CCA 200519049: Parent company may owe railroad employment tax for LLC

Plain-English summary

The Railroad Retirement Board told the IRS that a redacted limited liability company became an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act. Chief Counsel agreed that it became an employer under the Railroad Retirement Tax Act on a redacted date. Counsel also noted that the LLC might be disregarded as separate from its apparent sole owner, a parent company. If so, that parent company would ultimately owe any employment tax. The memorandum does not decide whether the LLC was disregarded.

Ruling snapshot

• Question: Did the LLC become a railroad tax employer, and who might owe its employment tax?
• Outcome: Advice: employer status began on a redacted date; the parent might owe the tax if the LLC was disregarded.
• Key authorities: Railroad Retirement Tax Act; IRC § 3231; Notice 99-6.

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200519049
Release Date: 5/13/2005

CC:TEGE:EOEG:ET1
POSTN-103353-05

UILC: 3231.01-00

date: February 8, 2005
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 dated
----------------------, that the following business became 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 and, based upon the information submitted to us by the RRB, we also conclude that ------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------became an employer under the Railroad Retirement Tax Act on -------------------------. However, we note that the LLC may be disregarded as an entity separate from its apparent sole owner, its parent company, in which case the parent company is ultimately liable for any employment tax liability. See Notice 99-6, 1991-1 C.B. 321. Please take the appropriate action regarding this business.

Janine Cook-