Foreign entities receive more time to elect partnership classification

Plain-English summary

The IRS granted eight foreign entities 120 additional days to file valid Forms 8832 electing to be treated as partnerships for federal tax purposes. The entities had intended to use partnership classification and represented that their required U.S. tax and information returns had been filed consistently with that intended classification. They had missed the Form 8832 filing deadline, but the IRS found that the regulatory-election relief requirements were satisfied. The relief was conditioned on filing the forms and any required consistent returns or amended returns within 120 days.

Ruling snapshot

• Question: Could the foreign entities receive extra time to file Forms 8832 and elect partnership classification?
• Outcome: Approved, with 120 days from the ruling date to file the forms and required returns
• Key authorities: IRC § 7701; Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201405001 Third Party Communication: None
Release Date: 1/31/2014 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
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---------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:02
PLR-111655-13
Date:
September 03, 2013

                                                  LEGEND

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Y1 =
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Y2 =
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Y3 =
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Y4 =
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Y5 =
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Y6 =
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Y7 =
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Y8 =
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Country = ----------

Date = ----------------------------

Dear -----------------:
PLR-111655-13 2

    This responds to a letter dated August 24, 2010 and subsequent

correspondence, submitted on behalf of Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8 requesting
an extension of time under § 301.9100-3 of the Procedure and Administration to file
entity classification elections to be treated as partnerships for federal tax purposes.

    The information submitted states that Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8

represent that they are foreign entities eligible to elect to be treated as partnerships for
federal tax purposes. Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8 further represent that all
required U.S. tax and information returns of each affected person (as defined in Section
4.01(2) of Rev. Proc. 2009-41) were filed timely or within 6 months of the due date of
the respective return (excluding extensions) in accordance with their intended
classification. However, Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8 failed to timely file valid
Form 8832, Entity Classification Elections.

   Section 301.7701-3(a) provides in part 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 at least two
members can elect to be classified as either an association or a partnership. An eligible
entity with a single owner can elect to be classified as an association or disregarded as
an entity separate from its owner.

     Section 301.7701-3(b)(2) provides guidance on the classification of a foreign

eligible entity for federal tax purposes. Unless the entity elects otherwise, a foreign
eligible entity is treated as an association if all members have limited liability. A foreign
eligible entity with a single owner may elect to be treated as a disregarded entity
pursuant to the rules under § 301.7701-3(c). A foreign eligible entity with two or more
members is treated as a partnership if at least one member does not have limited
liability. A foreign eligible entity with two or more members may elect to be treated as a
partnership pursuant to the rules under § 301.7701-3(c).

    Section 301.7701-3(c)(1)(i) provides that an eligible entity may make an entity

classification election 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 effective date
specified on Form 8832 cannot be more than 75 days prior to the date on which 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
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.
PLR-111655-13 3

  Sections 301.9100-1 through 301.9100-3 provide the standards by which the

Commissioner will determine whether to grant an extension of time to make an election.
Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 describes the conditions under which the
Commissioner will grant requests for relief 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 (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 §§ 301.9100-1 and 301.9100-3 have been satisfied.
As a result, Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8 are each granted an extension of time
of 120 days from the date of this letter to elect to be treated as a partnership for federal
tax purposes, effective Date, by filing a valid Form 8832 with the appropriate service
center.

    This ruling is contingent on Y1, Y2, Y3, Y4, Y5, Y6, Y7, and Y8 filing within 120

days of this letter all required returns and amended income tax returns consistent with
the relief granted. To the extent appropriate these returns must include, but are not
limited to, Form 8865, Information Return of U.S. Persons With Respect to Certain
Foreign Partnerships.

   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. The rulings contained in this letter are based upon information
and representations submitted by the taxpayer and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of
the material submitted in support of the request for rulings, it is subject to verification on
examination.
PLR-111655-13 4

   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. 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,

                                 Bradford R. Poston
                                 Senior Counsel, Branch 2
                                 (Passthroughs & Special Industries)

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