Late election extended for a foreign entity to be a disregarded entity

Plain-English summary

A foreign business entity wanted to be treated as a "disregarded entity" for U.S. federal tax purposes, meaning it would be ignored as separate from its single owner. To get that treatment it had to file Form 8832 (the entity classification election) by a deadline, but it missed the deadline. It asked the IRS for extra time under the regulations at § 301.9100-3, which let the IRS forgive a missed election deadline when the taxpayer acted reasonably, in good faith, and granting relief will not harm the government. The IRS agreed and gave the entity 120 days from the date of the letter to file the election, effective as of the date it originally wanted. The relief is conditional: the owner must file all required returns for open years (including Form 8858 for disregarded entities) consistent with the election. This matters to anyone who forgot to make a timely check-the-box election and needs a path to fix it.

Ruling snapshot

• Question: Should a foreign eligible entity get more time to file a late Form 8832 election to be disregarded as separate from its owner?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 301.7701-3(c), 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202451006                                              Third Party Communication: None
 Release Date: 12/20/2024                                       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-105739-24
                                                                Date:
                                                                September 09, 2024

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

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

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

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


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

This letter responds to a letter dated February 4, 2024, and subsequent
correspondence, submitted on behalf of X by X's authorized representative, requesting
an extension of time under § 301.9100-3(c) of the Procedure and Administration
Regulations to file an election under § 301.7701-3(c) to be treated as a disregarded
entity for federal tax purposes.

                                                     FACTS

According to the information submitted, X was formed on Date 1 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 effective Date 2. However, X inadvertently failed to timely
file Form 8832, Entity Classification Election, to be treated as a disregarded entity for
federal tax purposes.

                                     LAW & ANALYSIS

Section 301.7701-3(a) provides, in pertinent 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 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, 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 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 section 301.7701-
3(c)(1)(i) is 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 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, 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.

Sections 301.9100-1 through 301.9100-3 provide 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.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides
evidence (including affidavits described in § 301.9100-3(e)) to establish that the
taxpayer acted reasonably and in good faith, and that granting relief will not prejudice
the interests of the government.

                                      CONCLUSION

Based solely on the facts 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 make an
election to be treated as a disregarded entity for federal tax purposes effective Date 2.
X should make the election by filing a properly executed Form 8832 with the appropriate
service center. A copy of this letter should be attached to the form.

This ruling is contingent on the owners of X filing within 120 days of the date of this
letter all required returns for all open years consistent with the requested relief. These
returns include, but are not limited to, Form 8858, Information Return of U.S. Persons
With Respect to Disregarded Entities, such that these returns reflect the consequences
of the relief granted in this letter. A copy of this letter ruling should be attached to any
such returns.

Except as expressly provided herein, no opinion is expressed or implied concerning the
federal tax consequences of the facts described above 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.

We express no opinion concerning the assessment of any interest, additions to tax,
additional amounts, or penalties for failure to file a timely 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.

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) provides
that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent
to X's authorized representative.

                                                   Sincerely,
                                                   Holly Porter
                                                   Associate Chief Counsel
                                                   (Passthroughs & Special Industries)



                                           By:
                                                   Caroline E. Hay
                                                   Senior Technician Reviewer, Branch 1
                                                   Office of Associate Chief Counsel
                                                   (Passthroughs & Special Industries)

Enclosure
      Copy for § 6110 purposes




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