Late partnership-classification election receives a 120-day extension

Plain-English summary

The owners of a foreign eligible entity intended it to be classified as a partnership from its formation date, but the entity did not file Form 8832 on time. The IRS concluded that the entity satisfied the requirements for discretionary filing relief under Treasury Regulation sections 301.9100-1 and 301.9100-3. It granted 120 days from the ruling date to make the partnership election effective as of the intended date. The relief was conditioned on the entity and its owners filing all required returns for affected years within the earlier of 120 days or the expiration of the applicable limitations period. The IRS did not decide whether the entity was otherwise eligible for the election or whether late-return penalties applied.

Ruling snapshot

• Question: Could a foreign eligible entity receive additional time to elect partnership status effective from its formation date?
• Outcome: approved, with 120 days to file Form 8832 and subject to specified consistent-return conditions
• 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

Number: 201649007
Release Date: 12/2/2016
Index Numbers: 7701.00-00, 9100.31-00

                                                               Person To Contact:
------------------------------------------------               -----------------------, ID No. -------------------
--------------------------------------                         ---------------------------------------------------
-------------------------                                      Telephone Number:
-------------------------------                                ----------------------
 -----------------------------                                 Refer Reply To:
                                                               CC:PSI:B03 – PLR-112607-16
                                                               Date: August 16, 2016




                                                      LEGEND

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

Members           =                  -----------------------------------
------------------------------------------------------------

                                    -----------------------

Republic          =                 ---------------

D1                =                 --------------------


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

      This letter responds to a letter dated March 3, 2016, and subsequent
correspondence 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 classified as a partnership for federal tax purposes.

                                                      FACTS

     The information submitted discloses that X was formed on D1 under the laws of
Republic. X’s owners, Members, intended X to be classified as a partnership for federal
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tax purposes. However, X failed to timely file Form 8832, Entity Classification Election,
to be classified as a partnership for federal tax purposes effective D1.

                                   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
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, in part, 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, in part, that, except as provided in
§ 301.7701-3(c)(1)(iv) and (v), 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, in part, 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.

       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.

       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
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elections. Section 301.9100-3 provides extensions of time for regulatory 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 and representations submitted, we conclude that X has
satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Consequently, X is
granted an extension of time of one hundred twenty (120) days from the date of this
letter to elect under § 301.7701-3 to be classified as a partnership effective D1. X must
file Form 8832 within the extension period with the appropriate service center, with a
copy of this letter attached.

        This ruling is contingent on X and its owners filing within the earlier of the
expiration of the statute of limitations of any tax year affected by the granting of the
requested relief or 120 days from the date of this letter all required federal income tax
and information returns (including amended returns) for all years consistent with the
requested relief. These returns must include, but are not limited to, Form 8865, 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. A copy of this letter should
be attached to any such returns.

        We express no opinion concerning the assessment of any interest, additions to
tax, additional amounts, or penalties for failure to file a timely income tax or information
return with respect to any taxable year that may be affected by this ruling. For example,
we express no opinion as to whether a taxpayer is entitled to relief from any penalty on
the basis that the taxpayer had reasonable cause for failure to file timely any income tax
or information returns.

       Except for the specific ruling 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.

      This ruling is directed only to the taxpayer requesting it. According to
§ 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.
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        Under 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:_/s/____________________________
                                             Mary Beth Carchia
                                             Senior Technician Reviewer, Branch 3
                                             Office of the Associate Chief Counsel
                                             (Passthroughs & Special Industries)



Enclosures: Copy of this letter
            Copy for § 6110 purposes