Source: https://www.federalregister.gov/documents/2011/10/26/2011-27720/disregarded-entities-excise-taxes-and-employment-taxes
Timestamp: 2018-07-20 18:38:31
Document Index: 753837035

Matched Legal Cases: ['§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301', '§\u2009301']

Federal Register :: Disregarded Entities; Excise Taxes and Employment Taxes
A Rule by the Internal Revenue Service on 10/26/2011
66181-66183 (3 pages)
TD 9553
2011-27720
https://www.federalregister.gov/d/2011-27720 https://www.federalregister.gov/d/2011-27720
Applicability Date: For dates of applicability, see §§ 301.7701-2(e)(2), 301.7701-2(e)(5), and 301.7701-2(e)(6).
Temporary regulations (TD 9462, 74 FR 46903) and a cross-reference notice of proposed rulemaking (REG-116614-08, 74 FR 46957) were published in the Federal Register on September 14, 2009 (the 2009 proposed regulations). On October 14, 2009, corrections to the temporary regulations (74 FR 52677) and to the cross-reference notice of proposed rulemaking (74 FR 52708) were published in the Federal Register.
The 2009 proposed regulations clarify that a single-owner eligible entity that is disregarded as an entity separate from its owner for any purpose under § 301.7701-2, but regarded as an entity for certain excise tax purposes under § 301.7701-2(c)(2)(v), is treated as a corporation with respect to those excise taxes. In addition, the 2009 proposed regulations make conforming changes to the tax liability rule for disregarded entities in § 301.7701-2(c)(2)(iii) and the Start Printed Page 66182treatment of entity rule for disregarded entities with respect to employment taxes in § 301.7701-2(c)(2)(iv)(B).
On August 16, 2007, final regulations under § 301.7701-2(c)(2)(v)(A) were published in the Federal Register (TD 9356, 72 FR 45891) (the 2007 final regulations). The 2007 final regulations provide that a single-owner eligible entity that is disregarded as an entity separate from its owner for Federal tax purposes is treated as a separate entity for certain excise tax purposes, including Federal tax liabilities imposed by Chapter 33 of the Code. Under this rule, amounts paid after December 31, 2007, to an SMLLC by its owner for air transportation are subject to the tax imposed by section 4261. The commenter suggested that the rule in the 2007 final regulations created a tax liability where one did not exist before.
Prior to the adoption of the § 301.7701-2 regulations in 1997, amounts paid from one state law entity to another for air transportation were potentially subject to the section 4261 tax, regardless of the relationship between the entities. See for example, Rev. Ruls. 76-394 (1976-2 CB 355) and 70-325 (1970-1 CB 231), which involve transportation between related corporations and between corporations and their shareholders. Because there are separate and distinct entities in each case, these rulings hold that payments made from one entity to another for taxable air transportation are “amounts paid” for purposes of the section 4261 tax. While section 4282 provides a limited exception in the case of air transportation excise taxes for certain affiliated groups that do not offer air transportation services to non-affiliated members, no exception had been provided prior to 1997 for other situations.
The adoption of the § 301.7701-2 regulations in 1997 departed from this long-standing precedent by making those previously taxable transactions no longer subject to excise tax when the owner of an eligible entity elected to be a disregarded entity. The 2007 regulations merely restored the long-standing and reasonable pre-1997 rule. Accordingly, the final regulations retain the rule that excise taxes imposed on amounts paid for covered services (such as air transportation) apply to amounts paid between state law entities for such services (unless a statutory exception applies).
After the 2009 proposed regulations were published, section 10907 of the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)) added new Chapter 49 to the Code, which contains an excise tax on amounts paid for indoor tanning services under new section 5000B. The IRS and Treasury Department are aware of issues relating to the treatment of qualified subchapter S subsidiaries and single-owner eligible entities that are disregarded as entities separate from their owners with respect to tax liabilities imposed by Chapter 49 of the Code. The issues are similar to those addressed in § 301.7701-2(c)(2)(v). Accordingly, the IRS and the Treasury Department plan to issue regulations addressing the treatment of those entities with respect to tax liabilities imposed by Chapter 49 of the Code.
1. Revising paragraphs (c)(2)(iii), (c)(2)(iv)(B), (c)(2)(v)(B), (c)(2)(v)(C)
(3) Refunds or credits of Federal tax.Start Printed Page 66183
Acting, Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-27720 Filed 10-25-11; 8:45 am]