A foreign entity received a late partnership-classification election

Plain-English summary

A foreign eligible entity wanted partnership treatment from the date its classification first became relevant for U.S. tax purposes. It failed to timely file Form 8832 electing that classification. Based on the submitted facts and representations, the IRS concluded that the entity met the standards for regulatory-election relief. It granted 120 days to file Form 8832 with the requested effective date. The ruling cautioned that the election would be disregarded when calculating U.S. shareholders' section 965 elements if it otherwise changed those amounts.

Ruling snapshot

• Question: Could the foreign entity file a late Form 8832 election to be classified as a partnership from its intended effective date?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-1 through 301.9100-3; Treas. Reg. § 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202302005
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:03
----------------------------
PLR-108309-22
----------------------------------
Date:
October 19, 2022

LEGEND

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

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

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

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

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

This letter responds to a letter dated April 20, 2022, 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 elect to be classified as a partnership for federal tax purposes under § 301.7701-3.

FACTS

The information submitted states that X was formed under the laws of Country on Date 1 and that its classification became relevant for U.S. tax purposes on Date 2. X represents that it is a foreign entity eligible to elect to be classified as a partnership
PLR-108309-22
2

effective Date 2. However, X failed to timely file Form 8832, Entity Classification Election, electing to be classified 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 elect its classification for federal tax purposes. 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. Elections are necessary only when an eligible entity chooses to be classified initially as other than the default classification or when an eligible entity chooses to change its classification.

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 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 Form 8832 or on the date filed if no such 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 301.7701-3(d)(1)(i) provides that a foreign eligible entity’s classification is relevant when its classification affects the liability of any person for federal tax or information purposes.

Section 301.7701-3(d)(2) provides that if the classification of a foreign eligible entity has never been relevant (as defined in § 301.7701-3(d)(1)), then the entity’s classification will initially be determined pursuant to the default classification provisions of § 301.7701-3(b)(2) when the classification of the entity first becomes relevant (as defined in § 301.7701-3(d)(1)(i)).

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 not more than 6 months except in the
PLR-108309-22
3

case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (the Code) except subtitles E, G, H, and I. Section 301.9100-1(b) provides that the term “regulatory election” includes 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 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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the 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 facts submitted and representations made, we conclude that X has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, we grant X 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.

If applicable, X’s election to be classified 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) of the Income Tax Regulations.

Except as expressly provided herein, 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. 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.

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 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-108309-22
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 representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs and Special Industries)

By: ______
Mary Beth Carchia
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure:
Copy of this letter for § 6110 purposes

cc: