Foreign entity received more time to elect partnership status

Plain-English summary

A foreign eligible entity intended to be classified as a partnership for federal tax purposes but did not timely file Form 8832. It represented that the failure did not result from tax avoidance or retroactive tax planning. The IRS granted 120 days to make the election and required the entity and its owners to file all open-year returns consistently with the relief. The ruling also preserved the special rule that disregards a classification election if it would change a United States shareholder's Section 965 elements.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to file Form 8832 and elect partnership classification?
• Outcome: approved
• Key authorities: IRC §§ 965, 7701; Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202424010                                              Third Party Communication: None
Release Date: 6/14/2024                                        Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00,
              9100.31-00                                       Person To Contact:
                                                               -----------------------, ID No. -------------------
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------------------------------------------------------------   Telephone Number:
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------------------------------------------                     Refer Reply To:
----------------------------                                   CC:PSI:01
--------------------------                                     PLR-118205-23
                                                               Date:
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                                                               March 18, 2024




                                                   LEGEND

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

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

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


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

This responds to a letter dated August 31, 2023, 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(c) to
be treated as a partnership for federal tax purposes.

                                                    FACTS

According to the information submitted, X was organized under the laws of Country
on Date. X represents that it is a foreign entity eligible to elect to be classified as a
partnership. However, X failed to timely file Form 8832, Entity Classification Election,
electing to be treated as a partnership for federal tax purposes effective Date.

X intended to elect to be treated as a partnership for federal tax purposes as of Date. X
represents that the failure to timely file the election was not motivated by tax avoidance
or retroactive tax planning.

PLR-118205-23                                   2

                                   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 at least two
members can elect to be classified as either an association 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)(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 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.

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, 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, or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

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 making elections that do not meet the
requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides
evidence (including affidavits described in § 301.9100-3(e)) to establish that the

PLR-118205-23                                 3

taxpayer acted reasonably and in good faith, and that granting relief will not prejudice
the interests of the government.

                                     CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that
the requirements of § 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 make an election to be
treated as a partnership for federal tax purposes effective Date. X should make the
election by filing a properly executed Form 8832 with the appropriate service center. A
copy of this letter should be attached to the form.

This ruling is contingent on X and its owners filing within 120 days of the date 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.

If applicable, the election to classify X as a partnership effective Date 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 such United States shareholder. See § 1.965-4(c)(2) of the Income Tax
Regulations.

Except as specifically set forth above, we express no opinion concerning the federal tax
consequences of the facts described above under any other provision of the Internal
Revenue 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 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.

PLR-118205-23                                            4

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 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:
                                                  Joy C. Spies
                                                  Senior Technician Reviewer, Branch 1
                                                  (Passthroughs & Special Industries)


Enclosure
     Copy for §6110 purposes


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