A foreign entity gets 120 days to file a late check-the-box election to be taxed as a partnership

Plain-English summary

A business entity formed under foreign law wanted to be treated as a partnership for U.S. tax purposes. Under the "check-the-box" rules, an eligible entity can choose its classification by filing Form 8832, but the choice has to be made by a deadline. After interests in the entity were transferred to two new members, the entity intended to elect partnership treatment effective that date but never filed the form on time. It asked the IRS for more time under the section 301.9100-3 relief rules. The IRS concluded the entity acted reasonably and in good faith and that relief would not harm the government, and granted a 120-day extension to file Form 8832 electing partnership treatment. The relief is conditioned on the entity and its owners filing any tax and information returns (such as Forms 5471, 8865, and 8858) consistent with the election, and the letter notes the usual limits: it does not decide whether the entity is actually eligible, does not address penalties for late returns, and disregards the election for certain section 965 purposes.

Ruling snapshot

• Question: Should a foreign eligible entity get an extension of time to file a late Form 8832 electing to be taxed as a partnership?
• Outcome: Approved (120-day extension granted via section 9100 relief)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; IRC § 7701

Full text (IRS public release)

 Internal Revenue Service                                   Department of the Treasury
                                                            Washington, DC 20224

 Number: 202232007                                          Third Party Communication: None
 Release Date: 8/12/2022                                    Date of Communication: Not Applicable
 Index Number: 7701.00-00, 9100.31-00
                                                            Person To Contact:
 ---------------------------------                          --------------------------, ID No. ----------------
 ----------------------------------------                   Telephone Number:
 ------------------------------------------------           --------------------
 ------------------------                                   Refer Reply To:
                                                            CC:PSI:B01
 --------------------------------------------               PLR-123688-21
                                                            Date:
                                                            May 16, 2022




                                                    LEGEND

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

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

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

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


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

This responds to a letter dated November 9, 2021, and subsequent correspondence,
submitted on behalf of X by X’s authorized representatives, requesting an extension of
time under § 301.9100-3 of the Procedure and Administration Regulations to elect to be
treated as a partnership under § 301.7701-3.

                                                    FACTS

The information submitted states that X was formed on Date 1 as an entity under the
laws of Country. On Date 2, interests in X were transferred to two new members. X
represents that X is a foreign entity eligible to be treated as a partnership effective Date

2. However, X inadvertently failed to timely file a Form 8832, Entity Classification
Election, electing to treat X as a partnership effective Date 2.

                                           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 eligible entity) can
PLR-123688-21                                 2

elect its classification for federal tax purposes as provided in § 301.7701-3. An eligible
entity with at least two members may elect to be classified as either an association (and
thus a corporation under § 301.7701-2(b)(2)) or as 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 except as provided in § 301.7701-(3)(b)(3),
unless the entity 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 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 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 cannot be more than 12
months after the date on which the election is filed.

Section 301.9100-1(c) provides that the Commissioner may 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 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 regulator 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 (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) granting relief will not prejudice the interests of the government.
PLR-123688-21                                 3


                                      CONCLUSION

Based solely on the information 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 a Form
8832 with the appropriate service center and elect to be treated as a partnership
effective Date 2. A copy of this letter should be attached to the Form 8832.

This ruling is contingent on X and its owners 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 may include, but are not limited to, the following
forms: (i) Forms 5471, Information Return of U.S. Persons With Respect to Certain
Foreign Corporations, (ii) Forms 8865, Return of U.S. Persons With Respect to Certain
Foreign Partnerships, and (iii) Forms 8858, Information Return of U.S. Persons With
Respect to Disregarded Entities, such that these forms reflect the consequences of the
relief granted in this letter. A copy of this letter ruling 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 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.

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 any penalty on the basis
that the taxpayer had reasonable cause for failure to file timely any income tax or
information returns.

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 to the taxpayer requesting it. Section 6110(k)(3) provides that it
may not be used or cited as precedent.
PLR-123688-21                                  4


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,


                                        Holly Porter
                                        Associate Chief Counsel
                                        (Passthroughs & Special Industries )


                                    By: _/s/_________________________
                                        Jennifer N. Keeney
                                        Senior Counsel, Branch 1
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)


Enclosure (1):
      Copy of this letter for § 6110 purposes



cc: