PLR 200541019: Foreign entity gets more time to elect corporate tax treatment

Plain-English summary

A foreign entity sought to be classified as an association taxable as a corporation from an earlier effective date. The IRS had no record of a timely Form 8832 making that election. Based on the entity's representations, the IRS found that the requirements for late election relief were met and gave it 60 days to file Form 8832 with a copy of the ruling attached. The ruling addressed the filing extension and expressed no opinion on other federal tax consequences.

Ruling snapshot

• Question: Could the foreign entity file a late election for corporate tax classification?
• Outcome: Approved; the IRS granted a 60-day extension.
• 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: 200541019
Third Party Communication: None
Release Date: 10/14/2005
Date of Communication: Not Applicable
Index Number: 7701.00-00, 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:B02
PLR-108693-05
Date:
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June 17, 2005

Legend

X: ---------------------------------
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Country: ---------

Date 1: ---------------------------

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

This responds to a letter dated February 8, 2005, and subsequent correspondence submitted on behalf of X, requesting that the Service grant X an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to elect to be treated as an association taxable as a corporation under § 301.7701-3(c).

The information submitted states that X was formed under the laws of Country.
X represents that X is a foreign entity eligible to elect to be treated as an association taxable as a corporation. However, the Service has no record of a timely filed Form 8832, Entity Classification Election, electing to treat X as an association taxable as a corporation effective Date 1.

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 § 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code. Section 301.7701-2(a).
PLR-108693-05
2

Section 301.7701-3(b)(1) provides guidance on the classification of a domestic eligible entity for federal income tax purposes. 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.

Section 301.7701-3(c)(1)(i) provides that to elect to be classified other than as provided in ' 301.7701-3(b), an eligible entity must file Form 8832 with the designated service center. Section 301.7701-3(c) provides that an entity classification election must be filed on Form 8832 and can be effective up to seventy-five (75) days prior to the date the form is filed or up to twelve (12) months after the date on which the form is filed.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 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 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.

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 the election. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 provides 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. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the information submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. As a result, X is granted an extension of time of 60 days from the date of this letter to file a Form 8832 with the appropriate service center and elect to be treated as an association taxable as a corporation effective Date 1. A copy of this letter should be attached to the Form 8832. A copy is enclosed for that purpose.
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Except as specifically set forth above, no opinion is expressed 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 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 representatives.

Sincerely,

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes