CCA 200725032: Railroad employer finding may involve disregarded LLC

Plain-English summary

The Railroad Retirement Board found that a business became a covered employer under the Railroad Retirement Act and Railroad Unemployment Insurance Act. IRS counsel agreed that it became a covered employer under the Railroad Retirement Tax Act on a redacted date. Counsel also noted that the business appeared to be a wholly owned LLC that might be disregarded as a separate entity for federal tax purposes, possibly including employment taxes. The memo asks the IRS processing unit to take appropriate action.

Ruling snapshot

• Question: Did the business become a covered Railroad Retirement Tax Act employer?
• Outcome: Yes, effective on a redacted date, with a separate entity classification concern noted.
• Key authorities: Railroad Retirement Tax Act, IRC § 3231

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200725032
Release Date: 6/22/2007

CC:TEGE:EOEG:ET1
POSTN-141838-06

UILC: 3231.01-00

date: November 06, 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 that the following business became a covered 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 a covered employer under the jurisdiction of the Railroad Retirement Tax Act effective -----------------------.

POSTN-141838-06
2

However, it appears that the entity is a wholly-owned LLC of its owner company, ---------
----------------------------------------------, and thus may be disregarded as a separate entity
for federal tax purposes, including possibly for federal employment tax purposes.
Please take the appropriate action regarding this business.

_____
Janine Cook

cc: