Entity classification election: Check the Box Regulations

  • Accountant
  • AFSP
  • CRTP
  • CPA (US)
  • EA
  • ORTP
  • MRTP
  • CFIRS
  • CWS

Published: November, 2021

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  • Course Description
  • Course Qualification
  • Presenter
  • FAQ

Course Description

Overview

  • Check the box: Fundamentals (History)
    9 mins
  • Deemed corporation & "PER SE" foreign corporations
    16 mins
  • Default classification - Domestic entity determination
    22 mins
  • Entity classification rules
    28 mins
  • Examples of the concept
    40 mins

Course Description

The so-called U.S. “Check-the-Box” regulations (Reg. §§ 301.7701–1 through –4) have made the difficult choice of business entity classification elective for taxpayers. Taxpayers may elect to have an entity treated as a corporation, a partnership, or a disregarded entity (if the entity has only one member) by checking a box on a prescribed form. This entity classification election is made by filing IRS Form 8832.

In December 1996, the Internal Revenue Service issued final regulations that allowed unincorporated entities to choose whether to be taxed as partnerships or as corporations. Prior to 1996, the classification of domestic or foreign entities as corporations was based on a complicated six-factor test which, in practice, was easily manipulated. The regulations permit “eligible entities” to choose among various business classifications. Both domestic and foreign businesses may be eligible entities if they meet the requirements of the regulations. For example, an eligible entity with at least two members can choose to be classified as either (1) an association taxable as a corporation or (2) a partnership. An eligible entity with a single member can choose to be (1) classified as an association taxable as a corporation or (2) disregarded as an entity separate from its owner.

The U.S. check–the-box regulations create the possibility of a hybrid mismatch. Hybrid mismatches occur when the tax treatment of an entity or financial instrument differs between two taxing jurisdictions.

A common example of a hybrid entity mismatch occurs when a U.S. taxpayer makes a check-the-box election on its foreign subsidiary.  This results in corporate treatment in the local country and disregarded or “transparent” status for U.S. tax purposes. This is a common structure for U.S. partnerships and S corporations, allowing for the use of foreign tax credits. 

However, the possibility of such deliberately planned mismatches enables aggressive cross-border tax arbitrage.  Unlike the rather benign foreign subsidiary election described above, more sophisticated mismatches create planning opportunities for “double non-taxation” where income may be exempt from tax in multiple jurisdictions. In 2015 when the 15 Base Erosion Profit Shifting (“BEPS”) Articles were finalized by the OECD, BEPS Article 2 dealt with hybrid mismatches. Article 2 set out recommended tax policy guidance aimed at counteracting the aggressive planning surrounding hybrid mismatch arrangements.

While BEPS addresses several abusive hybrid mismatches, there is uncertainty regarding how these guidelines will impact global structures of U.S.-based multinationals. Concerning to tax professionals are the restrictions against “deduction-without-inclusion” and “double-deduction” outcomes. Further complications may arise under the U.S. dual consolidated loss rules.

While Congress did not override the check-the-box regulations in the 2017 Tax Cuts and Jobs Act (“TCJA”), it imposed other constraints on the use hybrid entities. Given BEPS Article 2, anti-hybrid legislation will continue to spread internationally among OECD member countries.  Only time will tell if practical guidance emerges regarding the application of these rules to non-abusive check-the-box structures. 

Major topics covered in this online CE/CPE webinar:

  • Entity Classification
  • Eligibility requirements for a check the box election 
  • Hybrid entities
  • Hybrid entity mismatches 
  • Cross Border Tax Arbitrage
  • International Tax Planning opportunities from hybrid mismatches 
  • Anti-hybrid legislation initiatives
  • TCJA and check the box rules 
  • BEPS and BEPS Article 2


Note:- William Seegar moved on from this world. With sadness in our hearts, we find solace in knowing that he’s in a better place. This is a recorded webinar of his live webinar. For any queries please contact us at support@my-cpe.com

Learning Objectives

  • To determine the eligibility criteria for check the box elections.
  • To discuss form 8832.
  • To determine the default classification.
  • To describe the uses of check the box regulations in international tax planning.
  • To describe the Deduction-without-inclusion scenario and its impact.
  • To describe the Double-deduction scenario and its outcome.
  • To describe the Dual consolidated loss scenario and its tax impact.
  • To describe the impact of the TCJA on check the box regulations.
  • To describe the ramifications of BEPS Action 2 on check the box elections by US Multinationals.
  • To determine “reverse hybrid” arrangements and how are they employed to avoid US withholding tax.
  • To describe the retroactivity of the check-the-box election.  
  • To discuss examples of tax arbitrage. 

Recommended For

  • This IRS-Approved CE course is recommended for CPAs, EAs, AFSPs, Tax Directors, Tax Staff, Transfer Pricing Practitioners, Treasury, Internal Auditors, Tax Attorneys, CEOs and CFOs desiring to learn about entity classification and check the box regulations.

Who Should Attend?

  • Bookkeepers & Accountants & Tax Preparers
  • California Registered Tax Professional
  • CFO/Controller
  • CPA (Industry)
  • CPA - Mid Size Firm
  • CPA - Small Firm
  • Enrolled Agent
  • Maryland Tax Preparers
  • Oregon Tax Preparers
  • Tax Accountant (Industry)
  • Tax Attorney
  • Tax Director (Industry)
  • Tax Firm
  • Tax Managers
  • Tax Practitioners
  • Tax Preparer
  • Tax Professionals
  • Tax Pros
  • Young CPA

Course Qualification

Webinar Qualifies For

  • 1 CE Credit of Federal tax-related matters for Enrolled Agents (EA) (Approval No. GEHNZ-T-00712-21-S)
  • 1 CPE Credit of Taxes for Certified Public Accountants (CPA-US)
  • 1 CE Credit of Federal tax-related matters for California Registered Tax Preparers (CRTP) (Approval No. 6273-CE-0667)
  • 1 CE Credit of Federal tax-related matters for Annual Filing Season Program (AFSP)
  • 1 CE Credit of Federal tax-related matters for Oregon Registered Tax Preparers (ORTP) (Approval No. GEHNZ-T-00712-21-S)
  • 1 CE Credit of Federal tax-related matters for Maryland Tax Preparer (MRTP) (Approval No. GEHNZ-T-00712-21-S)
  • 1 CE Credit for Certified Fiduciary & Investment Risk Specialist (CFIRS)
  • 1 CE Credit for Certified Wealth Strategist (CWS)
  • 1 General Credit for Accountant/Bookeeper

Additional details

  • Course Level :
    Basic
  • Credits :
    1
  • Instructional Method :
    QAS Self Study
  • Pre-requisites :
    None
  • Advance Preparation :
    None

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MY-CPE LLC (Sponsor Id#: GEHNZ) has entered into an agreement with the Internal Revenue Service, to meet the requirements of 31 Code of Federal Regulations, section 10.6(g), covering maintenance of attendance records, retention of program outlines, qualifications of instructors, and length of class hours. This agreement does not constitute an endorsement by the IRS as to the quality of the program or its contribution to the professional competence of the enrolled individual. Credit earned by attendees with a PTIN will be reported directly to the IRS as required of all providers. To ensure your CPE hours are reported, update your profile in My Account to include your PTIN number. Please note: IRS CE is only mandatory for EAs and ERPAs. For all other tax return preparers, CE is voluntary.

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MY-CPE LLC (Sponsor Id#: 143597) is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.NASBARegistry.org.

CTEC APPROVED

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MY-CPE LLC (Sponsor ID# : 6273) has been approved by the California Tax Education Council to offer continuing education courses that count as credit towards the annual “continuing education” requirement imposed by the State of California for CTEC Registered Tax Preparers. A listing of additional requirements to register as a tax preparer may be obtained by contacting CTEC at P.O. Box 2890, Sacramento, CA, 95812-2890, toll-free by phone at (877) 850-2832, or on the Internet at www.ctec.org.

Presenter

About Presenter

William Seeger

President, QuantEcon Consulting

Dr. Seeger is currently a Clinical Professor of Economics at the University of Texas at Arlington, College of Business Administration, and President of Quantecon Consulting, an Economic consulting firm.  The focus of his academic research is Transfer Pricing and International Tax issues. Upon his retirement in October 2014, Dr. Seeger was a Principal in KPMG’s Global Transfer Pricing Services practice. He was practice leader, Economic and Valuation Services, for the Dallas, Houston and Denver Business Units and a senior economist and Southwest area lead for KPMG’s Economic Consulting Practice. Dr. Seeger has twenty years of experience in public accounting and three years’ experience with the Internal Revenue Service as an Industry Economist in the Comprehensive Examination Program. 

In his public accounting career, Dr Seeger specialized in economic and tax issues related to tax efficient structuring of the operations of multinational organizations. He has advised clients on the Transfer Pricing economics related to intercompany financing, deferral, intangible planning, services, shared cost allocations, and operational price setting. While at KPMG, Dr. Seeger led Transfer Pricing teams as part of KPMG's financial statement audits of clients related to Fin 48 matters, assisted in Transfer Pricing Dispute Resolution, helped clients with negotiating and establishing their Advance Pricing Agreements, worked with KPMG's Mergers and Acquisitions teams on Transfer Pricing exposures of potential target acquisitions, and served as part of KPMG's Quality review team finalizing TP reports for release to clients.

As the market leader for KPMG in the Dallas/Denver Business unit, Dr. Seeger had oversight in the areas of Oil and Gas, Engineering and Construction, Consumer and Industrial Business, and Financial Services. He was the Southwest area practice leader for Transfer Pricing services and Economic Consulting Services, the Global market leader for Energy and Natural Resources in the areas of oil and gas, chemicals, utilities, engineering and construction, and mining and forestry, and the National Transfer Pricing leader for the Engineering, Construction, and Procurement industry market segment.

Dr. Seeger has a PhD and MA in Political Economy from the University of Texas at Dallas, with specializations in Industrial Regulation and Econometrics, and a BA in Economics from the University of Notre Dame, with a concentration in Quantitative Economics. He is currently a candidate for a Master’s degree in Jurisprudence in International Taxation from the Texas A&M University Law School.  

About Company

QuantEcon Consulting

quanteconconsulting.com/

Economic Consulting Services including Transfer Pricing / Dispute Resolution / International Trade / Policy & Taxation / Forensic Investigation / Public Speaking for mid to large size businesses.

We are a team of diverse professionals who recognize that success in business depends upon a multidisciplinary approach to problems. Problems and their solutions are never one dimensional;  as such our diverse skills provide a unique platform upon which all facets of a challenging problem can be assessed and solutions discerned and derived. 

The first thing we'll do for you is listen. We need to understand your perspective and point of view on the challenges you face. Second, we become experts on your business model and your position in the marketplace. Thirdly, we provide value by providing the right solution that comports with your facts and unique circumstances. Finally, we don't fold up our consulting tent and walk away; instead we partner with you on the implementation of our proposed solution.

Faq

FAQs content

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Ratings and Review

4.2

11 Ratings

Excellent

3

Very Good

7

Average

1

Poor

0

Terrible

0

RK

Rodney Knicely, EA

Nov 29th, 2021

5TH question in the test appeared to not be address in the course.

MP

Michael Pagano, CPA (US)

Dec 27th, 2021

Good course

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