Foreign entity gets 120 extra days to elect partnership classification

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for U.S. federal tax purposes from the date it was formed. It missed the deadline to file Form 8832, the form used to make an entity-classification election under the check-the-box regulations. The entity asked for "9100 relief," which allows the IRS to extend certain regulatory election deadlines when the taxpayer acted reasonably and in good faith and the government would not be prejudiced. The IRS found those requirements satisfied and gave the entity 120 days from the letter date to file Form 8832 with the intended effective date. The relief is conditioned on the entity and its owners filing all required consistent returns, including amended returns and applicable Forms 8865, within the same 120-day period. The ruling does not determine whether the entity otherwise qualifies for partnership classification or excuse penalties associated with late tax or information returns.

Ruling snapshot

• Question: May the foreign entity receive more time to elect partnership classification effective from its formation date?
• Outcome: Approved (120-day extension to file Form 8832, contingent on consistent returns)
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3; IRC § 7701

Full text (IRS public release)

Internal Revenue Service                                    Department of the Treasury
                                                            Washington, DC 20224

Number: 201851001                                           Third Party Communication: None
Release Date: 12/21/2018                                    Date of Communication: Not Applicable
Index Number: 9100.31-00
                                                            Person To Contact:
-------------------------                                   --------------------, ID No. ------------------
----------------------------------------                    Telephone Number:
-------------------------------------                       ----------------------
------------------------------------                        Refer Reply To:
------------                                                CC:PSI:03
                                                            PLR-110176-18
                                                            Date:
                                                            September 18, 2018




X                 =         -------------------------
---------------------------------------------------
Country           =        ------------
Date 1            =        --------------------


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

      This letter responds to a letter dated March 23, 2018, submitted on behalf of X
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to make an election under § 301.7701-3 to be classified as a
partnership for federal tax purposes.

                                                        FACTS

        The information submitted states that X was formed on Date 1 under the laws of
Country. X represents that, as of Date 1, X was a foreign entity eligible to elect to be
classified as a partnership for federal tax purposes. However, X inadvertently failed to
timely file a Form 8832, Entity Classification Election, electing to be classified as a
partnership effective Date 1.

                                            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.
PLR-110176-18                              2




         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 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 on which 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)
defines the term "regulatory election" as an election whose due date is prescribed by a
regulation published in the Federal Register, or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

       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 extensions 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
elections that do not meet the requirements of § 301.9100-2.

       Section 301.9100-3(a) provides that a request 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 (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.
PLR-110176-18                            3




                                      CONCLUSION

        Based solely on the information submitted and 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 effective Date 1. A copy of this letter should be attached to the Form 8832.

        This ruling is contingent on X and its owners filing, within 120 days from the date
of this letter, any required returns (including amended returns) consistent with the
requested relief being effective on Date 1. To the extent appropriate, these returns or
amended 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. A copy of this letter should
be attached to any such returns or amended 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 as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. 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. In accordance with a
power of attorney on file with this office, we are sending a copy of this letter to X’s
authorized representative.
PLR-110176-18                           4




       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 and Special Industries)



                                         By:    ______________________________
                                                James A. Quinn
                                                Senior Counsel, Branch 3
                                                Office of Associate Chief Counsel
                                                (Passthroughs & Special Industries)

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


cc: