A foreign company received a late partnership election with return-filing conditions

Plain-English summary

A foreign eligible entity intended to be classified as a partnership but failed to timely file Form 8832. The IRS concluded that the entity satisfied the standards for late regulatory-election relief. It granted 120 days to file Form 8832 with the requested effective date. The relief was contingent on the owners filing all required returns for open years consistently with partnership treatment within the same 120-day period. The ruling specifically noted that those filings could include Forms 5471, 8865, and 8858.

Ruling snapshot

• Question: Could the foreign company file a late Form 8832 election for partnership treatment from its intended date?
• Outcome: Approved, subject to consistent owner return filings
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202302003 Third Party Communication: None
Release Date: 1/13/2023 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
--------------------------------------- ------------, ID No. -----------------
----------------------------------------------------- Telephone Number:
------------------------------------------------------------ --------------------
------------ Refer Reply To:
------------------------------------------------- CC:PSI:B03
----------------------------------- PLR-107981-22
Date:
October 14, 2022

LEGEND

Company = ----------------------------------------------
-----------------------

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

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

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

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

    This letter responds to a letter dated April 13, 2022, and subsequent

correspondence submitted on behalf of Company by its authorized representative,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for Company to file an election under § 301.7701-3 to be
classified as a partnership for federal tax purposes.

                                                 FACTS

    The information submitted states that Company was formed under the laws of

Country on Date 1. Company represents that it is a foreign eligible entity eligible to
elect to be classified as a partnership as of Date 2. However, Company failed to timely
file a Form 8832, Entity Classification Election, electing to be classified as a partnership
effective Date 2.
PLR-107981-22 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
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, 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 in relevant 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 under § 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 that an election made under § 301.7701-

3(c)(1)(i) will be effective on the date specified by the entity on the 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 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 six 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) 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 the 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
PLR-107981-22 3

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) the grant of relief will not prejudice the interests of the Government.

                                   CONCLUSION

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

conclude that the requirements of § 301.9100-3 have been satisfied. As a result,
Company 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 to elect to be classified as a partnership
for federal tax purposes effective Date 2. A copy of this letter should be attached to the
Form 8832 filed for Company.

     This ruling is contingent on the owners of Company filing within 120 days of this

letter all required returns for all open years consistent with the requested relief. 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 Foreign
Disregarded Entities, such that these forms reflect the consequences of the relief
granted in this letter. A copy of this letter should be attached to any such returns.

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

the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  The rulings contained in this letter are 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 request for rulings, 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.
PLR-107981-22 4

  In accordance with the Power of Attorney on file with this office, we are sending a

copy of this letter to Company’s authorized representative.

                                 Sincerely,

                                 Associate Chief Counsel
                                 (Passthroughs & Special Industries)


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

Enclosure:
Copy of this letter for § 6110 purposes

cc: