What are the Check-the-Box Regulations?

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What are the Check-the-Box Regulations?

A foreign (non-U.S.) eligible entity may elect its classification for U.S. federal tax purposes under the so-called
“check-the-box” regulations which are effective generally after January 1, 1997. These Treasury Regulations
permit certain business entities (but not trusts) that are not treated as “per se corporations” (referred to as “eligible
entities” ) to elect their classification for U.S. tax purposes by filing Form 8832 “Entity Classification Election”
with the Service.
An eligible entity may elect be treated as an association taxable as a corporation or partnership (if it has two or
more owners), or as a disregarded entity (if it has a single owner).49 The election may be effective prospectively,
up to 12 months from when filed, or retroactively, up to 75 days from when filed.50 However if it is made
retroactively effective, the owner(s) of the entity is also required to sign the Form (this is not otherwise required,
and an officer or manager who is an authorized signatory can sign the Form instead of the owner).51
Absent an election, a non-U.S. eligible entity is classified as (i) a partnership if it has two or more members and at
least one member has unlimited liability, or (ii) as an association taxable as a corporation, if all members have
limited liability, or (iii) disregarded as a separate entity, if it has a single member that does not have limited
liability.52 For this purpose, a member has limited liability if the member has no personal liability for the debts of
or claims against the entity. This determination appears to be based solely on the governing law or, if the
governing law so permits, the organizational documents of the entity. It does not turn on whether or not the
member in question meets certain net worth requirements.
A non-U.S. eligible entity’s classification is “relevant,” when that classification affects the liability of any person
for U.S. tax or information purposes.53 The definition of relevance bears upon, among other things, the default
rule for existing or newly-formed foreign entities. Classification is relevant on the date an event occurs which
causes an obligation to file a U.S. tax or information return, or statement for which the classification must be
determined.54 If an entity is not otherwise relevant, it is relevant on the effective date indicated on Form 8832.
Generally such entity will retain its prior classification; however, if the entity (which was previously relevant)
ceases to be relevant for 60 consecutive months, its status is retested under default rules on the date when it
becomes relevant again.55

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