IRS Grants Extension for LLC to Elect Corporate Status

Late Election Relief Granted

In a win for taxpayers, the IRS has granted a Limited Liability Company (LLC), referred to as Taxpayer X, an extension to elect to be taxed as a corporation for federal tax purposes. Taxpayer X missed the original deadline to file Form 8832, Entity Classification Election, but successfully obtained relief under Section 301.9100-3 of the Treasury Regulations, which provides procedures for seeking extensions for certain regulatory elections.

The 'Check-the-Box' Mechanics

As previously mentioned, Taxpayer X was granted an extension to elect to be taxed as a corporation. This election is made via Form 8832, Entity Classification Election. Under Treasury Regulation § 301.7701-3, an eligible entity—that is, a business entity that is not already classified as a corporation under specific provisions of § 301.7701-2—can elect its classification for federal tax purposes. Typically, a domestic eligible entity with two or more members is classified as a partnership, while a single-member entity is disregarded as an entity separate from its owner, meaning its income is reported directly on the owner's return. However, these entities can "check the box" to elect corporate status. This election is made by filing Form 8832 with the IRS, and the effective date can be specified on the form. Critically, § 301.7701-3(c)(1)(iii) stipulates that the effective date cannot be more than 75 days prior to the filing date, which is where Taxpayer X encountered difficulties.

The Safety Valve: Section 9100 Relief

Because Taxpayer X missed the filing deadline dictated by regulation, they sought relief under Treasury Regulation § 301.9100-3. This regulation provides a mechanism for the Commissioner of the IRS to grant an extension of time for regulatory elections – elections where the deadline is set by a regulation, revenue ruling, revenue procedure, notice, or announcement, rather than by statute. To obtain this relief, Taxpayer X had to demonstrate they acted reasonably and in good faith, and that granting the extension would not prejudice the interests of the government. The IRS assesses these factors based on the specific facts and representations made by the taxpayer, often supported by affidavits.

The 120-Day Window and Implications

As a result of meeting the criteria under Treasury Regulations Sections 301.9100-1 and 301.9100-3, Taxpayer X received a 120-day extension from the IRS to file Form 8832, Entity Classification Election, with the appropriate service center. The taxpayer sought to elect to be treated as a corporation for federal tax purposes, effective retroactively to a specified date.

Crucially, this ruling was contingent. The IRS stipulated that within the 120-day extension period, Taxpayer X must file all required federal income tax and information returns (including any necessary amended returns) for all open tax years. These filings must be consistent with the corporate election relief granted. A copy of the Private Letter Ruling (PLR) must be attached to the Form 8832 and to all such tax returns.

Implications: This PLR serves as a reminder to practitioners that Treasury Regulations Section 301.9100-1 et seq. provides a safety net for taxpayers who miss administrative election deadlines. This '9100 relief' is often granted when the failure is caught and corrected promptly and providing relief does not prejudice the interests of the government.