SECTION 2. BACKGROUND

.01 Section 301.7701–3(a) of the Procedure and Administration Regulations 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 as 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) provides a default classification for an eligible entity that does not file an entity classification election. Thus, an entity classification election is necessary only when an eligible entity chooses to be classified initially as other than its default classification or when an eligible entity chooses to change its classification.

.02 Section 301.7701–3(c)(1)(i) provides the general rules for the time and place for filing an entity classification election. Section 301.7701–3(c)(1)(i) provides that, except as provided in paragraphs (c)(1)(iv) (limitation) or (c)(1)(v) (deemed elections) of § 301.7701–3, 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, “ Entity Classification Election,” with the IRS service center designated on Form 8832. An election will not be accepted unless all of the information required by the form and instructions, including the taxpayer identifying number of the entity, is provided on Form 8832. See § 301.6109–1 for rules on applying for and displaying Employer Identification Numbers.

.03 Section 301.7701–3(c)(1)(ii) provides that an eligible entity required to file a federal tax or information return for the taxable year for which an election is made must attach a copy of its Form 8832 to its federal tax or information return for that year. If the entity is not required to file a return for that year, a copy of its Form 8832 must be attached to the federal income tax or information return of any direct or indirect owner of the entity for the taxable year of the owner that includes the date on which the election was effective.

.04 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

2009–39 I.R.B. 439 September 28, 2009

an entity and an affected person will be treated as having timely filed a required tax or information return if the return is filed within 6 months after its due date, excluding extensions. An indirect owner of an eligible entity (such as a partner in a partnership that holds an interest in the eligible entity) is not an affected person if an entity in which the indirect owner holds a direct or indirect interest would be required to attach a copy of the eligible entity’s Form 8832 to its federal tax or information return in the circumstances described in section 4.01(2)(b)(i) or (ii) . An affected person is either:

(i) with respect to the effective date of the eligible entity’s classification election, a person who would have been required under § 301.7701–3(c)(1)(ii) to attach a copy of the Form 8832 for the eligible entity to its federal tax or information return for the taxable year of the person which includes that date; or

(ii) with respect to any subsequent date after the entity’s requested effective date of the classification election, a person who would have been required under § 301.7701–3(c)(1)(ii) to attach a copy of the Form 8832 for the eligible entity to its federal tax or information return for the person’s taxable year that includes that subsequent date had the election first become effective on that subsequent date; and

(3) the eligible entity has reasonable cause for its failure to timely make the entity classification election; and

(4) 3 years and 75 days from the requested effective date of the eligible entity’s classification election have not passed.

.02 Procedural requirements for re- questing relief . Within 3 years and 75 days from the requested effective date of the eligible entity’s classification election, the eligible entity must file with the applicable IRS service center (determined in accordance with the instructions to Form 8832) a completed Form 8832, signed in accordance with § 301.7701–3(c)(2). The Form 8832 must indicate that it is being filed pursuant to this revenue procedure in accordance with the Form 8832 and accompanying instructions. The Form 8832 must include both a declaration that the elements required for relief in Section 4.01 of this revenue procedure have been satisfied and a statement explaining the

classification for the year of the entity’s formation.