Late entity classification election granted 9100 relief

Plain-English summary

A limited liability company asked for additional time to elect disregarded-entity status after its sole owner acquired it. The company and its owner had filed their relevant returns consistently with the intended treatment, but Form 8832 was not filed on time. The IRS found that the requirements for discretionary relief under Treasury Regulations §§ 301.9100-1 and 301.9100-3 were satisfied. It granted the company 120 days from the ruling date to file Form 8832 with the requested effective date. The ruling addressed only the late election and did not determine other federal tax consequences.

Ruling snapshot

• Question: Could the company receive additional time to file an entity classification election for disregarded-entity treatment?
• Outcome: Approved.
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

                                                           Third Party Communication: None

Number: 201643010 Date of Communication: Not Applicable
Release Date: 10/21/2016
Person To Contact:
Index Number: 7701.00-00, 9100.00-00, -------------------------, ID No. ------------------
9100.31-00 -----------------------------------------------------
Telephone Number:
------------------------- ----------------------
----------------------------------- Refer Reply To:

-------------------------------------------------- CC:PSI:B03
---------------------------------------------- PLR-116152-16
Date:
July 22, 2016

Legend

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

Y = ---------------------------------------

State = ---------

Date1 = ----------------------

Date2 = ----------------------------

Date3 = ----------------------

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

    This letter responds to a letter dated May 13, 2016, and subsequent

correspondence submitted on behalf of X, requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations for X to file an entity
classification election.

    The information submitted states that X was formed as a limited liability company

under the laws of State on Date1. X filed an entity classification election to be classified
as an association taxable as a corporation, effective on Date1. In addition, X filed an
election to be treated as an S corporation, also effective on Date1. On Date2, Y
acquired all of the ownership interests in X, and intended to treat X as a disregarded
entity effective Date3. However, an entity classification election to treat X as a
disregarded entity was not filed at that time. X represents that X and Y have filed tax
PLR-116152-16 2

returns for all of the relevant tax years consistent with the income tax treatment of X as
a disregarded entity.

    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. Elections are necessary only when an
eligible entity does not want to be classified under the default classification or when an
eligible entity chooses to change its classification.

   Section 301.7701-3(b) (1)(1)(ii) provides that, unless the entity elects otherwise,

a domestic eligible entity is disregarded as an entity separate from its owner if it has a
single owner.

    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)(2) by filing Form 8832 with the
appropriate service center. Under § 301.7701-3(c)(1)(iii), this election will be effective
on the date specified by the entity on Form 8832 or on the date filed if no such date is
specified. The date specified on Form 8832 cannot be more than 75 days prior to the
date on which the election is filed and no more than 12 months after the date the
election is filed.

   Section 301.7701-3(c)(2)(i) provides, in general, that an election made under

§ 301.7701-3(c)(1)(i) must be signed by (A) each member of the electing entity who is
an owner at the time the election is filed; or (B) any officer, manager, or member of the
electing entity who is authorized (under local law or the entity’s organizational
documents) to make the election and who represents to having such authorization
under penalties of perjury.

   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
6 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) 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 the
election. Section 301.9100-2 provides the rules governing automatic extension of time
for making certain elections. Section 301.9100-3 provides the standards the
Commissioner will use to determine whether to grant an extension of time for regulatory
elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a
request for relief will be granted when a taxpayer provides evidence to establish to the
satisfaction of the Commissioner that (1) the taxpayer acted reasonable and in good
faith, and (2) granting relief will not prejudice the interests of the government.
PLR-116152-16 3

    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.
As a result, X is granted an extension of time of 120 days from the date of this letter to
file a Form 8832 with the appropriate service center and elect to be treated as a
disregarded entity for federal tax purposes, effective Date3. A copy of this letter should
be attached to the Form 8832. A copy is enclosed for that purpose.

   Except as specifically set forth above, no opinion is expressed concerning the

federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code and the regulations thereunder.

   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.

  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, we are sending

copies of this letter to X’s authorized representatives.

                                  Sincerely,


                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries


                               By: __________________________
                                  Bradford R. Poston
                                  Senior Counsel, Branch 3
                                  Office of Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes