A foreign entity gets extra time to elect to be taxed as a partnership

Plain-English summary

The "check-the-box" rules under Treasury Regulation section 301.7701-3 let an eligible business entity choose how it is taxed for U.S. purposes by filing Form 8832: an eligible entity with at least two members can elect to be classified as a partnership, and the election generally must be filed on time. Here a foreign entity eligible to be treated as a partnership intended to make that election effective on a certain date, but it inadvertently failed to file a valid Form 8832. When a taxpayer misses a regulatory election deadline, section 301.9100-3 lets the IRS grant an extension if the taxpayer acted reasonably and in good faith and granting relief will not prejudice the government. The entity represented that the failure was not motivated by tax avoidance or retroactive planning. The IRS concluded the entity satisfied those standards and granted a 120-day extension to file the Form 8832 electing partnership classification as of the intended date. This lets the entity secure the pass-through partnership tax treatment it meant to elect despite the missed filing.

Ruling snapshot

• Question: Should a foreign eligible entity that failed to timely file Form 8832 get a section 9100 extension to elect classification as a partnership?
• Outcome: approved (120-day extension to file Form 8832 granted)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                 Department of the Treasury
                                                         Washington, DC 20224

Number: 201910019                                        Third Party Communication: None
Release Date: 3/8/2019                                   Date of Communication: Not Applicable
Index Number: 7701.02-00
                                                         Person To Contact:
-----------------                                        --------------------------, ID No. ----------------
---------------------------------                        -----------------
-------------------------------------------------        Telephone Number:
------------------------------------------------------   ---------------------
                                                         Refer Reply To:
                                                         CC:PSI:B03
                                                         PLR-129404-18
                                                         Date:
                                                         November 27, 2018

Legend

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

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

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


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

This letter responds to a letter dated October 2, 2018, and additional correspondence,
submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an initial election under § 301.7701-3
to be treated as a foreign partnership for federal tax purposes.

                                                     FACTS

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

X intended to elect to be treated as a partnership for federal tax purposes as of Date. X
represents that the failure to timely file the election was not motivated by tax avoidance
or retroactive tax planning.
PLR-129404-18                                 2

                                  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) can elect its classification
for federal tax purposes as provided in this section.

Section 301.7701-3(a) provides that an eligible entity with at least two member can elect
be classified as a partnership.

Section 301.7701-3(c)(1)(iii) 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 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 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.

Section 301.9100-3 provides the standard the Commissioner will use to determine
whether to grant an extension of time for the regulatory election if the taxpayer
demonstrates to the satisfaction of the Commissioner that the taxpayer acted
reasonably and good faith, and that the granting the 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. Accordingly, X is granted
an extension of time of 120 days from the date of this letter to elect to be treated as a
partnership for federal tax purposes effective Date. X must make such an election by
filing a properly executed Form 8832 with the appropriate service center. A copy of this
letter should be attached to each of those elections.

Except as specifically set forth above, we express no opinion concerning the federal
income tax consequences of the facts described above under any other provision of the
Code.
PLR-129404-18                                3

This ruling is directed only to the taxpayers requesting it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent. Pursuant to a power of
attorney on file with this office, a copy of this letter is being sent to the authorized
representative of X.

                                             Sincerely,

                                             Associate Chief Counsel
                                             (Passthroughs & Special Industries)



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