CCA 200520027: Business is not a railroad employer; worker status remains unresolved

Plain-English summary

The Railroad Retirement Board concluded that a business was not an employer under the Railroad Retirement Act or Railroad Unemployment Insurance Act. IRS Chief Counsel agreed that it was not an employer under the Railroad Retirement Tax Act based on information from the Board. Chief Counsel lacked enough information to decide whether people the business called its employees were covered employees of other railroad employers. It also could not determine whether the business's other workers, whom it treated as independent contractors, were contractors or employees. The memo asks processing staff to take appropriate action while leaving those worker questions open.

Ruling snapshot

• Question: Was the business a railroad employer, and were its workers covered employees or contractors?
• Outcome: The business was not an employer under the Railroad Retirement Tax Act; worker status remained undetermined.
• Key authorities: Railroad Retirement Tax Act; IRC § 3231 (employer and employee definitions).

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200520027
Release Date: 5/20/2005

CC:TEGE:EOEG:ET1:
POSTN-161037-04

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 is not an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act:

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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 -----------------------------------------------------is not an employer under the Railroad Retirement Tax Act. We do not have sufficient information to determine whether we agree with the RRB’s opinion that the persons treated by -------
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as its employees are not covered employees of other entities which are covered employers under the Railroad Retirement Tax Act.

In addition, we note that the RRB opinion indicates that ------- provides services to its clients, some of whom include covered employers, through a relatively large number of persons whom ------- treats as independent contractors. The RRB opinion does not

POSTN-161037-04
2

determine the status of these contractors. Nor do we have sufficient information to determine whether such persons should be treated as independent contractors or employees. Please take the appropriate action regarding this business.

_________
Janine Cook

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