulatory election” as including an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards that 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 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 a request for relief will be granted when the
taxpayer provides 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) granting relief will not prejudice the government.
PLR-122964-23 3

                                        CONCLUSION

Based on the information submitted and the representations made, we conclude that
the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. 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 under § 301.7701-3 to be treated as an
association taxable as a corporation for federal tax purposes effective Date 2. A copy of
this letter should be attached to the Form 8832 filed for X.

This ruling is contingent upon X and its owner(s), filing, within 120 days of this letter, all
required federal income tax returns and information returns (including amended returns)
consistent with the requested relief granted in this letter. These returns may include,
but are not limited to, the following forms: (i) Forms 5471, Information Return of U.S.
Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865, Return of U.S.
Persons With Respect to Certain Foreign Partnerships, and (iii) Forms 8858,
Information Return of U.S. Persons With Respect to Disregarded Entities, such that
these forms reflect the consequences of the relief granted in this letter. A copy of this
letter ruling should be attached to any such returns.

If applicable, this election 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 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
referenced in this letter. In addition, § 301.9100-1(a) provides that the granting of the
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.

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 upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While the office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.
PLR-122964-23 4

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to X’s authorized representatives.

                                        Sincerely,

                                        Holly Porter
                                        Associate Chief Counsel
                                        (Passthroughs & Special Industries)




                                        By:__________/s/______________
                                        Christiaan T. Cleary
                                        Assistant to the Branch Chief, Branch 1
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)

Enclosure
Copy of Letter for § 6110 purposes

cc: