Two foreign LLCs received 120 days for late partnership elections

Plain-English summary

Two foreign limited liability companies intended to be classified as partnerships from their respective formation dates but did not timely file Forms 8832. Because all members of a foreign eligible entity may have limited liability, the default classification could otherwise be an association taxable as a corporation. The companies represented that they acted reasonably and in good faith, that no hindsight was involved, and that relief would not prejudice the government. The IRS granted each company 120 days to file a properly executed Form 8832 electing partnership status from its intended date. Any election that would change a U.S. shareholder's section 965 elements would be disregarded for that section 965 computation.

Ruling snapshot

• Question: May the two foreign LLCs make late elections to be treated as partnerships from their formation dates?
• Outcome: approved, with 120 days for each company to file Form 8832
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, 301.9100-3, and 1.965-4(c)(2)

Full text (IRS public release)

 Internal Revenue Service                                   Department of the Treasury
                                                            Washington, DC 20224

 Number: 201943003                                          Third Party Communication: None
 Release Date: 10/25/2019                                   Date of Communication: Not Applicable
 Index Number: 7701.00-00, 9100.00-00,
               9100.31-00                                   Person To Contact:
                                                            --------------------, ID No. ------------------
 ------------------------------------------                 Telephone Number:
 --------------------------------                           ----------------------
 ------------------------------------                       Refer Reply To:
 --------------------------------------------------------   CC:PSI:01
                                                            PLR-101693-19
                                                            PLR-101695-19
                                                            Date:
                                                            July 08, 2019

LEGEND

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

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

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

Date 2         = ------------------

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


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


 This responds to a letter dated January 23, 2019, and subsequent correspondence,
 submitted on behalf of X and Y, requesting an extension of time under § 301.9100-3 of
 the Procedure and Administration Regulations for X and Y to file an entity classification
 election to be classified as a partnership for federal tax purposes.

                                                      FACTS

 The information submitted states that X is a limited liability company formed under the
 laws of Country on Date 1. Y is a limited liability company formed under the laws of
 Country on Date 2. X and Y are not classified as a corporation under § 301.7701-
 2(b)(1), (3), (4), (5), (6), (7), or (8). X intended to be classified as a partnership,
 effective on Date 1. Y intended to be classified as a partnership, effective on Date 2.
PLR-101693-19                                  2

However, X and Y did not timely file Form 8832, Entity Classification Election, electing
to be treated as a partnership.

X and Y represent that they acted reasonably and in good faith, and that the interests of
the government will not be prejudiced by granting relief. X and Y further represent that
no hindsight is involved in seeking the relief requested.


                                   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, 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.

Section 301.7701-3(c)(1)(i) provides that to elect to be classified other than as provided
in § 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election,
with the designated service center. Under § 301.7701-3(c)(1)(iii), this election can be
effective up to seventy-five (75) days prior to the date the form is filed or up to twelve
(12) months after the date on which the form 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 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.

Under § 301.9100-3, a request for relief will be granted when the taxpayer provides
evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted
reasonably and in good faith, and (2) granting relief will not prejudice the interests of the
government.
PLR-101693-19                                3


                                     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 beginning Date 1. Y 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 beginning Date 2. X
and Y must 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.

If applicable, the elections made by X and Y are disregarded for purposes of
determining the amounts of all section 965 elements of all United States shareholders of
X and Y if the election otherwise would change the amount of any section 965 element
of any such United States shareholder. See §1.965-4(c)(2).

Except as specifically set forth above, 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(s) 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
taxpayer representative. Pursuant to a power of attorney on file with this office, a copy
of this letter is being sent to X and Y's authorized representatives.

                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                  By: David R. Haglund
                                      David R. Haglund
                                      Branch Chief, Branch 1
                                      (Passthroughs & Special Industries)


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

cc: