Seven foreign entities received more time to elect partnership status

Plain-English summary

Seven foreign eligible entities intended to be classified as partnerships for federal tax purposes but did not file Form 8832 for their intended effective dates. Each entity asked for an extension under the regulatory relief rules. The IRS concluded that each entity satisfied the requirements for relief and granted 120 days from the letter date to file its election. The ruling notes that an election is disregarded for purposes of calculating a United States shareholder's Section 965 elements if the election otherwise would change those elements.

Ruling snapshot

• Question: Could seven foreign eligible entities receive more time to file Form 8832 and elect partnership classification from their intended effective dates?
• Outcome: approved
• Key authorities: IRC §§ 965, 7701; Treas. Reg. §§ 1.965-4, 301.7701-2, 301.7701-3, 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202422009                                              Third Party Communication: None
Release Date: 5/31/2024                                        Date of Communication: Not Applicable
Index Numbers: 7701.00-00, 7701.02-00,
              9100.00-00, 9100.31-00                           Person To Contact:
                                                               -----------------------, ID No. -------------------
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--------------------------------------                         Telephone Number:
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----------------------------------------------------------     Refer Reply To:
----------------------------------------------------------     CC:PSI:3
-------------------------------------------------              PLR-118228-23
----------------------------------------                       PLR-118229-23
                                                               PLR-118230-23
------------------------------------------------------------   PLR-118231-23
----------------------------------------                       PLR-118232-23
----------------------------------------------------------     PLR-118233-23
----------------------------                                   PLR-118234-23
-------------------------------------------------              Date:
---------------------------------------                        March 01, 2024

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LEGEND

T               = -------------------------------------------------
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PLR-118228-23 through                           2
PLR-118234-23

U           = --------------------------------------
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V           = ----------------------------------------------------
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W           = ----------------------------------------------------
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X           = -----------------------------------
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Y           = ----------------------------------------
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Z           = ------------------------------------------------------
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Country 1   = ---------------------

Country 2   = -----------------

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

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

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

Date 4      = --------------------------

Date 5      = ---------------------------

Date 6      = ----------------

Date 7      = --------------------------

Date 8      = -----------------------

Date 9      = --------------------------
 PLR-118228-23 through                               3
 PLR-118234-23


 Date 10        = ----------------------


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

       This letter is in response to your letter dated September 5, 2023, and subsequent
correspondence, submitted on behalf of T, U, V, W, X, Y, and Z (Entities) by their
authorized representatives, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations for each of the Entities to file an election
under § 301.7701-3 to be classified as a partnership for federal tax purposes.

                                                   FACTS

        The information submitted states that T, U, V, W, X, and Y were formed under
the laws of County 1 on Date 1, Date 2, Date 3, Date 8, Date 5, and Date 6,
respectively, and became relevant for United States tax purposes on Date 4, Date 4,
Date 7, Date 9, Date 5, and Date 7, respectively. Z was formed under the laws of
Country 2 on Date 10. Each of T, U, V, W, X, Y, and Z represents that it is a foreign
entity eligible to elect to be classified as a partnership for federal tax purposes effective
Date 4, Date 4, Date 7, Date 9, Date 5, Date 7, and Date 10, respectively (Intended
Effective Date). However, each of the Entities failed to file a Form 8832, Entity
Classification Election, electing to be classified as a partnership for federal tax purposes
effective on its Intended Effective Date.

                                           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)(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.
 PLR-118228-23 through                      4
 PLR-118234-23


        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 301.7701-3(d)(1)(i) provides that a foreign eligible entity's classification is
relevant when its classification affects the liability of any person for federal tax or
information purposes.

        Section 301.7701-3(d)(2) provides that if the classification of a foreign eligible
entity has never been relevant (as defined in § 301.7701-3(d)(1)), then the entity's
classification will initially be determined pursuant to the default classification provisions
of § 301.7701-3(b)(2) when the classification of the entity first becomes relevant (as
defined in § 301.7701-3(d)(1)(i)).

       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 not more than 6 months except in the
case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (the
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 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 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 (1) the
taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice
the interests of the Government.
 PLR-118228-23 through                      5
 PLR-118234-23

                                     CONCLUSION

        Based solely on the facts submitted and representations made, we conclude that
each of the Entities has satisfied the requirements of §§ 301.9100-1 and 301.9100-3.
As a result, we grant each of the Entities 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 for federal tax purposes effective on its Intended Effective
Date. A copy of this letter should be attached to each Form 8832.

       If applicable, the Entities’ elections to be classified as partnerships are
disregarded for purposes of determining the amounts of all § 965 elements of all United
States shareholders of the Entities if the elections otherwise would change the amount
of any § 965 element of any such United States shareholder. See § 1.965-4(c)(2) of the
Income Tax Regulations.

       Except as expressly provided herein, we express or imply no opinion concerning
the federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. 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.

       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 requested ruling, 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 a power of attorney on file with this office, we are sending a
copy of this letter to the Entities’ authorized representatives.

                                        Sincerely,

                                     Associate Chief Counsel
                                     (Passthroughs & Special Industries)


                                  By:
                                        Mary Beth Carchia
                                        Senior Technician Reviewer, Branch 3
                                        Office of Associate Chief Counsel
                                        (Passthroughs & Special Industries)
 PLR-118228-23 through                                6
 PLR-118234-23

Enclosure:
      Copy of this letter for § 6110 purposes


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