LLC receives 120 days for late corporate-classification election

Plain-English summary

A domestic limited liability company intended to elect association status so it would be taxed as a corporation from a specified date. It inadvertently failed to file Form 8832 on time. The company represented that it acted reasonably and in good faith, that relief would not prejudice the government, and that it was not using hindsight. The IRS found that the regulatory-relief standards were met and granted 120 days to file Form 8832 with the intended effective date. The ruling does not decide whether the company otherwise qualifies to make the election.

Ruling snapshot

• Question: May the LLC file a late election to be classified as an association taxable as a corporation?
• Outcome: Approved, with a 120-day extension
• Key authorities: Treas. Reg. §§ 301.7701-3 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                 Department of the Treasury
                                                          Washington, DC 20224

 Number: 202326006                                        Third Party Communication: None
 Release Date: 6/30/2023                                  Date of Communication: Not Applicable
 Index Number: 9100.31-00, 7701.00-00
                                                          Person To Contact:
 -----------------------------------                      -------------------, ID No. -----------------
 ----------------------------------                       Telephone Number:
 ----------------------------------                       --------------------
 --------------------------                               Refer Reply To:
  ----------------------------                            CC:PSI:03
                                                          PLR-118886-22
                                                          Date:
                                                          March 31, 2023




Legend

X:                 ------------------------------------
-----------------------------------------

State:            -------------

Date 1:           ------------------

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


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

       This letter responds to a letter dated September 28, 2022, submitted on behalf of
X by its authorized representatives, requesting an extension of time under § 301.9100-3
of the Procedure and Administration Regulations to file an election under § 301.7701-3
to be classified as an association taxable as a corporation for federal tax purposes.

                                                 FACTS

       The information submitted states that X was formed as a limited liability company
under the laws of State on Date 1. X represented that it is an entity eligible to elect to
be classified as an association taxable as a corporation for federal tax purposes. X
intended to elect to be classified as an association taxable as a corporation effective
Date 2. However, X inadvertently failed to timely file Form 8832, Entity Classification
Election, to be treated as an association taxable as a corporation for federal tax
purposes effective Date 2.
PLR-118886-22                                   2

        X represents that it has acted reasonably and in good faith, that granting relief
will not prejudice the interests of the government, and that it is not using hindsight in
making the election.

                                        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
a single owner can elect to be classified as an association or to be disregarded as an
entity separate from its owner. 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)(1) provides that unless the entity elects otherwise, a
domestic eligible entity is: (i) a partnership if it has two or more members; or (ii)
disregarded as an entity separate from its owner if it has a single owner.

        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) by filing Form 8832 with the
appropriate service center.

        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. 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 not more than 6 months except in the
case of a taxpayer who is abroad), under all subtitles of 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.
PLR-118886-22                                  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. 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 treated as an association taxable as a
corporation for federal tax purposes, effective Date 2. A copy of this letter should be
attached to the Form 8832.

       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 request for ruling, it is subject to verification on examination.

      This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to X’s authorized representatives.

                                                   Sincerely,

                                                   Associate Chief Counsel
                                                   (Passthroughs & Special Industries)


                                           By: _________________________
                                                 Robert D. Alinsky
                                                 Chief, Branch 3
                                                 Office of Chief Counsel
                                                 (Passthroughs & Special Industries)



Enclosure:
 Copy of this letter for § 6110 purposes

cc: