Foreign entity gets more time to elect partnership status

Plain-English summary

A foreign limited liability partnership that is eligible to choose how it is classified for U.S. federal tax purposes wanted to be treated as a partnership effective a specific date. To make that choice it had to file Form 8832, the entity classification election, by a deadline, but through inadvertence it did not. It asked the IRS for relief under the Section 301.9100-3 regulations, which allow the IRS to grant more time to make a missed regulatory election when the taxpayer acted reasonably and in good faith and relief would not prejudice the government. Based on the taxpayer's representations, the IRS granted a 120-day extension to file Form 8832 electing partnership classification for the requested effective date. The relief is contingent on the entity filing all consistent federal returns and information returns for the affected years (for example, Forms 8865); if that condition is not met, the ruling is null and void. The IRS expressed no opinion on whether the entity is otherwise eligible to make the election or on any penalties for late filing.

Ruling snapshot

• Question: May a foreign eligible entity that missed the deadline get extra time to file Form 8832 electing to be classified as a partnership?
• Outcome: Approved, 120-day extension granted (contingent on consistent return filing, or the ruling is void).
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3; § 1.965-4(c)(2); IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202420026 Third Party Communication: None
Release Date: 5/17/2024 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-118263-23
Date:
February 14, 2024

                                                 LEGEND

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

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

Date = --------------------------

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

This letter is to respond to a letter dated September 14, 2023, and subsequent
correspondence, submitted on behalf of X by X's 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 a partnership
effective Date.

                                                 FACTS

According to the information submitted, X was formed on Date as a
limited liability partnership under the laws of Country. X represents it is a foreign entity
eligible to be classified as a partnership effective Date. However, due to inadvertence,
X failed to file Form 8832, Entity Classification Election, electing to classify X as a
partnership effective Date.

                               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 income 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 except as provided in § 301.7701-3(b)(3),
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)(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, in part, that an eligible entity may elect to be
classified other than 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 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 under the rules set forth in §§ 301.9100-2 and 301.9100-3,
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) granting relief will not prejudice the Government.

                                  CONCLUSION

Based on the facts 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 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. A copy of this letter should be
attached to the Form 8832.

This ruling is contingent upon X filing, within 120 days from the date of this letter, to the
extent 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, for all required taxable years consistent with X
having made a timely election effective Date to be treated as a partnership for U.S.
federal income tax purposes. If this condition is not met, then this ruling is null and void.
A copy of this letter should be attached to any such returns.

If applicable, this entity classification election to classify X as a partnership 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 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. Specifically, we express or imply no opinion regarding whether the taxpayer is
otherwise eligible to make the election.

Further, we express or imply no opinion concerning the assessment of any interest,
additions to tax, additional amounts, or penalties for failure to file a timely income tax or
information return with respect to any taxable year that may be affected by this ruling.
For example, we express or imply 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.

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.

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 the appropriate party. While the office has not verified any of the material submitted
in support of the ruling request, it is subject to verification or examination.

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 of this letter for § 6110 purpose

cc: