An LLC gets extra time to elect to be taxed as a corporation

Plain-English summary

The "check-the-box" rules under Treasury Regulation section 301.7701-3 let an eligible business entity, such as a limited liability company (LLC), choose how it is taxed for U.S. purposes by filing Form 8832, and the election generally must be filed on time. By default an LLC is treated as a partnership or, with a single owner, a disregarded entity, but it can elect to be classified as an "association taxable as a corporation." Here a state-law LLC was eligible to elect corporate classification effective a certain date but inadvertently failed to timely file the Form 8832 to make that election. 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 IRS concluded the LLC met those standards and granted an extension (measured from the date of the letter) to file the Form 8832 electing to be taxed as a corporation as of the intended date. This lets the LLC secure the corporate tax treatment it meant to elect despite the missed filing.

Ruling snapshot

• Question: Should an LLC that missed the deadline to file Form 8832 get a section 9100 extension to elect classification as an association taxable as a corporation?
• Outcome: approved (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: 201911003                                          Third Party Communication: None
Release Date: 3/15/2019                                    Date of Communication: Not Applicable
Index Number: 9100.31-00
                                                           Person To Contact:
----------------------------------------                   --------------------, ID No. ------------------
------------------------                                   Telephone Number:
----------------------------------------------             ----------------------
----------------------------------                         Refer Reply To:
                                                           CC:PSI:03
                                                           PLR-121032-18
                                                           Date:
                                                           December 17, 2018




X                 =         ------------------------
---------------------------------------------------
State             =        --------------
Date 1            =        ------------------


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

      This letter responds to a letter dated June 27, 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
an association taxable as a corporation for federal tax purposes.

                                                       FACTS

        The information submitted states that X is a State limited liability company that
was formed on Date 1. X represents that, as of Date 1, X was eligible to elect to be
classified as an association taxable as a corporation for federal tax purposes. However,
X inadvertently failed to timely file a Form 8832, Entity Classification Election, electing to
be classified as an association taxable as a corporation 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
PLR-121032-18                            2

association or to be disregarded as an entity separate from its owner. Elections are
necessary only when an eligible entity does not want to be classified under the default
classification or when an eligible entity chooses to change its classification.

       Section 301.7701-3(b) (1)(1)(ii) provides that, unless the entity elects otherwise,
a domestic eligible entity is disregarded as an entity separate from its owner if it has a
single owner.

        Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be
classified other than as provided under § 301.7701-3(b)(2) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and no more than 12 months after the date the
election is filed.

       Section 301.7701-3(c)(2)(i) provides, in general, that an election made under
§ 301.7701-3(c)(1)(i) must be signed by (A) each member of the electing entity who is
an owner at the time the election is filed; or (B) any officer, manager, or member of the
electing entity who is authorized (under local law or the entity’s organizational
documents) to make the election and who represents to having such authorization
under penalties of perjury.

       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 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 the
election. Section 301.9100-2 provides the rules governing automatic extension 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. Under § 301.9100-3, a
request for relief will be granted when a taxpayer provides evidence to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonable and in good
faith, and (2) 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
PLR-121032-18                            3

file a Form 8832 with the appropriate service center and elect to be treated as an
association taxable as a corporation for federal tax purposes, effective Date 1. A copy of
this letter should be attached to the Form 8832. A copy is enclosed for that purpose.

       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. 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.

       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.

      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, we are sending
copies of this letter to X’s authorized representatives.


                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs and Special Industries)



                                          By:    ______________________________
                                                 Stacy L. Short
                                                 Senior Technician Reviewer, Branch 3
                                                 Office of Associate Chief Counsel
                                                 (Passthroughs & Special Industries)

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


cc: