Late relief to elect corporate tax classification for a single-member LLC

Plain-English summary

A single-member LLC wanted to be taxed as a corporation from the day it was formed, but it never filed the required Form 8832 entity classification election on time. By default a single-owner LLC is disregarded (treated as part of its owner) rather than taxed as a corporation, so missing the election mattered. The LLC asked the IRS for extra time under the § 301.9100-3 late-election rules, representing that it acted reasonably and in good faith and that relief would not prejudice the government. The IRS agreed and gave the LLC 120 days from the ruling date to file Form 8832 electing to be classified as an association taxable as a corporation, effective from its intended date. The IRS cautioned that this relief is not itself a ruling that the entity otherwise qualifies to make the election.

Ruling snapshot

• Question: May a single-member LLC that missed its Form 8832 deadline get more time under Treas. Reg. § 301.9100-3 to elect to be taxed as a corporation?
• Outcome: Approved
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. § 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202102005 Third Party Communication: None
Release Date: 1/15/2021 Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 9100.31-00 Person To Contact:
------------------------, ID No. -----------------
-------------------------------------- Telephone Number:
------------------------------------------- ---------------------
---------------------------- Refer Reply To:
--------------------------------------- CC:PSI:B03
PLR-111859-20
Date:
October 22, 2020

                                               LEGEND

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

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

State = -------------

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

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

   This letter responds to a letter dated April 10, 2020, submitted on behalf of X by

X’s authorized representative, 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 to be classified as an association taxable as a corporation
for federal tax purposes.

                                             FACTS

    The information submitted states that X was formed by Y as a single-member

limited liability company under the laws of State on Date. At the time of formation, X
intended to be classified as an association taxable as a corporation for federal tax
purposes. However, X did not timely file Form 8832, Entity Classification Election, to
elect to be classified as an association taxable as a corporation effective Date.
PLR-111859-20 2

   X represents that it acted reasonably and in good faith. Further, X represents

that the interests of the Government will not be prejudiced for all taxable years affected
by the election by granting the relief sought.

                                     LAW

    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 (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.

  Section 301.7701-3(b)(1) provides that, unless the entity elects otherwise, a

domestic eligible entity is classified as a partnership if it has two or more members or 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), or to change its classification,
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 301.9100-1(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)
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 (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.

                                CONCLUSION

PLR-111859-20 3

    Based solely on the information submitted and the representations made, we

conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. 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 an
association taxable as a corporation for federal tax purposes, effective Date. A copy of
this letter should be attached to the Form 8832.

   Except as specifically set forth above, we express or imply no opinion concerning

the federal tax consequences of the facts described above under any other provision of
the 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 a

copy of this letter to X’s authorized representative.

                                    Sincerely,

                                    Associate Chief Counsel
                                    (Passthroughs & Special Industries)


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

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

cc: