CCA 200519056: Railroad employer status may leave owner liable for employment tax

Plain-English summary

The Railroad Retirement Board told the IRS that a redacted business became an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act. Chief Counsel agreed that the business became an employer under the Railroad Retirement Tax Act on a redacted date. Counsel also noted that the business appeared to be a limited liability company with one owner and might be disregarded as a separate entity. If so, the owner would ultimately be liable for employment tax. The memorandum does not resolve whether the company was disregarded.

Ruling snapshot

• Question: Did the business become a railroad tax employer, and who might owe its employment tax?
• Outcome: Advice: employer status began on a redacted date; a sole owner might bear the tax liability 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: 200519056
Release Date: 5/13/2005

CC:TEGE:EOEG:ET1
POSTN-163332-04
UILC: 3231.01-00

date: February 7, 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 that the following business became an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act as of ------------------:

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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 jurisdiction of the Railroad Retirement Tax Act as of --------------------- ------------------------------------------------------------------------------------------------------------------.
However, we note that the LLC may be disregarded as an entity separate from its apparent sole owner, in which case the owner 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.

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Janine Cook-