In a private letter ruling (PLR
201522001), the IRS ruled that a corporation that had been
filing its U.S. federal income tax returns and otherwise operating
as a corporation, failed to file its annual state corporation
report and pay its annual state franchise tax in its state of
incorporation. As a result, the corporation was administratively
dissolved under state law.
Nonetheless, the corporation continued to file its federal Form
1120, "U.S. Corporation Income Tax Return," and otherwise
pay all corporate taxes. When the taxpayer corporation realized the
dissolution had occurred, it reincorporated in the same state on a
subsequent date.
The IRS ruled that the taxpayer's status as a corporation
did not terminate in spite of the administrative dissolution. While
this result appears equitable at first blush, it raises many
collateral issues in connection with situations such as de facto
liquidations and state and local tax concerns.
