IRS gives an LLC 120 more days to elect corporation ("check-the-box") tax status it missed

Plain-English summary

A business converted from a state corporation into a state LLC and wanted to keep being taxed as a corporation, which requires filing Form 8832 (the "check-the-box" election). It missed the filing deadline. Under Treas. Reg. § 301.9100-3, the IRS can grant a late-election extension if the taxpayer acted reasonably and in good faith and letting it file late will not hurt the government. The IRS found those standards met and gave the LLC 120 days from the date of the letter to file Form 8832 electing to be classified as an association taxable as a corporation. This is a routine but valuable form of relief: without it, the entity would have been taxed under the default rules (a partnership or disregarded entity) rather than as the corporation it intended to be. The IRS cautioned that the extension does not decide whether the entity is otherwise eligible to make the election.

Ruling snapshot

• Question: May an LLC that missed the deadline for a § 301.7701-3 entity classification election get an extension of time to file it?
• Outcome: Approved (120-day extension granted)
• Key authorities: Treas. Reg. §§ 301.9100-1 and 301.9100-3; Treas. Reg. § 301.7701-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202334001
Release Date: 8/25/2023
Index Numbers: 7701.00-00, 9100.00-00, 9100.31-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------, ID No. -----------------
Telephone Number: --------------------
Refer Reply To: CC:PSI:B03
PLR-100309-23
Date: June 1, 2023

LEGEND

X = ------------------------------------------
State = ---------
Date = -------------------

Dear --------------------

  This letter responds to a letter dated December 7, 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 election under § 301.7701-3 to be classified as an association taxable as a corporation for federal tax purposes.

                                 FACTS

   The information submitted discloses that X converted from a State corporation to a State limited liability company effective Date. X intended to be classified as an association taxable as a corporation for federal tax purposes effective Date. However, X failed to timely file Form 8832, Entity Classification Election, electing to be classified as an association taxable as a corporation for federal tax purposes effective Date.

                          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 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) provides that except as provided in § 301.7701-3(b)(3), 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, in part, that, except as provided in § 301.7701-3(c)(1)(iv) and (v), 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, in part, 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.

   Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six 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 an election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions 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 under § 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 the taxpayer acted reasonably and in good faith, and 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. Consequently, we grant X an extension of time of one hundred twenty (120) days from the date of this letter to file Form 8832 with the appropriate service center to elect to be classified as an association taxable as a corporation for federal tax purposes effective Date. A copy of this letter should be attached to the Form 8832.

   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 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.

  This ruling is directed only to the taxpayer requesting it. According to § 6110(k)(3) of the Code, this ruling may not be used or cited as precedent.

   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.

    Under 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 & 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: