IRS grants 120 days for a late corporate classification election

Plain-English summary

A single-owner limited liability company was treated by default as disregarded from its owner for federal tax purposes. It intended to change its classification and become an association taxable as a corporation on a specified date, but it did not timely file Form 8832. The IRS found that the company met the standards for discretionary election relief. It gave the company 120 days to file Form 8832 with the appropriate service center and attach a copy of the ruling. The relief was conditioned on the company filing all required original or amended federal income tax returns for open years within the same 120-day period, consistently with corporate classification. The IRS did not decide whether the company was otherwise eligible for the election or whether penalties, interest, or additions to tax applied.

Ruling snapshot

• Question: May a disregarded single-owner LLC make a late election to be classified as an association taxable as a corporation?
• Outcome: approved (120 days to file Form 8832 and all consistent returns for open years)
• 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: 202448004                                              Third Party Communication: None
Release Date: 11/29/2024                                       Date of Communication: Not Applicable
Index Numbers: 7701.01-00, 9100.31-00
                                                               Person To Contact:
                                                               -------------------------, ID No. -----------------
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--------------------------------------------------------       Telephone Number:

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---------------------------                                    Refer Reply To:
------------------------------------                           CC:PSI:B3
                                                               PLR-104566-24
                                                               Date:
                                                               August 30, 2024




LEGEND:

X                 =         --------------------------------
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Y                 =         ---------------------------------------------------------
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State             =        -------------

Date 1            =        -------------------

Date 2            =        ----------------------


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

     This letter responds to a letter dated December 15, 2023, 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 pursuant to § 301.7701-3 to be classified as an
association taxable as a corporation for federal tax purposes.

                                                    FACTS

     The information submitted states that X was formed as a State limited liability
company on Date 1. Effective Date 1, X was disregarded as an entity separate from its
owner, Y, for federal tax purposes. X represents that it intended to elect to change its

PLR-104566-24                                  2

classification from a disregarded entity to as an association taxable as a corporation for
federal tax purposes effective Date 2. 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 2.

                                       LAW & 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
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)(ii) provides that unless a domestic eligible entity elects
otherwise, the entity is 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 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.

      Section 301.7701-3(g)(1)(iv) provides that if an eligible entity that is disregarded
as an entity separate from its owner elects under § 301.7701-3(c)(1)(i) to be classified
as an association, the following is deemed to occur: The owner of the eligible entity
contributes all of the assets and liabilities of the entity to the association in exchange for
stock of the association.

       Section 301.7701-3(g)(3) provides, in part, that an election under § 301.7701-
3(c)(1)(i) that changes the classification of an eligible entity for federal tax purposes is
treated as occurring at the start of the day for which the election is effective. Any
transactions that are deemed to occur under § 301.7701-3(g) as a result of a change in
classification are treated as occurring immediately before the close of the day before the
election is effective.

      Section 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time to make a regulatory election under all subtitles of the
Internal Revenue Code (Code) except subtitles E, G, H, and I. Section 301.9100-1(b)

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

       Under § 301.9100-3, requests 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.

                                          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. As a result, we
grant X an extension of time of 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 2. A copy of this letter should be
attached to X’s Form 8832.

      This ruling is contingent on X filing, within 120 days from the date of this letter, all
required federal income tax returns (including amended returns) for all open years
consistent with the requested relief. A copy of this letter should be attached to any such
returns.

        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.

       Except as specifically ruled upon above, we express or imply no opinion
concerning the federal tax consequences of any facts discussed or referenced in this
letter. 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.

      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 requested ruling, it is subject to verification on examination.

PLR-104566-24                                             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 a power of attorney on file with this office, we are sending a
copy of this letter to your authorized representative.

                                                Sincerely,

                                                Associate Chief Counsel
                                                (Passthroughs & Special Industries)



                                       By:      _______________________________
                                                Mary Beth Carchia
                                                Senior Technician Reviewer
                                                Office of Associate Chief Counsel
                                                (Passthroughs & Special Industries)


Enclosure:
     Copy of this letter for § 6110 purposes

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