Late "check-the-box" election granted so a foreign entity can be taxed as a partnership

Plain-English summary

A foreign business entity wanted to be treated as a partnership for U.S. tax
purposes. To do that, it had to file Form 8832 (the "check-the-box" entity
classification election) on time, but it missed the deadline. The entity asked
the IRS for an extension under the Section 301.9100-3 relief rules, which let the
IRS forgive a late election if the taxpayer acted reasonably and in good faith
and granting relief will not hurt the government. The IRS agreed and gave the
entity 120 days to file the Form 8832, effective as of its original formation
date, so long as it also files any required returns (including Forms 8865 for
foreign partnerships) consistent with partnership treatment. The ruling only
fixes the timing of the election; it does not decide whether the entity was
otherwise eligible to make it, and it does not waive any late-filing penalties.

Ruling snapshot

• Question: Should the foreign entity get an extension of time under
  Section 301.9100-3 to file a late Form 8832 electing partnership
  classification effective from its formation date?
• Outcome: Approved (120-day extension, contingent on filing consistent
  returns)
• 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: 202210003                                            Third Party Communication: None
 Release Date: 3/11/2022                                      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-112166-21
                                                              Date:
                                                              December 02, 2021




                                                  LEGEND

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

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

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


Dear ---------:

       This letter responds to a letter dated April 16, 2021, and subsequent
correspondence, submitted on behalf of X by X's authorized representative, requesting
a ruling under § 301.9100-3 of the Procedure and Administration Regulations that X be
granted an extension of time to file an election under § 301.7701-3 to be classified as a
partnership for federal tax purposes.

                                                    FACTS

       According to the submission, X is an entity formed under the laws of Country on
d1. X represents that it is a foreign entity eligible to elect to be classified as a
partnership effective d1. However, X failed to timely file Form 8832, Entity Classification
Election, electing to classify X as a partnership effective d1.


                                              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
PLR-112166-21                                 2

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
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.

       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 an
election. 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
PLR-112166-21                                  3

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.

        This ruling is contingent upon X filing, within 120 days from the date of this letter,
to the extent necessary or appropriate, all required federal income tax returns and
information returns (including amended returns) consistent with the requested relief
granted in this letter. These returns include, but are not limited to Forms 8865, Return of
U.S. Persons With Respect to Certain Foreign Partnerships, for all required taxable
years consistent with X having made a timely election effective d1 to be treated as a
partnership for U.S. federal income tax purposes. If this condition is not met, then this
ruling is null and void. A copy of this letter should be attached to any such returns.

      If applicable, the election to classify X as a partnership is disregarded for
purposes of determining the amounts of all section 965 elements of all United States
shareholders of X 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 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.

       We express no opinion concerning the assessment of any interest, additions to
tax, additional amounts, or penalties for failure to file a timely tax or information return
with respect to any taxable year that may be affected by this ruling. For example, we
express no opinion as to whether a taxpayer is entitled to relief from a penalty on the
basis that the taxpayer had reasonable cause for failure to file timely any income tax or
information returns.

      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.
PLR-112166-21                               4



      In accordance with a 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: _____/s/___________________________
                                    Caroline E. Hay
                                    Senior Counsel, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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



cc: