Thursday, December 30, 2010

IRS Issues Long-Awaited Guidance On Series LLCs; Will The States Soon Follow?

In September 2010, the IRS issued proposed regulations that generally treat each series of a limited liability company (LLC) as a separate entity and wisely apply the entity classification provisions of the “check-the-box” regulations to each series. This article first examines the “helpful and well-written guidance” provided by Treasury in the proposed regulations, and then analyzes the impact that the proposed regulations may have on state tax issues regarding series LLCs. With the issuance of this long-awaited guidance, there will likely be an increased use of series LLCs as well as the issuance of additional guidance by the states regarding whether they will adhere to the federal tax treatment. (M.W. McLoughlin and B.P. Ely, 20 Journal of Multistate Taxation and Incentives, No. 9, 8 (January 2011).)

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