CCA 200645020: Rail carrier and affiliates received separate coverage dates

Plain-English summary

The Railroad Retirement Board reconsidered employer coverage for a rail passenger operation, its predecessor and two affiliated businesses. Chief Counsel accepted the Board's separate start and end dates for their coverage under the Railroad Retirement Tax Act. One predecessor's coverage ended when a successor began operations, while the two affiliates became covered when they began providing railroad related services. The memo also cautions that two entities might be disregarded as separate from their owners for tax purposes. The public release redacts the business names and coverage dates.

Ruling snapshot

• Question: When did each of four related businesses become or cease to be a covered railroad employer?
• Outcome: Advice given: separate redacted coverage dates for each business, with possible disregarded entity treatment for two.
• Key authorities: Railroad Retirement Tax Act; IRC § 3231.

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200645020
Release Date: 11/10/06
CC:TEGE:EOEG:ET1
POSTN-123959-06

UILC: 3231.01-00

date: July 17, 2006
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 -------------------, on reconsideration of the status of the following businesses under the Railroad Retirement Act and the Railroad Unemployment Insurance Act:

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No Employer Identification Numbers (EINs) were provided in the opinion.

We note the procedural and business structure history is complex. In the Board Coverage Decision No. --------, dated -----------------------, the RRB determined that -------- ----------------------------------------------------was a covered sleeping car company employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act (the Acts) effective ----------------------. --------------------------------------------------- filed a timely request for reconsideration of the decision on ------------------, and requested a hearing on its appeal. After such hearing, submission of the Hearing Examiner’s report, and the receipt of a declaratory order from the Surface Transportation Board (STB) holding that --------------------------------------------------- was a rail common carrier, the RRB determined that --------------------------------------------------- was a covered employer under the Acts as a

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rail carrier rather than as a sleeping car company. However, the RRB noted that the evidence obtained in the appeal establishes that the original effective date of --------------
--------was incorrect because --------------------------------------------- operated as two successive entities. The limited liability company which was the subject of B.C.D. -------- and the STB decision was preceded by an incorporated business known as ----------------
---------------------------------------------------. Later, ------------------------------------------------------- assumed operations effective -----------------.

Accordingly, the RRB concluded that -------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------, was a covered rail carrier employer under the Acts effective with the date it acquired the passenger cars from prior owners, ---------------------------, and ending ---------------------. The RRB also concluded that --------------------------------------------------- became a covered rail carrier employer under the Acts effective -----------------.

In the request for reconsideration regarding coverage of the -------------------------------------
-----------------, the Hearing Examiner’s Report recommended that the RRB find two affiliated companies, ------------------------------------ and -------------------------, as covered employers by reason of being under common control with ----------------------------------------
----------------- and providing services in connection with railroad transportation.

The RRB concluded that -------------------------------------and --------------------------have been employers under the Acts. ------------------------------------ performed its service immediately upon receiving title of the equipment effective ---------------------------, and thus its status as a covered employer began on that date. --------------------------did not perform its services until operations began effective --------------------.

We have reviewed the opinion of the RRB and, based upon the information submitted to us by the RRB we also conclude the following:

• --------------------------------------------------- became an employer under the Railroad Retirement Tax Act on -----------------. However, we note that the entity may be treated as an entity disregarded as separate from its owner, --------------------------- -------------------.
• -----------------------------------------------------------------. became an employer under the Railroad Retirement Tax Act on ---------------------------and ceased being an employer on ---------------------.
• ------------------------------------became an employer under the Railroad Retirement Tax Act on --------------------------.
• --------------------------became an employer under the Railroad Retirement Tax Act on --------------------. However, we note that the entity may be treated as an entity disregarded as separate from its owner, ------------------------------------.

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Please take the appropriate action regarding these businesses.

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Janine Cook-