Foreign entity received 120 days to elect partnership classification

Plain-English summary

A foreign eligible entity requested additional time to file Form 8832 electing
partnership classification from a specified date. The IRS found that the entity
satisfied the standards for regulatory-election relief and granted 120 days to
file the form. The relief is conditioned on the entity and its owners filing all
required returns for open years consistently with partnership treatment,
including potential Forms 8865. If the election would change any U.S.
shareholder's Section 965 elements, it is disregarded for purposes of calculating
those elements. The ruling did not determine the entity's underlying eligibility
or any penalty relief.

Ruling snapshot

• Question: May the foreign entity receive additional time to elect partnership classification?
• Outcome: Approved for 120 days, subject to consistent filings and the Section 965 limitation
• Key authorities: Treas. Reg. §§ 301.7701-3, 301.9100-1, 301.9100-3, and 1.965-4(c)(2)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202407001 Third Party Communication: None
Release Date: 2/16/2024 Date of Communication: Not Applicable
Index Number: 9100.31-00, 9100.00-00
Person To Contact:
----------------------------------- ----------------------, ID No. -----------------
---------------------------------------- Telephone Number:
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------------------------------ Refer Reply To:
CC:PSI:B03
PLR-108457-23
Date:
November 20, 2023

Legend

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

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

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

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

  This letter responds to a letter dated February 21, 2023, 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 a partnership for federal tax purposes.

                                                FACTS

 The information submitted states that X was formed under the laws of Country.

X represents that it was a foreign entity eligible to elect to be classified as a
partnership effective Date 1.

                                       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.
PLR-108457-23 2

    Section 301.7701-3(b)(2)(i) provides that, 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 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.

   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 a
partnership effective Date 1. A copy of this letter should be attached to the Form 8832.
PLR-108457-23 3

    This ruling is contingent on X and its owners 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. These returns 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.

     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. If applicable,
X’s election to be a partnership effective on Date 1 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).

   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 X and any affected taxpayers are entitled to relief
from any penalty on the basis that any taxpayer had reasonable cause for failure to
timely file 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.

  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-108457-23 4

  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 the Associate Chief Counsel
                                             (Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes

cc: ---------------------------
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