Foreign entity receives 120 days to elect partnership classification on Form 8832

Plain-English summary

A foreign entity with multiple limited-liability owners intended to be treated as a partnership for U.S. federal tax purposes from its formation date. Because all owners had limited liability, the default classification rules would treat it as an association unless it made an entity classification election. The entity inadvertently failed to file Form 8832 on time, although its indirect owners filed consistently with partnership treatment. The IRS found that the standards for late-election relief were satisfied. It granted 120 days from the ruling date to file Form 8832 electing partnership classification retroactively to the requested effective date.

Ruling snapshot

• Question: Could the foreign eligible entity make a late Form 8832 election to be classified as a partnership from its formation date?
• Outcome: Approved, with 120 days from the ruling date.
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 202133004 Third Party Communication: None
Release Date: 8/20/2021 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:B01
PLR-119154-20
Date:
March 01, 2021

                                                LEGEND

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

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

d1 = -----------------

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

    This letter responds to a letter dated September 2, 2020, submitted on behalf of

X by X’s authorized representative, requesting a ruling under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations that X be granted an
extension of time to file an election to be classified as a partnership under § 301.7701-
3(c) effective d1.

                                                 FACTS

    According to the submission, X is an entity formed under the laws of Country on

d1. X‘s owners have limited liability as a result of their investment in X under the laws of
Country. X is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6),
(7) or (8). X intended that it be treated as a partnership for federal tax purposes
effective d1. However, due to inadvertence, X failed to file a timely Form 8832, Entity
Classification Election. The entities that indirectly own X have filed all required federal
income tax and information returns consistent with X being treated as a partnership for
federal tax purposes effective d1.

                                       LAW AND ANALYSIS

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    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 as provided in § 301.7701-3. An eligible
entity with at least two members can elect to be classified as 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)(2)(i) provides that, unless it 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 an eligible entity may elect to

be classified other than as provided in § 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 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 has discretion to grant a

reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3
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) defines a regulatory election to include
an election whose due date is prescribed by a regulation published in the Federal
Register.

   Section 301.9100-2 provides the rules governing automatic extensions of time for

making certain elections. Section 301.9100-3 sets forth 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 requests for relief subject to § 301.9100-3

will be granted when the taxpayer provides evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the

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taxpayer acted reasonably and in good faith, and (2) granting relief will not prejudice the
interests of the Government.

                                 CONCLUSION

   Based on the facts 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 file Form 8832
with the appropriate service center to elect to be classified as a partnership for federal
tax purposes effective d1. A copy of this letter should be attached to the Form 8832. A
copy is enclosed for that purpose.

  If applicable, the election to classify Company as a disregarded entity is

disregarded for purposes of determining the amounts of all section 965 elements of all
United States shareholders of Company 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 expressly set forth above, we express or imply no opinion concerning

the federal tax consequences of the facts discussed above under any other provision of
the Code.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

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 representatives.

                                  Sincerely,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)



                             By: Caroline E. Hay
                                 Caroline E. Hay
                                 Senior Counsel, Branch 1
                                 Office of the Associate Chief Counsel
                                 (Passthroughs & Special Industries)

PLR-119154-20 4

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

cc: