PLR 200109036: Foreign entity receives extra time to elect its tax classification

Plain-English summary

A foreign company intended to elect a federal tax classification other than the default association status, but its advisors failed to file the election. The IRS found that the company met the requirements for regulatory election relief and gave it until 60 days after the letter to file Form 8832 with the intended effective date. A copy of the ruling must be attached to the form. The IRS did not decide whether the resulting classification would be a partnership or a disregarded entity.

Ruling snapshot

• Question: Could the company receive more time to file a federal entity classification election?
• Outcome: Approved; the Form 8832 election is due within 60 days of the letter.
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200109036
Washington, DC 20224
Release Date: 3/2/2001
Index Number: 9100.31-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:B2 - PLR-101770-00
Date:

December 1, 2000

X
=

Country =

D1
=

Dear
:

This is in reply to your letter dated January 12, 2000, and subsequent correspondence submitted on behalf of X, requesting a ruling that X be given an extension of time to elect under § 301.7701-3(c) of the Procedure and Administration Regulations to be classified for federal tax purposes other than as an association described in § 301.7701-2(b)(2).

The information submitted states that X is a company formed on D1 in Country.
Company represents that, pursuant to § 301.7701-3(a), it is a foreign entity that is not required to be classified as a corporation for U.S. federal tax purposes. Each member of X has limited liability as defined in § 301.7701-3(b)(2)(ii). X intended to elect under
§ 301.7701-3(c) to be classified for federal tax purposes other than as an association described in § 301.7701-2(b)(2) effective on D1. However, due to inadvertence on the part of X’s advisors, the election was not filed.

Section 301.7701-3(a) provides 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. A "business entity" is any entity recognized for federal tax purposes that is not properly classified as a trust under

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§ 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code. Section 301.7701-2(a).

Section 301.7701-3(b)(2)(i) provides that unless a foreign eligible entity elects otherwise, the 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 owners 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.

To elect to be classified other than as provided in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Section 301.7701- 3(c)(1)(i). An election will be effective on the date specified on the Form 8832 or on the date filed if no such date is specified. The effective date specified on the Form 8832 cannot be more than 75 days prior to the date the election is filed. Section 301.7701-3(c)(2)(iii).

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a regulatory election as 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.

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

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time to elect under § 301.7701-3(c) to be classified for federal tax purposes other than as an association described in § 301.7701-2(b)(2), effective for the taxable year beginning on D1, until 60 days following the date of this letter. A copy of this letter should be attached to the Form 8832.

Except as specifically ruled above, we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the Code. Specifically, no opinion is expressed whether, as a result of X’s election to

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not be classified as an association, X will be classified as a partnership or a disregarded entity for federal tax purposes.

This ruling is directed only to the taxpayers who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to X.

Sincerely yours,
PAUL F. KUGLER
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes