Foreign business receives late partnership-classification relief

Plain-English summary

A foreign business eligible to choose its U.S. tax classification missed the deadline to elect partnership treatment on Form 8832. The IRS determined that the entity qualified for regulatory-election relief. It allowed 120 days to file Form 8832 with the requested retroactive effective date. As a condition, the entity and its owners had to file all required federal tax and information returns, including amended returns where needed, consistently with partnership treatment within the same period. The ruling identified Form 8865 as one possible required filing for U.S. owners of the foreign partnership.

Ruling snapshot

• Question: May the foreign eligible entity file a late election to be treated as a partnership from its intended effective date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201528021                                            Third Party Communication: None
Release Date: 7/10/2015                                      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-138165-14
                                                             Date:
                                                             April 01, 2015




                                                    LEGEND

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

Country = --------

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


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

       This letter responds to a letter dated September 24, 2014, and subsequent
correspondence, submitted on behalf of X by its authorized representatives, 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 classified as a partnership for
federal tax purposes.

                                                    FACTS

       The information submitted states 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.

                                           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
PLR-138165-14                                   2

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 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 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 owner 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 § 301.7701-3(b) by filing Form 8832 with the
service center designated on Form 8832. Under § 301.7701-3(c)(1)(iii), the 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
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.

       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 extensions 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 regulatory elections that do not
meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief 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 (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.

                                       CONCLUSION

        Based solely on the information 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 grant X an extension of time of 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.
PLR-138165-14                                 3


       This ruling is contingent on X and the owners of X filing, within 120 days from the
date of this letter, all required Federal income tax and information returns (including
amended returns) consistent with the requested relief being effective Date. These
returns may include, but are not limited to, Form 8865, Return of U.S. Persons With
Respect To Certain Foreign Partnerships. A copy of this letter should be attached to
any such returns.

       Except as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of the facts discussed 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.

        Under a power of attorney on file with this office, we are sending a copy of this
letter to your authorized representatives.

       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:        ________________________________________
                                       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: