Foreign entity receives extra time to elect partnership classification

Plain-English summary

A foreign eligible entity intended to be treated as a partnership for U.S. federal tax purposes but did not timely file Form 8832. It requested additional time to make the entity-classification election with the intended effective date. The IRS concluded that the entity satisfied the standards for regulatory-election relief and granted 120 days to file Form 8832. The relief was conditioned on the relevant parties filing all required returns and amended returns consistently with partnership treatment, including Forms 8865 where appropriate.

Ruling snapshot

• Question: May the foreign eligible entity file a late Form 8832 election to be treated as a partnership?
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201621004 Third Party Communication: None
Release Date: 5/20/2016 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
--------------------------------------------- -----------------------, ID No. -------------------
------------------------------------------------------------ ---------------------------------------------------
-------------------------- Telephone Number:
----------------------------------- ----------------------
-------------------------------------------- Refer Reply To:
----------------------------------------- CC:PSI:B01
---------------------------------- PLR-127211-15
Date:
February 11, 2016

Legend

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

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

Date1 = --------------------------

Date2 = ---------------------

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

This responds to a letter dated August 7, 2015, and subsequent correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for X to file an entity classification election
under § 301.7701-3(c) to be treated as a partnership for federal tax purposes.

                                                 FACTS

According to the information submitted, X was formed under the laws of Country on
Date1. X represents that it is a foreign entity eligible to elect to be treated as a
partnership for U.S. federal tax purposes as of Date2. However, X failed to timely file
Form 8832, Entity Classification Election, electing to be treated as a partnership
effective Date2.
PLR-127211-15 2

                               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. An eligible entity with at least two
members can elect to be classified as either an association 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) provides guidance on the classification of a foreign eligible
entity for federal tax purposes. Generally, a foreign eligible entity is treated as an
association if all members have limited liability, unless the entity makes an election to
be treated otherwise. A foreign eligible entity with two or more members having limited
liability may elect to be treated as a partnership pursuant to the rules of § 301.7701-
3(c). Section 301.7701-3(c) provides that an entity classification election must be filed
on Form 8832 and can be effective up to 75 days prior to the date the form is filed or up
to 12 months after the date the form is filed.

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, 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.

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. Requests for relief under § 301.9100-3 will be granted
when the taxpayer provides evidence to establish that the taxpayer acted reasonably
and in good faith, and that granting relief will not prejudice the interests of the
government.

                                   CONCLUSION

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, X is granted an extension of time of 120 days from the date of this letter to file a
Form 8832 with the appropriate service center and elect to be treated as a partnership
for federal tax purposes, effective Date2. A copy of this letter should be attached to the
Form 8832.
PLR-127211-15 3

This ruling is contingent on the parties filing within 120 days of this letter all required
returns and amended income tax returns consistent with the requested relief. To the
extent appropriate, these returns must include, but are not limited to, Forms 8865,
Information Return of U.S. Persons With Respect to Certain Foreign Partnerships, such
that these forms reflect the consequences of the relief granted in this letter.

Except as specifically set forth above, no opinion is expressed concerning the federal
tax consequences of the facts described above under any other provision of the Internal
Revenue Code and the regulations thereunder.

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,

                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)



                               By: Laura C. Fields
                                   Laura C. Fields
                                   Senior Technician Reviewer, Branch 1
                                   Office of the Associate Chief Counsel
                                   (Passthroughs & Special Industries)

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