Late partnership-classification election received relief

Plain-English summary

A foreign eligible entity with two owners intended to elect partnership classification for federal tax purposes but did not timely file Form 8832. The IRS concluded from the submitted information and representations that the entity acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days from the letter date to file Form 8832 with the requested effective date. The entity and its owners also had to file any required original or amended returns consistently with the relief within that period. The ruling did not independently determine whether the entity was otherwise eligible to make the election.

Ruling snapshot

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

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

                                                                Third Party Communication: None
Number: 201623004                                               Date of Communication: Not Applicable
Release Date: 6/3/2016
                                                                Person To Contact:
Index Numbers: 7701.00-00, 9100.00-00,                          ------------------------, ID No. -------------------
              9100.31-00                                        ----------------------------------------------------
                                                                Telephone Number:
 --------------------------------------                         --------------------
 ----------------------                                         Refer Reply To:

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 -----------------------------                                  PLR-129319-15
                                                                Date:
                                                                February 03, 2016
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 Legend

 X                 =         ------------------------------------------------
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 Y                 = ------------------------------
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 Z                 =         -------------------------
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 Country           =        -------

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

 n1                =        -------

 n2                =        ------



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

       This letter responds to a letter dated August 25, 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 election
 under § 301.7701-3(c) to be classified as a partnership for federal tax purposes.
PLR-129319-15                                  2

       The information submitted states that X was formed under the laws of Country on
Date. X is owned by Y, which holds an n1 percent ownership interest in X, and Z which
holds an n2 ownership interest in X. X represents that it is a foreign entity that is eligible
to elect to be classified as a partnership for federal tax purposes effective Date.
However, X failed to file timely Form 8832, Entity Classification Election, to be classified
as a partnership for federal tax purposes effective Date.

        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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

       Section 301.7701-3(b) provides the default classification for an eligible entity that
does not make an election. Section 301.7701-3(b)(2)(i) provides that, 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.

       Under § 301.7701-3(b)(2)(ii), 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)(2) 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 date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and cannot be more than 12 months after the date 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 extension 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
PLR-129319-15                                 3

elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a
request for relief will be granted when a 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
granting of 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, 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 classified as a
partnership for federal tax purposes, effective Date. A copy of this letter should be
attached to the Form 8832. A copy is enclosed for that purpose.

        This ruling is contingent on X and its owners filing within 120 days from the date
of this letter, to the extent necessary or appropriate, all required federal income tax
returns and information returns (including amended returns) consistent with the relief
granted in this letter. A copy of this letter should be attached to any such returns.

       Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code and the regulations thereunder. 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.

      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.

       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.
PLR-129319-15                               4

      In accordance with the power of attorney on file with this office, we are sending
copies of this letter to X’s authorized representatives.

                                     Sincerely,


                                     Associate Chief Counsel
                                     (Passthroughs & Special Industries


                                  By: __________________________
                                     Richard T. Probst
                                     Senior Technician Reviewer, Branch 3
                                     Office of Associate Chief Counsel
                                     (Passthroughs & Special Industries)


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