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Note: The
following is an excerpt from the introduction to the article
as published in The Tax Lawyer. Author citations
have been omitted for brevity. Tax Section members may read
the article in its entirety in Adobe
Acrobat format.
INTRODUCTION
RIGHT WITHOUT REASON? THE CHECK-THE-BOX CORPORATE OR
PARTNERSHIP ELECTION REGULATIONS CORRECTLY HELD VALID:
LITTRIELLO V. UNITED STATES
In Littriello v. United States,1 the District Court for the Western District of
Kentucky became the first court to uphold the popular check-the-box regulations,
Treasury Regulations 301.7701-1 through 301.7701-3. The check-the-box
regulations allow small businesses to choose whether to be treated as corporations
or partnerships for federal tax purposes. The court correctly granted summary
judgment for the government, finding the regulations valid and holding the
taxpayer liable for the unpaid employment taxes of his limited liability company.
However, the court failed to articulate a convincing legal rationale for the
regulations’ validity, thereby creating an opportunity for future challenges to
them. Part I of this Note discusses the statutory, regulatory, and factual background
of Littriello. Part II explains the court’s decision. Part III demonstrates
that the court’s conclusion was correct, but the court’s rationale is weak.
Accordingly, Part III also provides a sound rationale for the check-the-box regulations’
validity. |
