LLC gets late-election relief to be taxed as a corporation

Plain-English summary

A single-member LLC, wholly owned by a corporation, meant to elect to be treated as an association taxable as a corporation for federal tax purposes (rather than being disregarded, which is the default for a single-owner LLC). Making that choice requires filing Form 8832, the "check-the-box" election, by a deadline. Through inadvertence, the LLC never filed the form on time. It asked the IRS for more time under the § 301.9100-3 relief rules. The IRS granted a 120-day extension, finding the LLC acted reasonably and in good faith and that relief would not harm the government. The relief is contingent on the LLC filing all required returns for open years consistent with corporate treatment. As always, the IRS noted that granting more time does not itself decide whether the LLC was eligible to make the election.

Ruling snapshot

• Question: May a single-member LLC that inadvertently missed its Form 8832 deadline get an extension of time under § 301.9100-3 to elect to be taxed as a corporation?
• Outcome: Approved (120-day extension granted, contingent on consistent return filing).
• 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: 202317004
Third Party Communication: None
Release Date: 4/28/2023
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-114467-22
Date:
January 25, 2023

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

Y = -------------------------------------------------------------------------------------------------
------------------------

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

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

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

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

This responds to your letter dated July 28, 2022, and subsequent correspondence, submitted on behalf of X by its authorized representative, requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations for X to file an entity classification election pursuant to § 301.7701-3 of the Procedure and Administrative Regulations to be treated as an association taxable as a corporation.

FACTS

The information submitted states that X was formed as a limited liability company under the laws of State on Date 1. X is wholly owned by Y, which is incorporated under the laws of State. Due to inadvertence, X failed to timely file a form 8832, Entity Classification Election, electing to be an association taxable as a corporation effective Date 2.
PLR-114467-22
2

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 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)(1)(ii) provides that unless a domestic eligible entity elects otherwise, the entity is disregarded as an entity separate from its owner if it has a single owner.

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 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the Internal Revenue 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.

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of section 301.9100-2.

Under section 301.9100-3, requests 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 granting relief will not prejudice the interests of the Government.
PLR-114467-22
3

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 with respect to its request to make a late election to be classified as an association taxable as a corporation effective Date 2. Accordingly, X is granted an extension of time of 120 calendar days from the date of this letter to make a late election to classify X as an association effective Date 2. A copy of this letter ruling should be attached to the Form 8832.

In addition, this ruling is contingent on X filing, within 120 days from the date of this letter, all required returns for all open years consistent with the requested relief. A copy of this letter should be attached to any such returns.

Except for the specific ruling above, we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the Code. In particular, § 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 on information and representations submitted by the taxpayer and 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 requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter ruling to your authorized representatives.

Sincerely,

______
Caroline E. Hay
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure:
Copy for § 6110 purposes
PLR-114467-22
4

cc: ----------------------------------
------------------------

----------------------------------
-------------------------------------
--------------------------------------------
--------------------------------

---------------
--------------------------
--------------------------------------------------
-----------------------
----------------------------------

---------------
-------------------------------------
--------------------------------------------
------------------------------
--------------------------------------