LLC gets 120 days to file a late election to be taxed as a corporation

Plain-English summary

A limited liability company intended to be classified as a corporation for federal tax purposes as of a chosen effective date, but it never filed the required Form 8832 (Entity Classification Election), the "check-the-box" form. Without that filing, the LLC would default to being a partnership or a disregarded entity rather than a corporation. It asked for relief under Treasury Regulation section 301.9100-3, which lets the IRS extend the deadline for certain elections when the taxpayer acted reasonably and in good faith and granting relief will not prejudice the government. The IRS concluded those standards were met and granted the LLC 120 days to file Form 8832 electing corporate treatment, effective on the originally intended date, conditioned on the LLC and its owner filing consistent returns for all open years. It matters because it is a standard fix that lets an LLC lock in the corporate tax treatment it meant to elect but forgot to file for.

Ruling snapshot

• Question: Will the IRS extend the deadline for an LLC to file a late Form 8832 electing to be taxed as a corporation?
• Outcome: Approved (120 days from the letter to file Form 8832, effective on the intended date)
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202147008
Third Party Communication: None
Release Date: 11/26/2021
Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
9100.31-00
Person To Contact:
-------------------, ID No. -----------------
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Telephone Number:
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Refer Reply To:
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CC:PSI:BR01
PLR-106557-21
Date:
June 24, 2021

LEGEND

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

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

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

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

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

This responds to a letter dated March 19, 2021, and subsequent correspondence, submitted on behalf of X, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an entity classification election to be classified as a corporation for federal tax purposes.

FACTS

The information submitted states that X is a limited liability company formed under the laws of State on Date 1. X is 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 corporation, effective on Date 2. However, X did not timely file Form 8832, Entity Classification Election, electing to be treated as a corporation.
PLR-106557-21
2

X represents that it acted reasonably and in good faith, and that the interests of the government will not be prejudiced by granting relief. X further represents 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)(1) provides that unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has two or more members; or (ii) disregarded as an entity separate from its owner if it has a single owner.

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-106557-21
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 corporation for federal tax purposes effective beginning Date 2. X 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.

This ruling is contingent on X and its owner filing within 120 days of the date of this letter all required original or amended information and tax returns for all open years consistent with the requested relief. A copy of this letter should be attached to any such returns.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and is accompanied by a penalty of perjury statement executed by the 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(s) 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 X's authorized representatives.

Sincerely,
Associate Chief Counsel
(Passthroughs & Special Industries)

By:

Laura C. Fields
Laura C. Fields
Branch Chief, Branch 1
(Passthroughs & Special Industries)

Enclosure
Copy for §6110 purposes

cc: