Foreign entity gets extra time to elect partnership status

Plain-English summary

A foreign eligible entity intended to be treated as a partnership for federal tax purposes but failed to timely file Form 8832. It asked the IRS for an extension under the regulatory election relief rules. The IRS concluded that the entity satisfied the standards for acting reasonably and in good faith without prejudicing the government. It granted 120 days to file the partnership election with the requested effective date. The relief is conditioned on the entity and its owner filing all required original or amended returns for open years consistently with partnership treatment.

Ruling snapshot

• Question: May the foreign entity receive more time to elect partnership classification on Form 8832?
• Outcome: Approved (120-day extension, subject to consistent return filings)
• 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: 201849010                                         Third Party Communication: None
Release Date: 12/7/2018                                   Date of Communication: Not Applicable
Index Number: 7701.04-00, 7701.31-00,
              7701.00-00                                  Person To Contact:
                                                          --------------------, ID No. ------------------
--------------------------------                          Telephone Number:
----------------------------------                        ----------------------
--------------------------------                          Refer Reply To:
 --------------------------------------                   CC:PSI:01
                                                          PLR-108028-18
                                                          Date:
                                                          August 30, 2018




LEGEND

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

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

Date 1      = ----------------------------



Dear --------------

This responds to a letter dated March 8, 2018, 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
Date. 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 Date. However, X failed to timely file
Form 8832, Entity Classification Election, electing to be treated as a partnership
effective Date.

                                                    LAW

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 Date. A copy of this letter should be attached to the
Form 8832.

This ruling is contingent on X and its owner filing within 120 days of this letter all
required original or amended information and tax returns for all open years consistent
with the requested relief.



These returns must include, but are not limited to, Forms 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.

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 representatives.

                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)




                                    By: Faith P Colson
                                       Faith P. Colson
                                       Senior Counsel, Branch 1
                                       (Passthroughs and Special Industries)



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


cc: