Foreign entity received 120 days to elect partnership status

Plain-English summary

A foreign entity intended to be classified as a partnership for federal tax purposes from a specified date. It inadvertently failed to file Form 8832 on time and requested regulatory relief. The IRS concluded that the requirements for a late regulatory election were satisfied. It granted 120 days to file Form 8832 with the requested effective date. Relief was conditioned on the owners filing all required open-year returns consistently with partnership treatment within the same period.

Ruling snapshot

• Question: Could the foreign entity receive extra time to file Form 8832 and elect partnership classification with the intended effective date?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 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: 201736006                                              Third Party Communication: None
Release Date: 9/8/2017                                         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:B01
                                                               PLR-107448-17
                                                               Date: June 7, 2017




LEGEND

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

Y                 =        ----------------------------

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

State             =        ---------

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


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

This responds to a letter dated February 28, 2017, and subsequent correspondence,
submitted on behalf of X, requesting that the Service grant X an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations to file an election under
§ 301.7701-3(c) to be classified as a partnership for U.S. federal income tax purposes.

FACTS

The information submitted states that X was formed under the laws of Country. Y,
which was formed under the laws of State is a direct owner of X. X represents that X
intended to be treated as a partnership for federal income tax purposes effective Date.
However, X inadvertently failed to timely file Form 8832, Entity Classification Election,
electing to be treated as a partnership effective Date.
PLR-107448-17                                  2


LAW AND ANALYSIS

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. An eligible entity with at least two
members can elect to be classified as either an association or a partnership.

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 that the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides rules for requesting extensions of time for regulatory
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 facts submitted and the representations made, we conclude that
the requirements of § 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 make an election to be
treated as a partnership for federal tax purposes effective Date. X shall make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.
PLR-107448-17                                  3


This ruling is contingent on the owners of X filing within 120 days of this letter all
required returns for all open years consistent with the requested relief. These returns
may include, but are not limited to, the following forms: (i) Forms 5471, Information
Return of U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865,
Return of U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms
8858, Information Return of U.S. Persons With Respect to Disregarded Entities, 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.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) 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)


                                          David R. Haglund
                                  By: _____________________________
                                      David R. Haglund
                                      Branch Chief, Branc 1
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)



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