Foreign-owned LLC receives 120 days for a late corporate-classification election

Plain-English summary

A domestic LLC wholly owned by a foreign proprietary limited company intended to be classified as an association taxable as a corporation from its formation date. After converting between two states' LLC laws, it discovered that Form 8832 had not been timely filed. Based solely on the submitted facts and representations, the IRS found that the company met the requirements for discretionary relief and granted 120 days to file the late election. The relief is conditioned on the LLC filing all required returns for open years consistently with the requested classification within the same period. The extension does not independently determine that the LLC is otherwise eligible to make the election.

Ruling snapshot

• Question: May a foreign-owned domestic LLC make a late election to be treated as an association taxable as a corporation from its formation date?
• Outcome: approved; 120-day extension granted, with consistent-return filing conditions
• Key authorities: Treas. Reg. §§ 301.7701-2, 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: 202326013                                            Third Party Communication: None
 Release Date: 6/30/2023                                      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-120466-22
                                                              Date:
                                                              April 04, 2023




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

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

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

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

 State 1      = --------

 State 2      = -------------

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


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

This responds to your letter, dated October 11, 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 1 on Date 1. On Date 2, X converted to a limited liability company
under the laws of State 2. X is wholly owned by Y, which is a proprietary limited
company incorporated under the laws of Country. Due to inadvertence, X failed to timely
PLR-120466-22                                 2

file a form 8832, Entity Classification Election, electing to be an association taxable as a
corporation effective Date 1.

                                   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.


                                      CONCLUSION
PLR-120466-22                                   3

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 1. 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 1. 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,

                                          Associate Chief Counsel
                                          (Passthroughs & Special Industries)

                                          By:


                                          _______________________________
                                          Laura Fields
                                          Chief, Branch 1
                                          Office of the Associate Chief Counsel
                                          (Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes

cc: