Late partnership classification election allowed

Plain-English summary

A foreign private company represented that it was an eligible entity that could elect partnership classification for U.S. federal tax purposes. It inadvertently failed to file Form 8832 on time for the requested effective date. The IRS concluded that the company satisfied the standards for a reasonable, good-faith extension that would not prejudice the government. It granted 120 days to file Form 8832 and elect partnership status retroactively. The relief was conditioned on the company's owner filing all required returns for open years consistently with that classification, potentially including Forms 5471, 8865, and 8858. The IRS did not decide whether the company was otherwise eligible for the election, did not alter subsidiary classifications, and expressed no view on penalties for late returns.

Ruling snapshot

• Question: May the foreign eligible entity file a late Form 8832 electing partnership classification for federal tax purposes?
• Outcome: Approved, subject to filings within 120 days
• 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: 202350004                                             Third Party Communication: None
 Release Date: 12/15/2023                                      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-106035-23
                                                               Date:
                                                               September 13, 2023




                                                    LEGEND

 X            =      -----------------------------------------------------------
 Date 1       =      -------------------------------
 Date 2       =      ------------------------
 Country      =      ----------------


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

       This letter responds to a letter dated March 23, 2023, and subsequent
correspondence, submitted on behalf of X by X’s authorized representative, requesting
an extension of time under § 301.9100-3 of the Procedure and Administration
Regulations to file an election under § 301.7701-3(c) to be treated as a partnership for
federal tax purposes effective Date 2.

                                                     FACTS

The information submitted states that X was formed under the laws of Country as a
private company on Date 1. X represents that it is a foreign entity eligible to elect to be
classified as a partnership for federal tax purposes. However, X inadvertently failed to
timely file Form 8832, Entity Classification Election, to be classified as a partnership for
federal tax purposes 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 as provided in § 301.7701-3. An eligible
PLR-106035-23                                2

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 it 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 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, 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 that an election made under § 301.7701-3(c)(1)(i)
will be effective on the date specified by the entity on the Form 8832 or on the date filed
if no 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 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) defines the term “regulatory election” as including 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 rules for requesting extensions of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

Section 301.9100-3(a) provides that a request 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 grant of relief will not prejudice the interests of the
Government.
PLR-106035-23                                  3

                                       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.
Accordingly, X is granted an extension of time of 120 days from the date of this letter to
file Form 8832 with the appropriate service center to elect under § 301.7701-3 to be
classified as a partnership for federal tax purposes effective Date 2. A copy of this letter
should be attached to the Form 8832.

This ruling is contingent on the owner of X filing within 120 days of this letter all required
returns for all open years consistent with the requested relief. These returns may
include, but are not limited to, the following forms: (i) Forms 5471, Information Return of
U.S. Persons With Respect to Certain Foreign Corporations, (ii) Forms 8865, Return of
U.S. Persons With Respect to Certain Foreign Partnerships, and (iii) Forms 8858,
Information Return of U.S. Persons With Respect to Disregarded Entities, 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.

Except as expressly set forth above, we express or imply no opinion concerning the federal
tax consequences of the facts discussed above 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.

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 rulings contained in this letter are 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 rulings, it is subject to verification on examination.

This ruling is directed only to the taxpayer requesting it. This ruling does not affect the
entity classification of any subsidiaries of X. Section 6110(k)(3) of the Code provides
that it may not be used or cited as precedent.
PLR-106035-23                                   4

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,

                                          Holly Porter
                                          Associate Chief Counsel
                                          (Passthroughs & Special Industries)



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




Enclosure
      Copy for § 6110 purposes



cc: