Foreign entity received 120 days to elect partnership classification

Plain-English summary

A foreign eligible entity wanted to be classified as a partnership for federal tax purposes from its formation date but did not timely file Form 8832. The IRS concluded that the entity met the requirements for discretionary election relief and granted 120 days to submit the form. The relief depended on the entity's owners filing all required returns and amended returns for open years consistently with partnership treatment, including applicable Forms 5471, 8865, or 8858. The ruling also stated that the election would be disregarded when calculating Section 965 elements if recognizing it would change those amounts. It did not decide whether penalties for late tax or information returns should be excused.

Ruling snapshot

• Question: Could the foreign eligible entity make a late Form 8832 election to be classified as a partnership from its formation date?
• Outcome: approved
• Key authorities: Treas. Reg. §§ 301.7701-3, 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: 202328002                                        Third Party Communication: None
 Release Date: 7/14/2023                                  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:B01
 ---------------------------                              PLR-112709-22
                                                          Date:
                                                          April 20, 2023




                                               LEGEND

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

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


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

This letter responds to a letter dated June 14, 2022, and subsequent correspondence,
submitted on behalf of Company by Company's 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 classified as a partnership for
federal tax purposes.

                                                FACTS

According to the information and representations submitted, Company was formed on
Date 1 under the laws of Country. Company represents that Company was a foreign
entity eligible to elect to be classified as a partnership for federal tax purposes as of Date

1. However, Company failed to timely file a Form 8832, Entity Classification Election,
electing to be classified as a partnership effective Date 1.

                                        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
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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)(2)(i) provides that, except as provided in § 301.7701-3(b)(3),
unless the entity 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(b)(2)(ii) provides, in part, that for purposes of § 301.7701-3(b)(2)(i), a
member of a foreign eligible entity has limited liability if the member has no personal
liability for the debts of or claims against the entity by reason of being a member.

Section 301.7701-3(c)(1)(i) provides, in part, that, except as provided in § 301.7701-
3(c)(1)(iv) and (v), 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, in part, 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 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 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) 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. 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.

Section 301.9100-3(a) provides that a request for relief under § 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 (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
PLR-112709-22                                 3

the interests of the Government.

                                      CONCLUSION

Based solely on the facts submitted and representations made, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a result,
Company is granted an extension of time of 120 days from the date of this letter to file
Form 8832 with the appropriate service center to make an election under § 301.7701-3.
A copy of this letter should be attached to the Form 8832.

This ruling is contingent on the owners of Company 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.

If applicable, Company’s election is disregarded for purposes of determining the amounts
of all section 965 elements of all United States shareholders of Company 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) of the Income Tax Regulations.

Except as specifically set forth above, we express or imply no opinion concerning 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 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.

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-112709-22                                 4

Under a power of attorney on file with this office, we are sending a copy of this letter to
Company's authorized representatives.




                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                       By:___/s/________________________
                                       Caroline E. Hay
                                       Senior Technician Reviewer, Branch 1
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)




Enclosure
      Copy for § 6110 purposes




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