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CHECKING IN ON “CHECK-THE-BOX”
Heather M. Field
Twelve years ago, new regulations dramatically changed the manner in
which the federal income tax system determines how business entities
are taxed. The new explicitly elective “check-the-box” regulations for
entity classification drew wide praise when they replaced the old multi-
factored corporate resemblance test. Now, with the benefit of hindsight
and with previously unpublished data regarding entity classification
elections made since 1997, this Article revisits the check-the-box
regulations. As the first comprehensive study of these regulations in
action, this Article critically examines the successes and failures of
arguably the most significant change to the business tax system in the
last twenty years. The Article argues that the experience with the
check-the-box regulations suggests that they fall short of their promise
even though they are an improvement over the prior entity classification
rules. The Article also examines the scope of the check-the-box election
itself and argues that the election lacks a coherent set of limitations,
which undermines the goals behind the provision of the election.
Ultimately, this Article concludes that the policy weaknesses revealed
by an examination of the check-the-box regulations stem fundamentally
from the existence of a multi-regime system for taxing businesses.
Hence, the regulations expose a problem with the business tax regimes
among which taxpayers can choose, thus adding an additional reason
to reform the federal income tax treatment of businesses.
Associate Professor of Law, University of California, Hastings College
of the Law. The author wishes to thank the University of California, Hastings
College of the Law, and the 1066 Foundation for their generous support. The
author appreciated the opportunity to present this Article at the 2008 Tax Law
Colloquium hosted by the Business and Transactional