Foreign entity receives 120 days to file late corporate classification election

Plain-English summary

A foreign eligible entity intended to be classified as an association taxable as a corporation from a redacted effective date. It inadvertently failed to file Form 8832 on time. The entity represented that it acted reasonably and in good faith, that relief would not prejudice the government, and that hindsight was not involved. The IRS granted 120 days to file the late entity-classification election. The relief was conditioned on the entity and its owners filing all required returns for open years, including amended returns and potentially Forms 5471, consistently with the requested effective date.

Ruling snapshot

• Question: May the foreign eligible entity file a late Form 8832 electing corporate classification from its intended effective date?
• Outcome: approved, with 120 days to file the election and consistent open-year returns
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201704001 Third Party Communication: None
Release Date: 1/27/2017 Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
Person To Contact:
------------------------------- ----------------------, ID No. ------------------
---------------- Telephone Number:
------------------------ ---------------------
------------------------ Refer Reply To:
CC:PSI:B01
PLR-112663-16
Date:
October 13, 2016

Legend

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

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

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

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

This letter responds to a letter dated February 9, 2016, and subsequent
correspondence, written on behalf of X, 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 an association taxable as a corporation for federal tax
purposes.

                                         FACTS

According to the information submitted, X was formed under the laws of Country. X
represents that, as of Date, X was a foreign entity eligible to elect to be treated as an
association taxable as a corporation for federal tax purposes. X intended to be treated as
an association taxable as a corporation for federal tax purposes effective Date.
However, X inadvertently failed to timely file Form 8832, Entity Classification Election,
electing to be treated as an association taxable as a corporation for federal tax
purposes.

X represents that granting relief will not prejudice the interests of the government and that
hindsight is not involved in seeking relief to file a late election. Furthermore, X represents
that it acted reasonably and in good faith.
PLR-112663-16 2

                                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 tax purposes. An eligible entity with at least two members can elect
to be classified as either an association or a partnership.

Section 301.7701-3(b)(2) provides guidance on the classification of a foreign eligible entity
for federal tax purposes. Generally, unless a foreign eligible entity elects otherwise, the
entity is treated as (A) a partnership if it has two or more members and at least one ember
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)(i) provides that unless an 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(c)(1)(i) provides that an eligible entity may elect to be classified other
than as provided in § 301.7701-3(b) by filing Form 8832 with the designated service center.
Section 301.7701-3(c) provides that an entity classification election must be filed on Form
8832 and can be effective up to 75 days prior to the date the form is filed or up to 12 months
after the date the form is filed.

Section 301.7701-3(c)(2) provides 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.

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.

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
301.9100-1(a). 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.
PLR-112663-16 3

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence
to establish that the 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 representations made, we conclude that X has
satisfied the requirements of §§ 301.9100-1 and 301.9100-3 and, therefore, it is granted
an extension of time of 120 days from the date of this letter to file a Form 8832 to elect
to be treated as an association taxable as a corporation for federal tax purposes,
effective Date. A copy of this letter should be attached to the election. A copy is
enclosed for that purpose.

This ruling is contingent on X and the owners of X filing within 120 days of this letter all
required income tax and information returns, including amended returns, for all open years
consistent with the requested relief being effective Date. These returns may include, but
are not limited to, Forms 5471, Information Return of U.S. Persons With Respect to Certain
Foreign CorporationsA copy of this letter should be attached to any such returns.

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.

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 your authorized representatives.

                                    Sincerely,

                                    Associate Chief Counsel
                                    (Passthroughs & Special Industries)


                                By: David R. Haglund
                                    David R. Haglund
                                    Chief, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

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