Foreign entity receives more time to elect partnership status

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for federal tax purposes but did not file Form 8832 on time. Its direct and indirect owners that filed U.S. returns had reported consistently with partnership treatment. The IRS concluded that the entity met the requirements for regulatory-election relief and granted 120 days to file Form 8832 with the requested effective date. The relief depends on the entity and its owners having filed all required later returns consistently with the requested treatment.

Ruling snapshot

• Question: May the foreign entity make a late election to be classified as a partnership?
• Outcome: Approved, with Form 8832 due within 120 days.
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 201516033 Third Party Communication: None
Release Date: 4/17/2015 Date of Communication: Not Applicable
Index Numbers:7701.00-00, 9100.31-00
Person To Contact:
------------------------ ---------------------, ID No. ----------------
------------------------------------------------------------ Telephone Number:
---------------------------------- --------------------
------------------------------------- Refer Reply To:
------------------------------------------------- CC:PSI:B3
PLR-127221-14
Date:
December 22, 2014

                                                 Legend

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

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

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

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

  This letter responds to a letter dated July 15, 2014, 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
partnership for federal tax purposes.

                                                  Facts

    The information submitted discloses that X was organized on Date under the

laws of Country. X represents that it is a foreign entity eligible to elect to be classified
as a partnership for federal tax purposes. However, X failed to timely file Form 8832,
Entity Classification Election, electing to be a partnership effective Date. X represents
that all its direct and indirect owners that file U.S. federal income tax returns have filed
all U.S. tax and information returns consistent with the intent to treat X as a partnership.

                                          Law and Analysis

    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 as provided in
§ 301.7701-3. An eligible entity with at least two members can elect to be classified as
PLR-127221-14 2

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(c)(1)(i) provides, in part, 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. If
an election specifies an effective date more than 75 days prior to the date on which the
election is filed, it will be effective 75 days prior to the date it was filed.

    Section 301.9100-1(c) provides that the Commissioner in exercising the

Commissioner’s discretion may grant a reasonable extension of time under the rules set
forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory
election (but not more than 6 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.

  Section 301.9100-2 provides the standards the Commissioner will use to

determine whether to grant an automatic extension of time for making certain elections.

   Section 301.9100-3 provides the guidelines for granting 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 subject to § 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 X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, we
PLR-127221-14 3

grant X an extension of time of one hundred twenty (120) days from the date of this
letter to file Form 8832 with the appropriate service center to elect to be classified as a
partnership effective Date. A copy of this letter should be attached to the Form 8832.

   This ruling is contingent on X and the owners of X having filed all required returns

consistent with the requested relief for all tax years subsequent to Date.

   Except as specifically set forth above, we express or imply no opinion concerning

the federal tax consequences of the facts of this case under any other provision of the
Code. In addition, § 301.9100-1(a) provides that the granting of an extension of time for
making an election is not a determination that the taxpayer is otherwise eligible to make
the election.

  We are directing the ruling only to the taxpayer who requested 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, we are sending a copy of

this letter to X’s authorized representative.

   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 & Special Industries)


                                   By: _______________________
                                       Holly Porter
                                       Chief, Branch 3
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

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

cc: