Three foreign entities received late partnership election relief

Plain-English summary

Three foreign entities intended to be treated as partnerships for U.S. federal tax purposes but failed to file Forms 8832 on time. The IRS found that the entities met the standards for discretionary late-election relief. It granted each entity 120 days from the ruling date to file Form 8832 with the requested effective date. The relief was conditioned on the entities and their owner filing all required original or amended returns for open years, including Forms 8865, consistently with partnership treatment. The IRS did not address any other tax consequences.

Ruling snapshot

• Question: Could the three foreign entities make late elections to be classified as partnerships?
• Outcome: Approved, subject to filing Forms 8832 and all consistent open-year returns within 120 days.
• Key authorities: IRC § 7701; 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: 201744017                                             Third Party Communication: None
Release Date: 11/3/2017                                       Date of Communication: Not Applicable
Index Number: 7701.02-00, 9100.00-00
                                                              Person To Contact:
--------------------------                                    ----------------------, ID No. -----------------
----------------------------                                  Telephone Number:
----------------------                                        -------------------
----------------------------------                            Refer Reply To:
                                                              CC:PSI:1
                                                              PLR-133654-16
                                                              Date:
                                                              July 28, 2017




Legend

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

Z=                 ---------------------------------------
------------------------------------------

Country =         --------

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

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

This responds to a letter dated October 18, 2016, and subsequent correspondence,
submitted on behalf of X, Y, and Z requesting extensions of time under § 301.9100-3 of
the Procedure and Administration Regulations for X, Y, and Z to file entity classification
elections under § 301.7701-3(c) to be treated as a partnerships for federal tax
purposes.

                                                     FACTS

According to the information submitted, X, Y, and Z were each formed under the laws of
Country. X, Y, and Z represent that they are foreign entities eligible to elect to be
treated as partnerships for U.S. federal tax purposes as of Date. However, X, Y, and Z
failed to timely file Forms 8832, Entity Classification Election, electing to be treated as
partnerships effective Date.
PLR-133654-16                                  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 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.

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 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, Y, and Z are granted extensions of time of 120 days from the date of this letter
to file Forms 8832 with the appropriate service center and elect to be treated as
partnerships for federal tax purposes, effective Date. A copy of this letter should be
attached to the Forms 8832.
PLR-133654-16                                  3

This ruling is contingent on X, Y, and Z and their owner filing within 120 days of this
letter all required original or amended information and tax returns for all open years
consistent with the requested relief. These returns must include, but are not limited to,
Forms 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.

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.

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)


                                       Laura C. Fields
                                   By: ___________________________
                                       Laura C. Fields
                                       Senior Technician Reviewer, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)


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