State-law dissolution does not end federal corporate status

Plain-English summary

A corporation was administratively dissolved under state law after failing to file an annual report and pay a state franchise tax. Unaware of the dissolution, it continued operating as a corporation, filing Form 1120, and paying its federal corporate taxes. After discovering the problem, it reincorporated in the same state. The IRS explained that federal law controls whether an organization is taxed as a corporation and that corporate tax status can continue while the business operates in corporate form despite a state-law termination. It ruled that the administrative dissolution and later reincorporation did not terminate the taxpayer's status as a corporation for federal tax purposes.

Ruling snapshot

• Question: Did an administrative dissolution and later reincorporation under state law interrupt the taxpayer's federal corporate status?
• Outcome: Approved, federal corporate status continued without interruption.
• Key authorities: Ochs v. United States, 305 F.2d 844 (Ct. Cl. 1962); Messer v. Commissioner, 438 F.2d 774 (3d Cir. 1971)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201522001 Third Party Communication: None
Release Date: 5/29/2015 Date of Communication: Not Applicable
Index Number: 301.00-00
Person To Contact:
--------------------- ---------------------, ID No. ----------------
------------ Telephone Number:
----------------------------------------------- ------------------
------------------------------ Refer Reply To:
---------------------- CC:CORP:B05
PLR-132753-14
Date:
January 21, 2015

LEGEND:

Taxpayer = ------------------------------------------------

State A = --------

Date 1 = ---------------------

Date 2 = ---------------------

Date 3 = ---------------------------

Year 1 = ------

Year 2 = ------

Dear -----------------:

We respond to your letter dated August 28, 2014, requesting a ruling under the Internal
Revenue Code (the Code). The information submitted is summarized below.

Taxpayer incorporated under State A law on Date 1. Taxpayer was administratively
dissolved by State A on Date 2 for failure to file a Year 1 annual report and to pay an
annual franchise tax. During the period in which Taxpayer was unaware of this
dissolution, Taxpayer continued to file Form 1120 and to pay all corporate taxes as they
came due. Following discovery of the dissolution in Year 2, Taxpayer reincorporated in
State A on Date 3.

PLR-132753-14 2

The core test of corporate existence for purposes of federal income taxation is always a
matter of federal law. Whether an organization is to be taxed as a corporation under the
Code is determined by federal, not state, law. Ochs v. United States, 158 Ct. Cl. 115,
119, 305 F.2d 844, 847 (1962). A corporation is subject to federal corporate income tax
liability as long as it continues to do business in a corporate manner, despite the fact
that its recognized legal status under state law is voluntarily or involuntarily terminated.
Messer v. Commissioner, 438 F.2d 774, 778 (3d Cir. 1971).

RULING

Based solely on the facts submitted and the representations made, we rule that
Taxpayer’s status as a corporation for federal tax purposes was not terminated by
reason of the administrative dissolution and subsequent reincorporation of Taxpayer
under state law.

CAVEAT

Except as expressly provided herein, no opinion is expressed or implied concerning the
federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

PROCEDURAL STATEMENTS

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for a ruling, it is subject to verification on examination.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.

PLR-132753-14 3

In accordance with the power of attorney on file with this office, copies of this letter are
being sent to your authorized representatives.

Sincerely,

Richard M. Heinecke ______
Richard M. Heinecke
Assistant to the Branch Chief, Branch 5
Office of Associate Chief Counsel
(Corporate)

cc: