PLR 200518043: Foreign company received extension to elect corporate tax status

Plain-English summary

A domestic LLC formed and wholly owned a foreign unlimited liability company. The foreign company intended to be classified as a corporation for U.S. federal tax purposes from its formation date but did not file Form 8832 on time. The IRS found that it met the requirements for discretionary election relief and granted a 60-day extension to file the form. The election could be effective from the requested formation date, and a copy of the ruling had to accompany Form 8832.

Ruling snapshot

• Question: Could the foreign company make a late election for corporate tax classification from its formation date?
• Outcome: Approved: a 60-day extension to file Form 8832.
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200518043
Release Date: 5/6/2005
Index Number: 9100.31-00

Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PSI:2 – PLR-150400-04
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Date:
December 27, 2004

LEGEND:

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

Y = -------------------------------------
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Country = ----------------------------

State = ------------

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

Dear -----------------

This letter responds to a letter dated September 21, 2004, submitted on behalf of X by X's authorized representative, requesting a ruling under § 301.9100-3 of the Procedure and Administration Regulations, that X be granted an extension of time to elect to be classified as an association taxable as a corporation under § 301.7701-3(c).

The information submitted states that on Date 1, Y, a State limited liability company, formed X, a Country unlimited liability company. X is wholly owned by Y. X intended to be classified as an association taxable as a corporation for federal tax purposes effective Date 1. However, X inadvertently failed to timely file Form 8832, Entity Classification Election, effective Date 1. 2

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. An eligible entity with a single owner can elect to be classified as an association (and thus taxable as a corporation under § 301.7701-2(b)(2)) or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(2)(i)(C) provides that unless the entity elects otherwise, a foreign eligible entity is 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 debt 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) by filing Form 8832 with the service center designated on the form.

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 Form 8832 or on the date filed, if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which 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 Code except subtitles E, G, H and I.

Section 301.9100-1(b) defines the term “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 an announcement published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extension of time for making certain elections. Section 301.9100-3 provides extensions of time for making 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 to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of 3

the Government.

Based solely on the facts submitted and the representations made, we conclude that X has satisfied the requirements of § 301.9100-3. As a result, X is granted an extension of time of sixty (60) days from the date of this letter to file a properly executed Form 8832 with the appropriate service center, electing to be treated as an association, effective Date 1.

A copy of this letter should be attached to the election. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the Code.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Internal Revenue Code 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’s authorized representative.

Heather C. Maloy

Associate Chief Counsel
(Passthroughs and Special
Industries)

Enclosures (2)

Copy of this letter
Copy for section 6110 purposes