Late relief lets a foreign entity elect to be disregarded from its owner

Plain-English summary

A foreign company 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 do that it had to file Form 8832 (the entity classification election) by a deadline, but it missed the deadline. It asked the IRS for relief under the § 301.9100-3 regulations, which allow a late election when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS granted 120 days to file the Form 8832 electing disregarded-entity status as of the intended date. The relief is conditioned on the owner filing all required returns for open years, including Form 8858 for foreign disregarded entities. This is a common check-the-box cleanup for cross-border structures.

Ruling snapshot

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

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202452002                                              Third Party Communication: None
 Release Date: 12/27/2024                                       Date of Communication: Not Applicable
 Index Number: 7701.00-00, 9100.00-00,
               9100.31-00

                                                                Person To Contact:
 -------------------------------------------------              ------------------------, ID No. -----------------
 ---------------------------------------------------            Telephone Number:
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 ------------------------------                                 Refer Reply To:
 ----------------------------                                   CC:PSI:B3
 -----------------------------------                            PLR-105670-24
                                                                Date:
                                                                September 23, 2024




LEGEND

Company           =        --------------------------------------------------------------------------

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

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


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

        This letter responds to a letter dated March 15, 2024, 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 a foreign entity disregarded as an entity separate from its owner for federal
tax purposes.

                                                    FACTS

        The information submitted states that Company was formed under the laws of
Country on Date 1. Company represents that it is a foreign entity eligible to elect to be
classified as a foreign entity disregarded as separate from its owner effective Date 2.

Company further represents that it intended to elect to be treated as a foreign entity
disregarded as separate from its owner effective Date 2.

       Company, however, failed to timely file Form 8832, Entity Classification Election,
electing to be treated as a foreign entity disregarded as separate from its owner for
federal tax purposes effective Date 2.

      Company represents that it acted reasonably and in good faith. Company also
represents that granting the 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 § 301.7701-3(b)(1), (3), (4), (5), (6), (7), or (8) (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 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
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 a foreign entity disregarded as separate from its owner for federal tax
purposes, effective Date 2. A copy of this letter should be attached to the Form 8832.

        This ruling is contingent on the owners of Company 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 beginning with the tax year that includes
Date 2 consistent with the requested relief. The returns must include Form 8858,
Information Return of U.S. Persons With Respect to Foreign Disregarded Entities
(FDEs) and Foreign Branches (FBs), in a manner that reflects the consequences of the
relief granted in this letter. A copy of this letter should be attached to any 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.

      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: ________________________
                                              Richard T. Probst
                                              Senior Technician Reviewer
                                              Office of the Associate Chief Counsel
                                              (Passthroughs & Special Industries)


Enclosure
      Copy of this letter for § 6110(k)(3) purposes


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