PLR 201007034: IRS granted extra time for a foreign entity to elect corporate treatment

Plain-English summary

The IRS granted a foreign eligible entity an extension of time to file Form 8832 and elect to be treated as an association taxable as a corporation for federal tax purposes. The entity had one member without limited liability and failed to file the election by the requested effective date. The IRS concluded that the requirements for relief under the regulations were satisfied and gave the entity 60 days from the date of the letter to file Form 8832. The ruling addressed only the election and did not express an opinion on other tax consequences.

Ruling snapshot

• Question: Could the entity receive more time to elect association-taxable-as-corporation treatment under Treas. Reg. § 301.9100-3?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224
Number: 201007034                                              Third Party Communication: None
Release Date: 2/19/2010                                        Date of Communication: Not Applicable
Index Numbers: 7701.00-00; 9100.31-00                         Person To Contact:
                                                               ----------------------------, ID No. --------------
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-------------------------------------                          Telephone Number:
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 --------------------------------------------------------      Refer Reply To:
                                                               CC:PSI:B01
                                                               PLR-126197-09
                                                               Date: November 18, 2009

LEGEND

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

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

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

Country           =        ----------


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

      This letter responds to a letter dated May 20, 2009 submitted on behalf of X, requesting an extension of time under § 301.9100-1 and § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3(c) to be treated as an association taxable as a corporation for federal tax purposes.

Facts

         The information submitted states that X was a foreign eligible entity formed on Date 1 under the laws of Country. X has one member that does not have limited liability. X failed to timely file an election to be treated as an association taxable as a corporation for federal tax purposes effective Date 2.

Law and Analysis

      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. Elections are necessary only when an eligible entity does not want to be classified under the default classification or when an eligible entity chooses to change its classification.

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        Section 301.7701-3(b)(2)(i) provides that, except for certain existing entities described in § 301.7701-3(b)(3), 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 owner if it has a single member that does not have limited liability.

        Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified other than as provided under Section 301.7701-3(b) by filing Form 8832 with the appropriate service center. Under Section 301.7701-3(c)(1)(iii), this election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified. The date specified on Form 8832 cannot be more than 75 days prior to 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 Internal Revenue Code, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term "regulatory election" as including an election whose due date is prescribed by a regulation published in the Federal Register.

       Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory 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 the government.

Conclusion

        Based solely on the facts 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 sixty (60) days from the date of this letter to file a Form 8832 to elect to be classified as an association taxable as a corporation for federal tax purposes, effective Date 2. A copy of this letter should be attached to the form.

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       Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

      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.

         In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

                                       Sincerely,

                                       Curt G. Wilson

                                       Curt G. Wilson
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)


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