IRS grants a foreign entity 120 days for a late corporate-classification election

Plain-English summary

A foreign eligible entity intended to elect corporate treatment for U.S. federal tax purposes from a specified date but inadvertently failed to file Form 8832 on time. The IRS concluded that the entity met the standards for regulatory-election relief. It granted 120 days to file Form 8832 electing association treatment as a corporation from the intended date. The relief was conditioned on the entity's owners filing all required original and amended returns for open years consistently with the election, including Forms 5471, 8865, and 8858 when applicable. The ruling did not decide whether the entity otherwise qualified to make the election or how section 304 applied to any transaction.

Ruling snapshot

• Question: Could the foreign eligible entity receive more time to elect classification as a corporation from its intended effective date?
• Outcome: approved (the entity received 120 days to file Form 8832 and consistent owner returns)
• 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: 202024010                                              Third Party Communication: None
Release Date: 6/12/2020                                        Date of Communication: Not Applicable
Index Number: 7701.00-00, 9100.00-00
                                                               Person To Contact:
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-----------------------------------------                      Refer Reply To:
                                                               CC:PSI:B01
                                                               PLR-125888-19

                                                               Date:
                                                               February 26, 2020




LEGEND

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

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

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

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


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

This responds to a letter dated October 29, 2019, and subsequent information, provided
on behalf of X, requesting that the Service grant X 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 corporation for federal tax purposes.

FACTS

The information submitted states that X was formed as an entity under the laws of
Country on Date 1. X represents that, as a foreign eligible entity, X was able to elect to
be treated as a corporation effective Date 2. However, X inadvertently failed to timely
file Form 8832, Entity Classification Election, electing to treat X as a corporation
effective Date 2.
PLR-125888-19                                  2

LAW AND ANALYSIS

Section 301.7701-3(a) of the income tax regulations 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, in part, that unless an election is made a foreign
eligible entity will be classified as a "corporation" for U.S. income tax purposes if it offers
its members limited liability. Section 301.7701-3(c)(1)(i) provides, in part, that an entity
may elect to be classified other than as provided under section 301.7701-3(b) by filing
Form 8832, Entity Classification Election, with the IRS Service Center designated on the
form.

Section 301.7701-3(c)(1)(iii) 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.

Section 301.7701-3(c)(2) provides that such an election must be signed by either (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 organization 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) defines
the term “regulatory election” as 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 the election.
PLR-125888-19                                 3

Section 301.9100-2 provides the rules governing automatic extensions 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 the taxpayer provides
evidence to establish to the satisfaction of the Commissioner that (1) the taxpayer acted
reasonably and in good faith, and (2) 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 § 301.9100-3 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 to elect to be classified as an association treated as a
corporation for federal tax purposes effective Date 2. A copy of this letter should be
attached to the Form 8832 filed for X.

This ruling is contingent on the owners of X filing within 120 days of this letter all
required returns and amended 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 or imply no opinion concerning the
federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. In particular, no opinion is expressed or implied concerning the
application of section 304 to any aspect of any transaction described in this letter.
Additionally, § 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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that
it may not be used or cited as precedent.

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.
PLR-125888-19                                           4

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.




                                                  Sincerely,



                                                  Holly Porter
                                                  Associate Chief Counsel
                                                  (Passthroughs & Special Industries)



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

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

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