|Referenced Sources:||Massachusetts General Laws|
Personal Income Tax
On behalf of your client, *************** (herein " Parent Corporation"), a domestic corporation currently taxed as an S corporation for federal income tax purposes, you have requested a letter ruling on whether Massachusetts will recognize Parent Corporation's status as an S corporation if it directly owns 80 percent or more of a non-Massachusetts business entity classified as either a partnership or a single owner business entity treated as a branch or division under Treasury Regulation §§ 301.7701-2(a) and 301.7701(c)(2) (herein "federal check-the-box rules").1 Under federal law, an S corporation is permitted to own 80 percent or more of a C corporation. See P.L. 104-188, § 1308(a) (effective for tax years beginning after December 31, 1996). However, prior to 1997, such corporate ownership by an S corporation would have terminated the S corporation shareholder's election to be treated as an S corporation. See IRC § 1362(d)(2). For the reasons stated below, we rule that Massachusetts will recognize the Parent Corporation's status as an S corporation if it is treated as an S corporation under the Internal Revenue Code.