Extra time for a foreign entity to file a late check-the-box election to be treated as a partnership

Plain-English summary

A foreign business entity meant to be treated as a partnership for U.S. federal tax purposes as of a chosen date, which requires filing Form 8832, the entity classification (check-the-box) election. Through inadvertence, it never timely filed that form. The entity and its owners had consistently reported income as if it were a partnership all along. It asked the IRS for an extension under Treasury Regulation section 301.9100-3, representing that it acted reasonably and in good faith, that relief would not lower its overall tax, and that the government would not be prejudiced. The IRS agreed and granted 120 days to file the Form 8832 electing partnership treatment effective from the intended date. Relief is contingent on the entity and its owners also filing, within 120 days, all required original or amended returns for open years, including Forms 8865 for foreign partnerships. This is the standard cure that lines up an entity's tax classification with how it has actually been reporting.

Ruling snapshot

• Question: Should a foreign eligible entity get more time to file a late Form 8832 electing to be treated as a partnership?
• Outcome: Approved (120 days to file Form 8832 effective from the intended date, contingent on filing conforming returns including Forms 8865).
• Key authorities: Treas. Reg. § 301.7701-3; Treas. Reg. §§ 301.9100-1, 301.9100-3; Treas. Reg. § 1.965-4(c)(2).

Full text (IRS public release)

 Internal Revenue Service                                     Department of the Treasury
                                                              Washington, DC 20224

 Number: 202209004                                            Third Party Communication: None
 Release Date: 3/4/2022                                       Date of Communication: Not Applicable
 Index Number: 7701.00-00, 7701.02-00,
               9100.00-00                                     Person To Contact:
                                                              ----------------------, ID No. -----------------
 ---------------------------------                            Telephone Number:
 ---------------------------------------                      --------------------
 --------------------------------------------------------     Refer Reply To:
 ----------------------------------------------               CC:PSI:B01
 -----------------------------                                PLR-112402-21
                                                              Date:
                                                              December 01, 2021




Legend

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

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

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

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



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

This letter responds to a letter dated June 8, 2021, submitted on behalf of X by its
authorized representative, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 301.7701-3 to be
treated as a partnership for federal tax purposes.

                                                      Facts

According to the information submitted, X was formed under the laws of Country on
Date 1. X represents that it is a foreign eligible entity and intended to be treated as a
partnership for U.S. federal tax purposes as of Date 2. However, due to inadvertence,
X failed to timely file Form 8832, Entity Classification Election, to elect to be treated as a
partnership effective Date 2.
PLR-112402-21                                  2

X represents that it and its owners consistently reported income treating X as a
partnership. X also represents that granting relief will not prejudice the interests of the
government and that such relief would not result in a lower tax liability in the aggregate
for all years to which the request applies. Finally, X represents that it acted reasonably
and in good faith.

                                      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 as provided in § 301.7701-3.

Section 301.7701-3(b)(2)(i) provides that, unless it elects otherwise, a foreign eligible
entity is (A) a partnership if it has two or more members and at least one member does
not have limited liability; (B) an association if all members have limited liability; or (C)
disregarded as an entity separate from its owner if it has a single owner that does not
have limited liability.

Section 301.7701-3(c)(1)(i) provides that an eligible entity may elect to be classified
other than as provided in § 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 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 has discretion to 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 no more than six months
except in the case of a taxpayer who is abroad), under all subtitles of the Code, except
subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election to include
an election whose due date is prescribed by a regulation published in the Federal
Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for
making certain elections. Section 301.9100-3 sets forth 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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be
granted when the taxpayer provides evidence (including affidavits described in §
301.9100-3(e)) to establish to the satisfaction of the Commissioner that (1) the taxpayer
PLR-112402-21                                 3

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 §§ 301.9100-1 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 and elect to be treated as a partnership
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 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.

If applicable, this election is disregarded for purposes of determining the amounts of all
section 965 elements of all United States shareholders of X if the election otherwise
would change the amount of any section 965 element of any such United States
shareholder. See §1.965-4(c)(2).

The ruling contained in this letter is based upon information and representations
submitted by X 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.

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.
PLR-112402-21                                4

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



                                      Sincerely,


                                      Holly Porter
                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                               by:    ____________________________
                                      Laura C. Fields
                                      Chief, Branch 1
                                      (Passthroughs & Special Industries)


Enclosure (1)
      Copy for §6110 purposes




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