LLC receives 120 days to file a late corporate-classification election

Plain-English summary

A state-law limited liability company intended to be treated as an association taxable as a corporation from a specified date. It missed the Form 8832 filing deadline because of inadvertence and asked for an extension under Treas. Reg. § 301.9100-3. The company represented that it acted reasonably and in good faith and that relief would not prejudice the government's interests. The IRS granted 120 days from the letter date to file the election with the requested effective date. The company and its owners also had to file any required original or amended returns for open years within that period and make them consistent with the election.

Ruling snapshot

• Question: May the LLC file a late Form 8832 electing corporate classification from its intended effective date?
• Outcome: Approved (120-day extension)
• 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

 Number: 202110013                                               Third Party Communication
 Release Date: 3/12/2021                                         Date of Communication:
                                                                 Not applicable
 Index Number: 7701.00-00, 9100.00-00,
               9100.31-00                                        Person To Contact:
                                                                 ----------------------, ID No. ------------------
 ----------------------------                                    Telephone Number:
 ------------------------------------------------------------    -------------------
 -------------------                                             Refer Reply To:
 --------------------------------------------                    CC:PSI:B3
 ---------------------------                                     PLR-116524-20
                                                                 Date:
                                                                 December 8, 2020




Legend

                      ----------------------------------------
 X              =     ----------------------------------------
                      ----------------------------------------
                      ----------------------------------------
 State          =     -------------

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

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


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

        This letter responds to a letter dated July 15, 2020, submitted on behalf of X by
its authorized representative, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for X to file an election under § 301.7701-3
to be classified as an association taxable as a corporation for federal tax purposes.

                                                      Facts

       Based on the material submitted, X, a State limited liability company, was formed
on Date 1. X intended to be classified as an association taxable as a corporation for
federal tax purposes effective Date 2. However, due to inadvertence, X failed to file a
Form 8832, Entity Classification Election, electing to be treated as an association
taxable as a corporation effective Date 2.

       X represents that it acted reasonably and in good faith. Further, X represents
that the interests of the Government will not be prejudiced by granting the relief sought.
PLR-116524-20                                  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 as provided in
§ 301.7701-3. An eligible entity with at least two members can elect to be classified as
either an association (and thus a corporation under § 301.7701-2(b)(2)) 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)(1) provides that except as provided in § 301.7701-3(b)(3),
unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has
two or more members or (ii) disregarded as an entity separate from its owner if it has a
single owner.

        Section 301.7701-3(c)(1)(i) provides, in part, that an eligible entity may elect to
be classified other than as provided under § 301.7701-3(b), or to change its
classification, by filing Form 8832 with the service center designated on Form 8832.

        Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701-
3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified on the election form. The effective date specified
on Form 8832 cannot be more than 75 days prior to the date on which the election is
filed and cannot be more than 12 months after the date on which the election is filed.

        Section 301.9100-1(c) provides that the Commissioner in exercising the
Commissioner’s discretion may grant a reasonable extension of time under the rules set
forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory
election (but not more than 6 months except in the case of a taxpayer who is abroad),
under all subtitles of the Internal Revenue Code (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.

      Section 301.9100-2 provides the standards the Commissioner will use to
determine whether to grant an automatic extension of time for making certain elections.

       Section 301.9100-3 provides the guidelines for granting extensions of time for
making elections that do not meet the requirements of § 301.9100-2. Section 301.9100-
3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the
taxpayer provides the evidence (including affidavits described in § 301.9100-3(e)) to
establish to the satisfaction of the Commissioner that the taxpayer acted reasonably
and in good faith, and the grant of relief will not prejudice the interests of the
Government.


                                         Conclusion
PLR-116524-20                                 3

       Based solely on the facts submitted and the representations made, we conclude
that X has satisfied the requirements of § 301.9100-3. As a result, we grant X an
extension of time of one hundred twenty (120) days from the date of this letter to file
Form 8832 with the appropriate service center to elect to be classified an association
taxable as a corporation for federal tax purposes, effective Date 2. A copy of this letter
should be attached to the Form 8832.

        This ruling is contingent on X and its owners filing within 120 days from the date
of this letter all required original or amended information and tax returns for all open
years consistent with the requested relief. 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 the facts of this case under any other provision of the
Code and the regulations thereunder. In addition, § 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.

      We are directing the ruling only to the taxpayer that requested it. Section
6110(k)(3) of the Code provides that it may not be used or cited as precedent.

        Pursuant to a power of attorney on file with this office, we are sending a copy of
this letter to X’s authorized representative.

       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.


                                           Sincerely,
                                           Associate Chief Counsel
                                          (Passthroughs & Special Industries)


                                      By: _______________________
                                          Mary Beth Carchia
                                          Senior Technician Reviewer, Branch 3
                                          Office of the Associate Chief Counsel
                                          (Passthroughs & Special Industries)


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



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