Did an entity's federal Form 8832 election to be taxed as a corporation determine whether it was subject to Louisiana corporation franchise tax?

Plain-English summary

A federal election to tax a noncorporate entity as a corporation did not determine Louisiana corporation-franchise-tax liability.

Form 8832 did not establish that the entity was actually a corporation in form or substance. Louisiana therefore looked beyond the federal income-tax election when deciding franchise-tax status.

Common questions

Q: Did a corporate election automatically make an LLC owe franchise tax?

A: No.

Q: Did the ruling declare every check-the-box entity exempt?

A: No. It said only that the federal election had no significance in the franchise-tax determination.

Citations and references

• IRS Form 8832 — federal entity-classification election discussed in the ruling
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 01-013

Original ruling text

Revenue Ruling
No. 01-013
October 1, 2001
Corporation Franchise Tax
Significance of Federal “Check-the-Box” Elections

This revenue ruling addresses the significance of federal income tax “check-the-box” elections in determining if an entity is subject to Louisiana franchise tax. Under Internal Revenue Service regulations, entities that are not corporations may elect, on Internal Revenue Service Form 8832, to be considered corporations for federal income tax purposes. The federal regulations providing for the election are commonly known as “check-the-box” regulations, and the election to be or not be taxed as a corporation is known as a “check-the-box” election. The question that has arisen is if the election by a non-corporate entity to be taxed for federal income tax purposes as a corporation has significance in determining if the entity will be subject to Louisiana franchise tax. An election made on Internal Revenue Service Form 8832 to be taxed as a corporation is not a statement or finding that the entity is, in fact, a corporation. There is no requirement that the entity, in substance or form, be a corporation to elect corporation treatment under the “check-the-box” regulations. The position of the Department of Revenue is that “check-the-box” elections have no significance in determining if the entity is subject to Louisiana franchise tax.

Cynthia Bridges
Secretary
By:

________
Michael D. Pearson
Senior Policy Consultant
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is issued under Section 61:III.101(C) of the Louisiana Administrative Code to apply principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the department's position and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.