The issue is interesting to me as a long time ago in a galaxy far, far away I was an attorney in the treasury department and one of the issues I handled was classification of entities. It was a big deal back then, now it matters primarily to publicly traded entities.
People are focusing on a bill in Congress but the real issue is the status of the entity under current law. It seems to me that it is an association taxable as a corporation, it bears all the hallmarks.
It is standard practice to get a PLR on these types of issues as due diligence. With respect to a PLR, IRS chief counsel has three options: favorable ruling, unfavorable ruling, no ruling. If there is a no ruling or an unfavorable ruling, a memo gets placed in the taxpayer's master file (i.e., "look at this when you audit them").
A taxpayer contemplating a request for a ruling is entitled to a pre-submission conference in D.C. Though of course the IRS will not indicate how it will rule, as it is hypothetical, there will be discussion of whether it is worth the taxpayer's time and money to request a ruling.
Imo what happened is that at the pre-submission conference the IRS indicated it would not issue a PLR on the matter, either favorable or unfavorable (i.e., a "no ruling") so no request was filed. The IRS probably has a Revenue Ruling project (which applies to all taxpayers, not just that particular taxpayer) in the works which will address the issue and provide Treasury's position when the matter eventually goes into litigation at the Tax Court.
All in all it should take three years to shake out and determine the status of the entity.
I imagine Blackstone will keep a reserve for these tax issues until they are settled but if they don't it would be a bad thing. |
