TEI urges Treasury to permit companies to "check the box" (Notice 95-14).

• Position: Tax Executives Institute

On January 23, 1996, Tax Executives Institute filed the following comments with the Department of the Treasury on Notice 95-14, which asks whether a simplified method of classifying unincorporated business organizations should be adopted (commonly referred to as the "check-the-box" procedure). The comments, which took the form of a letter from TEI President Jack R. Skinner to Deputy Tax Legislative Counsel Michael D. Thomson, follows up on a November 1995 meeting between Mr. Thomson and TEI representatives. TEI's initial comments on Notice 95-14 are reprinted in the July-August 1995 issue of The Tax Executive. The letter was prepared under the aegis of TEI's International Tax Committee, whose chair is Philip J. Bergquist of Apple Computer, Inc.

This letter follows up on our recent meeting concerning Notice 95-14, which asks whether a simplified method of classifying unincorporated business organizations should be adopted (commonly referred to as the "check-the-box" procedure). During that meeting, you asked TEI to address three issues relating to the international aspects of the procedure: (i) the feasibility of using a list of per se corporations; (ii) the designation of "default' corporate status for entities that fail to make an election; and (iii) the mechanics of making the election.

The Institute wholeheartedly supports the expansion of the check-the-box procedure to the international area and is eager to assist the Treasury in ironing out the "nits" in the system. We have completed a survey of the members of our Executive Committee and International Tax Committee on this issue. The following comments are based on that survey.

Automatic Classification of

Corporations

Under Notice 95-14, domestic, state-law corporations are automatically treated as corporations for federal tax purposes. You asked whether there are foreign entities that should be excluded from an elective check-the-box regime because they are always treated as corporations by U.S. taxpayers.

You specifically requested comments on the treatment of an altiengesellschaft (AG) in Germany, a societe anonyme (SA) in France, and a public limited company (PLC) in the United Kingdom and Australia. Although the majority of our responding members treat these entities as corporations, the survey revealed that some members treat each of these enterprises as flow-through entities under the Morrissey regulations.

Given the IRS and Treasury's historical resistance to the use of lists...