IRS modifies an earlier ruling to give an LLC 120 days to elect corporate treatment from the intended date

Plain-English summary

This letter modifies and supersedes an earlier private letter ruling. An LLC had intended to elect to be treated as an association taxable as a corporation effective on a chosen date, but it failed to timely file Form 8832 (Entity Classification Election), and when it later filed, it listed the wrong effective date. The IRS had already granted relief under Treasury Regulation section 301.9100-3 in the earlier ruling; this letter corrects that ruling's conclusion so the LLC gets 120 days from this letter to file a Form 8832 electing corporate treatment effective as of the originally intended date. The analysis under section 301.7701-3 and sections 301.9100-1 through 301.9100-3 is the standard reasonable-and-good-faith test, and a separate S corporation election the LLC later made is unaffected. It matters because it shows the IRS will reissue a 9100 ruling to fix an effective-date error so the taxpayer ends up with the corporate classification it actually intended.

Ruling snapshot

• Question: Will the IRS modify its prior ruling to grant the LLC a late Form 8832 election effective on the originally intended date?
• Outcome: Approved (prior ruling modified and superseded; 120 days from the letter to file Form 8832 effective on the intended date)
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202146007 Third Party Communication: None
Release Date: 11/19/2021 Date of Communication: Not Applicable
Index Number: 9100.31-00
Person To Contact:
-----------------, ID No. -----------------
------------------------------------------------------------ Telephone Number:
--------------------------------------------- ---------------------
----------------------------- Refer Reply To:
------------- CC:PSI:03
--------------------------- PLR-117084-21
--------------------------- Date:
August 27, 2021

Legend:

X: = -------------------------------------------------------------
-----------------------

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

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

Date 3: = ---------------------

State = -------------

Year 1: = -------

Year 2: = -------

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

    This letter is being sent to modify private letter ruling (PLR-100234-21) dated

May 24, 2021 (the “PLR”). We are modifying the second sentence under the heading
CONCLUSION to state that “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 taxable as a corporation effective Date 1.” This
ruling modifies and supersedes the PLR.
PLR-117084-21 2

   The PLR, as modified, reads as follows:

   This letter responds to a letter dated December 15, 2020, and subsequent

correspondence submitted on behalf of X, 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 from Date 1 through Date 3.

                                       FACTS

   According to the information submitted, X was formed as a limited liability

company under the laws of State. X represents that it intended to make an election to
be treated as an association taxable as a corporation for federal tax purposes effective
Date 1. However, X inadvertently failed to timely file a Form 8832, Entity Classification
Election.

   In Year 2, X filed a Form 8832 electing to be classified as an association taxable

as a corporation. However, X inadvertently identified the effective date for the election
as Date 2 rather than Date 1.

   In Year 2, Taxpayer filed a Form 2553, Election by a Small Business

Corporation, electing to be taxed as an S corporation effective Date 3. This ruling does
not affect that election.

                               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 (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, unless the entity elects otherwise, a

domestic eligible entity is classified as a partnership if it has two or more members or is
disregarded as an entity separate from its owner if it has a single owner.

    Section 301.7701-3(c)(1)(i) provides 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 appropriate service center. Under § 301.7701-3(c)(1)(iii),
this election will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified. 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 the election is filed.
PLR-117084-21 3

   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 (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.

   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. 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 a taxpayer provides evidence (including affidavits
described in § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that
(1) the taxpayer acted reasonably and in good faith, and (2) the grant of 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 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 taxable as a corporation effective Date 1. A copy of this letter should be
attached to the Form 8832.

   This ruling is contingent on X filing, within 120 days from the date of this letter, to

the extent necessary or appropriate, all required federal income tax returns and
information returns (including amended returns) consistent with the requested 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 the facts described above 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 express no opinion concerning the assessment of any interest, additions to

tax, additional amounts, or penalties for failure to file a timely tax or information return
with respect to any taxable year that may be affected by this ruling. For example, we
express no opinion as to whether a taxpayer is entitled to relief from any penalty on the
basis that the taxpayer had reasonable cause for failure to file timely any income tax or
information returns.
PLR-117084-21 4

   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.

  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, we are sending a

copy of this letter to your authorized representative.

                                  Sincerely,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)


                                 Richard T. Probst
                             By: __________________________________
                                 Richard T. Probst
                                 Senior Technician Reviewer, Branch 3
                                 Office of Associate Chief Counsel
                                 (Passthroughs & Special Industries)

Enclosure:
Copy for § 6110 purposes

cc: