9100 relief for a foreign entity's late check-the-box election to be a partnership

Plain-English summary

A foreign business entity wanted to be treated as a partnership for U.S. federal
tax purposes. Under the "check-the-box" rules (Treas. Reg. § 301.7701-3), an
eligible entity can choose its tax classification by filing Form 8832, but the
election has to be filed on time. This entity was eligible to elect partnership
treatment but failed to file its Form 8832 by the deadline. It asked the IRS for
"9100 relief" (Treas. Reg. § 301.9100-3), an extension of time to make the late
election. The IRS granted a 120-day extension, finding the entity acted
reasonably and in good faith and that relief would not prejudice the government.
The relief is conditioned on the entity filing all needed tax and information
returns (such as Form 8865 for foreign partnerships) consistent with the election,
and the IRS noted a special rule that disregards the election for certain § 965
"transition tax" calculations if it would otherwise change those amounts. This
matters because a missed check-the-box deadline can be fixed through 9100 relief
when the failure was innocent.

Ruling snapshot

• Question: May a foreign eligible entity that missed the deadline to elect partnership classification get an extension of time to file a late Form 8832?
• Outcome: approved (120-day extension granted, subject to consistent-return and § 965 conditions)
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 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: 202318002                                             Third Party Communication: None
 Release Date: 5/5/2023                                        Date of Communication: Not Applicable
 Index Numbers: 7701.00-00, 9100.00-00,
               9100.31-00                                      Person To Contact:
                                                               ----------------------, ID No. -----------------
 ----------------
 ------------------------                                      Telephone Number:
 -------------------------                                     --------------------
 ---------------------------                                   Refer Reply To:
  --------------------------                                   CC:PSI:03
                                                               PLR-115102-22
                                                               Date:
                                                               February 3, 2023




                                                   LEGEND


 X:              =       ----------------

 Country:        =       ---------

 Year            =       -------

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

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


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

      This letter responds to a letter dated August 2, 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 file an election
under § 301.7701-3 to be classified as a partnership for federal tax purposes.

                                                       FACTS

      The information submitted states that X was formed under the laws of Country on
Date 1. X represents that it was a foreign entity eligible to elect to be classified as a
PLR-115102-22                                  2

partnership effective Date 2. However, X failed to timely file Form 8832, Entity
Classification Election, electing to classify X as a partnership effective Date 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. 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 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 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 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 the election is filed.

       Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time 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 (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 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 regulatory
elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a
request for relief will be granted when a taxpayer provides evidence (including affidavits
PLR-115102-22                                  3

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 §§ 301.9100-1 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 to elect to be classified as a
partnership effective Date 2. A copy of this letter should be attached to the Form 8832.

        This ruling is contingent on 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, 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.

       If applicable, X's election to be classified as a partnership effective Date 2 is
disregarded for purposes of determining the amounts of all § 965 elements of all United
States shareholders of X if the election otherwise would change the amount of any
§ 965 element of any such United States shareholder. See § 1.965-4(c)(2) of the
Income Tax Regulations.

       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.
PLR-115102-22                                4


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



                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



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



Enclosure: Copy of this letter


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