Foreign entity granted late partnership election

Plain-English summary

A foreign eligible entity intended to elect partnership status for federal tax purposes but inadvertently failed to file Form 8832 on time. The IRS found that the entity met the standards for discretionary filing relief and granted it 120 days to file the election. The relief is contingent on the entity's owner filing all required returns and information returns for open years consistently with partnership treatment. The ruling also says the election is disregarded in determining United States shareholders' section 956 elements if recognizing it would change those amounts.

Ruling snapshot

• Question: May the foreign entity file a late Form 8832 electing partnership status?
• Outcome: Approved, with 120 days to file the election and consistent returns
• Key authorities: Treas. Reg. §§ 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: 202434005 [Third Party Communication:
Release Date: 8/23/2024 Date of Communication: Month DD, YYYY]
Index Number: 7701.01-00, 9100.31-00
Person To Contact:
-------------------------------------------------------- ---------------------, ID No. -----------------
---------------------------------------------------- Telephone Number:
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---------------------- Refer Reply To:
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PLR-122349-23
Date:
May 10, 2024

LEGEND

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

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

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

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

    This responds to a letter dated November 3, 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 for
federal tax purposes.

                                                  FACTS

    The information submitted discloses that 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 for federal tax purposes effective Date. However, X inadvertently failed
to timely file a Form 8832, Entity Classification Election, to be classified as a partnership
for federal tax purposes.

                                        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
PLR-122349-23 2

§ 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)(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 owners if it has a single owner that does not have limited liability.

    Section 301.7701-3(b)(2)(ii) provides, in part, 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, 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
PLR-122349-23 3

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 and representations submitted, we conclude that X has

satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Consequently, X is
granted 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 a
partnership effective Date. A copy of this letter should be attached to the election.

     This ruling is contingent on the owner of X filing within 120 days of the date of

this letter all required returns and information returns (including amended returns) for all
open years consistent with the requested relief granted in this letter. These returns
include, but are not limited to, Form 8865, Return of U.S. Persons with Respect to
Certain Foreign Partnerships, 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, X’s election to be classified as a partnership is disregarded for

purposes of determining the amounts of all § 956 elements of all United States
shareholders of X if the election otherwise would change the amount of any § 956
element of any such United States shareholder. See § 1.965-4(c)(2) of the Income Tax
Regulations.

    Except for the specified 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.
PLR-122349-23 4

    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.

                                             Sincerely,

                                             Holly Porter
                                             Associate Chief Counsel
                                             (Passthroughs & Special Industries)




                                             By: ___________________________
                                             Richard T. Probst
                                             Senior Technician Reviewer, Branch 3
                                             (Passthroughs & Special Industries)

cc: -----------------------------------------------------

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