CCA 200738012: Railroad business classified as an employer for tax purposes

Plain-English summary

The Railroad Retirement Board told the IRS that a redacted business had become an employer under two railroad benefit laws. Chief Counsel reviewed that opinion and concluded the business also became an employer under the Railroad Retirement Tax Act on the redacted effective date. The memorandum notes that the business may be disregarded as a separate entity for employment tax purposes because another entity wholly owns it. If so, that owner may file the required railroad tax returns. The receiving IRS unit was asked to take appropriate action.

Ruling snapshot

• Question: Was the business an employer under the Railroad Retirement Tax Act?
• Outcome: Advice given: yes, subject to a possible disregarded entity filing arrangement.
• Key authorities: Railroad Retirement Tax Act; Railroad Retirement Act; Railroad Unemployment Insurance Act.

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200738012
Release Date: 9/21/2007
CC:TEGE:EOEG:ET1
POSTN-113880-07

UILC: 3231.01-00

date: May 21, 2007
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 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 effective -----------------------.
However, the RRB opinion indicates that -------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------is wholly owned by -----------------------------------------------------. Thus, ------------------------------ ----------------------- may be disregarded as a separate entity for employment tax purposes. In such case, ------------------------------------------------------may be filing the necessary tax returns under the Railroad Retirement Tax Act. Please take the appropriate action regarding this business.

POSTN-113880-07
2

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Janine Cook cc: ----------------------------
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