Foreign entity received 120 days to elect partnership treatment

Plain-English summary

A foreign eligible entity with limited-liability members failed to file Form 8832 on time to elect partnership treatment from its organization date. It represented that the failure was reasonable and made in good faith and that late relief would not harm the government's interests. The IRS concluded that the regulatory standards were met and granted 120 days to file the entity-classification election. Relief was conditioned on the entity's owners filing all required returns for open years consistently with partnership treatment within the same period. Those filings could include foreign corporation, foreign partnership, or disregarded-entity information returns as applicable.

Ruling snapshot

• Question: Could the foreign entity make a late election to be classified as a partnership from its organization date?
• Outcome: Approved for 120 days, conditioned on consistent owner filings for all open years.
• Key authorities: Treas. Reg. §§ 301.7701-2(b), 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: 201744001                                          Third Party Communication: None
Release Date: 11/3/2017                                    Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.31-00
                                                           Person To Contact:
-----------------------                                    ------------------------------,
--------------------------------------------               ID No. ----------------
------------------------                                   Telephone Number:
----------------------------------                         ----------------------
                                                           Refer Reply To:
                                                           CC:PSI:B01
                                                           PLR-102452-17
                                                           Date:
                                                           July 17, 2017




LEGEND

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

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

D                 =        --------------------


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

      This responds to a letter dated December 31, 2016, submitted 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 a
partnership for federal tax purposes.

FACTS

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

       X represents that it acted reasonably and in good faith. X also represents that
granting the relief requested will not prejudice the interests of the government.
PLR-102452-17                                  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) provides guidance on the classification of a foreign
eligible entity for federal tax purposes. Generally, a foreign eligible entity is treated as
an association if all members have limited liability, unless the entity makes an election
to be treated otherwise. A foreign eligible entity with two or more members, all having
limited liability may elect to be treated as a partnership pursuant to the rules of
§ 301.7701-3(c). 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.

       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 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 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 make
an election to be treated as a partnership for federal tax purposes effective D. 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.
PLR-102452-17                                  3


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

       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 X’s authorized representatives.


                                            Sincerely,

                                            John P. Moriarty
                                            Acting Associate Chief Counsel
                                            (Passthroughs & Special Industries)


                                            Joy C. Spies

                                      By: ________________________________
                                          Joy C. Spies
                                          Senior Technician Reviewer, Branch 1
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)



Enclosures (2)

       Copy of this letter
       Copy of this letter for section 6110 purposes