internal_revenue_service number release date index number ------------------- ------- -------------------------------------- --------------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b1 plr-112784-09 date date legend x --------------------------------------------------------------------- -------------------------- y --------------------------------------------------------------------- -------------- exempt_organization --------------------------------------------------------------------- ------------------------------------------------ building ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------- ----------------------------------------------------------- address date date year state city -------------------------- ------------------------- -------------------------- ------- -------------- -------------------- plr-112784-09 dear -------------- this letter responds to a request dated date written on behalf of taxpayer x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be treated as a corporation for federal tax purposes under sec_301_7701-3 additionally x requests an extension under sec_301_9100-3 to make an election not to be treated as a tax-exempt_entity under sec_168 of the code a tax-exempt_controlled_entity that makes an election under sec_168 can avoid limitations on the rehabilitation_credit that otherwise would be imposed by sec_47 facts based on the information submitted and representations made within the relevant facts are as follows on date x was organized under state law as a limited_liability_company x uses the accrual_method of accounting and the calendar_year as its taxable_year x is wholly owned by exempt_organization which has received a determination that it is a tax-exempt_organization described in sec_501 exempt_organization formed x to act as the managing member of y y is a partnership for federal tax purposes and owns and is engaged in the rehabilitation of building located at address in city state building is a certified_historic_structure and the rehabilitation of building is intended to qualify for the sec_47 rehabilitation tax_credit the other members of y are taxable investors x filed a federal_income_tax return for year the year in which building was placed_in_service but failed to make the election under sec_168 not to be treated as a tax-exempt_entity on that return in addition on or about date x discovered that it had not timely filed an election to be treated as an association_taxable_as_a_corporation effective date for federal tax purposes because it had not done so under the applicable regulations x was considered an entity disregarded from exempt_organization for federal tax purposes and therefore exempt_organization was considered a partner in y after x realized that it had not timely filed the two elections it requested relief under sec_301_9100-3 to make an election to be treated as an association_taxable_as_a_corporation effective date as well as relief to make the election provided for under sec_168 effective for year from the affidavit and other materials submitted it is clear that x at all times intended to make the sec_168 election upon discovering its failure x promptly sought an extension of time in which to file the election moreover x represents that it plr-112784-09 has acted reasonably and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making either election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is an entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code sec_301_7701-2 an eligible_entity with a single owner can elect to be classified either as an association and thus a corporation under sec_301_7701-2 or as an entity separate from its owner sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is disregarded as an entity separate from its owner if it has a single owner to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election can be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 sec_47 of the code provides a rehabilitation_credit for percent of the qualified_rehabilitation_expenditures qre with respect to any certified_historic_structure sec_168 provides that for purposes of sec_168 if any property which is not tax-exempt-use property is owned by a partnership which has both a tax- exempt entity and a nontax-exempt entity as partners and any allocation to the tax- exempt entity is not a qualified_allocation then an amount equal to such tax-exempt entity’s proportionate share of such property shall be treated as tax-exempt_use_property under sec_47 expenditures allocable to the portion that is tax-exempt_use_property within the meaning of sec_168 are not qre sec_168 provides generally that any tax-exempt_controlled_entity shall be treated as a tax-exempt_entity for purposes of sec_168 and however under sec_168 a tax-exempt_controlled_entity can elect not to treated as a tax- exempt entity such an election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt_controlled_entity plr-112784-09 sec_301_9100-1 of the procedure and administration regulations defines the term regulatory election as including any election the due_date for which is prescribed by a regulation sec_301_9100-7t requires an election under sec_168 to be made by the due_date of the tax_return for the first taxable_year for which the election is to be effective thus the sec_168 election is a regulatory election sec_301_9100-1 provides that the commissioner of internal revenue has discretion to grant a reasonable extension of time to make a regulatory election sec_301_9100-1 though sec_301_9100-3 provides the standards that the internal_revenue_service will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than automatic changes covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer-- i ii iii requests relief before the failure to make the regulatory election is discovered by the service failed to make the election because of intervening events beyond the taxpayer's control failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer-- i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested plr-112784-09 ii iii was fully informed of the required election and related tax consequences but chose not to file the election or uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the service will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made conclusion based solely on the facts submitted and representations made we conclude that with respect to x’s failure to timely elect to be treated as an association_taxable_as_a_corporation effective date the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as an association for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election in addition we also conclude that the requirements of sec_301_9100-3 have been satisfied with respect to x’s failure to make the election under sec_168 for year accordingly x is granted an extension of time of days from the date of this letter to file an amended_return for year making the election under sec_168 x should attach this letter to its amended_return although this office has not verified any of the material submitted or facts assumed in support of the request_for_ruling they are subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular this letter does not rule on whether x is entitled to claim the rehabilitation_credit under sec_47 this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-112784-09 in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc