Foreign entity receives 120 days for late partnership election

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for federal tax purposes from a specified date, but inadvertently failed to file Form 8832 on time. The IRS found that the entity satisfied the requirements for discretionary late-election relief. It granted 120 days to file a properly executed entity classification election effective on the requested date. The relief was conditioned on the entity and its owners filing all required original or amended returns for the affected years within the same period, including Forms 8865 when appropriate.

Ruling snapshot

• Question: Could the foreign eligible entity make a late election to be classified as a partnership from the intended effective date?
• Outcome: Approved, with a 120-day filing period and return-filing conditions
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201504001 Third Party Communication: None
Release Date: 1/23/2015 Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.00-00,
9100.31-00 Person To Contact:
--------------------, ID No. ----------------
----------------------- Telephone Number:
------------------------------------------- ------------------
--------------------------- Refer Reply To:
--------------------------------------- CC:PSI:B03
------------------------ PLR-113009-14
Date:
August 27, 2014

                                               LEGEND

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

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

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

m = ------

n = ------

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

  This letter responds to a letter dated March 21, 2014, and subsequent

correspondence, submitted on behalf of X by its authorized representative, requesting
an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations to file an election to be treated as a partnership under
§ 301.7701-3.

                                                FACTS

    X was formed under the laws of Country on Date. X represents that it is a foreign

entity eligible to elect to be classified as a partnership for federal tax purposes. X
intended to be classified as a partnership effective Date. However, due to inadvertence,
Form 8832, Entity Classification Election, was not timely filed.
PLR-113009-14 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 as provided in § 301.7701-3. An eligible
entity with at least two members can elect to be classified as either an association (and
thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with
a single owner can elect to be classified as an association or to be disregarded as an
entity separate from its owner.

    Section 301.7701-3(b)(2)(i) provides that, except as provided in § 301.7701-

3(b)(3), unless the entity elects otherwise, a foreign eligible 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 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 an eligible entity may elect to be

classified other than as provided under § 301.7701-3(b), or to change its classification,
by filing Form 8832 with the service center designated on Form 8832.

    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.

     Section 301.7701-3(c)(2)(ii) provides that if an election under § 301.7701-

3(c)(1)(i) is to be effective for any period prior to the time it is filed, each person who
was an owner between the date the election is to be effective and the date the election
is filed, and who is not an owner at the time the election is filed, must also sign the
election.

   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 (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.
PLR-113009-14 3

   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 extensions 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.

   Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be

granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and the grant of 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 §§ 301.9100-1 and 301.9100-3 have been satisfied. As a
result, X is granted an extension of time of 120 days from the date of this letter to make
an election to be treated as a partnership for federal tax purposes effective Date. X
should make the election by filing a properly executed Form 8832 with the appropriate
service center. A copy of this letter should be attached to the form.

   This ruling is contingent on X and the owners of X filing, within 120 days from the

date of this letter, any required amended or original returns consistent with the
requested relief for its taxable years m through n. To the extent appropriate, these
returns or amended returns must include Forms 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships, reflecting the consequences of the relief
granted in this letter. Copies of this letter should be attached to any such returns or
amended returns.

    Except as expressly provided herein, we express or imply no opinion 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) of

the Code provides that it may not be used or cited as precedent.

  In accordance with a power of attorney on file with this office, we are sending a

copy of this letter to your authorized representative.
PLR-113009-14 4

   The ruling contained in this letter is 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 ruling request, it is subject to verification on examination.

                                     Sincerely,
                                     Associate Chief Counsel
                                     (Passthroughs and Special Industries)



                                 By:_____/s/__________________________
                                    Mary Beth Carchia
                                    Senior Technician Reviewer, Branch 3
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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

cc: