PLR 201247006: IRS grants extra time for an LLC to elect corporate tax classification

Plain-English summary

The IRS granted a limited liability company 120 additional days to file an election to be treated as an association taxable as a corporation for federal tax purposes. The entity was eligible to make the election effective on a stated date, but its Form 8832 was not timely filed. The IRS found that the requirements for an extension of time were satisfied, including reasonable action in good faith and no prejudice to the government's interests. The ruling did not express an opinion on other federal tax consequences.

Ruling snapshot

• Question: Could an eligible LLC receive more time to make a late entity-classification election effective on the requested date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; 26 U.S.C. § 6110(k)(3)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201247006
Third Party Communication: None
Release Date: 11/23/2012
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:
CC:PSI:02
PLR-121138-12
Date:
August 15, 2012

Legend
X = --------------------------------------------------------------------------------------------------------------
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State = -------------
D1 = ---------------------------

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

This letter responds to a letter dated May 14, 2012, and subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 301.7701-3 to be treated as a corporation for federal tax purposes.

The information submitted states that X was formed as a limited liability company under the laws of State. X was eligible to elect to be treated as an association taxable as a corporation for federal tax purposes effective D1. However, Form 8832, Entity Classification Election, was not timely filed for X.

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.

Section 301.7701-3(b)(2)(i) provides that, except for certain existing entities described in § 301.7701-3(b)(3), unless a domestic eligible entity elects otherwise, the entity is (A) a partnership if it has two or more members; or (B) disregarded as an entity separate from its owner if it has a single owner.
PLR-121138-12
2

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)(2) by filing Form 8832 with the appropriate service center. Under § 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 and no more than 12 months after the date the election 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) provides that the term “regulatory election” includes 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 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 extension 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 the regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when a taxpayer provides evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted reasonable and in good faith, and (2) granting relief will not prejudice the interests of the government.

Based solely on the facts submitted and representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly, X is granted an extension of time of one hundred twenty (120) days from the date of this letter to elect to be treated as an association taxable as a corporation for federal tax purposes effective D1. A copy of this letter should be attached to the election.

Except as expressly set forth herein, 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 requesting it. Section 6110(k)(3) of the Code 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,

Bradford R. Poston
Senior Counsel, Branch 2
(Passthroughs & Special Industries)
Enclosures (2)
Copy of this Letter
Copy for § 6110 purposes