CCA 200518078: Former shortline operator ceased to be a railroad carrier employer

Plain-English summary

The Railroad Retirement Board advised the IRS that a business had stopped operating a shortline railroad. Chief Counsel agreed that, as of a redacted date, the business ceased to be an employer as a carrier under the Railroad Retirement Tax Act. The memorandum leaves open whether the business might still qualify as an employer under a separate definition in IRC § 3231(a). The Board had suggested it might continue rail car repair work, but had not addressed whether carriers owned or controlled it.

Ruling snapshot

• Question: Did the business remain a railroad carrier employer after it stopped operating a shortline railroad?
• Outcome: Advice given: carrier employer status ended; possible status under the alternate definition was unresolved.
• Key authorities: IRC § 3231(a).

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200518078
Release Date: 5/6/2005
CC:TEGE:EOEG:ET1
POSTN-164274-04

UILC: 3231.01-00
date: January 6, 2004
to: Director, Submission Processing
Cincinnati, OH
Attn: Entity Unit
from: Office of Division Counsel/Associate Chief Counsel (Tax Exempt & Government Entities)

subject: Railroad Retirement Tax Act Status

In accordance with the coordination procedure established between the Service and the Railroad Retirement Board (RRB), the RRB has provided us with its opinion that the following business ceased to be an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act effective -------------------:
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We have reviewed the opinion of the RRB, which states that -------------------------------------------------

---------has terminated its operation of --------------------------. Based upon the information submitted to us by the RRB, we also conclude that ------ ceased to be an employer (as a “carrier”) under the Railroad Retirement Tax Act (RRTA) effective -------------------, since it no longer operates a shortline railroad.1 Please take the appropriate action regarding this business or contact me at (202) 622-6040 if you have any questions.

Joseph W. Spires cc:

1
The Board’s opinion suggests that ------ may continue to perform rail car repair services. Since the RRB’s opinion does not discuss whether ------ is directly or indirectly owned or controlled by carriers, we cannot conclude whether --
------ may be an employer for purposes of the RRTA under the alternate definition of “employer” under § 3231(a) of the Code.