I’m not an expert, but I also agree with Michael’s interpretation. If we interpret paragraph 2 to mean that SMLLCs and LLPs are excluded from the first year exemption, that would directly contradict the first paragraph. To me, it would only make sense for paragraph 2 to mean simply that LLCs, including those which are disregarded entities (SMLLCs) and LLPs, are usually subject to an annual tax. Also, look at the preceding paragraph as well: “Single member LLCs classified as disregarded entities generally do not report their own income separately from their owners. However, they are treated as separate entities for purposes of the annual tax, LLC fee, tax return requirements, and credit limitations.” This further supports that it doesn’t matter whether the LLC is a disregarded entity—they are all treated as separate entities for the purposes of the annual tax, and therefore they should all be exempt from the first year annual tax, separate entities or not. I realize there is likely to be further debate on this, but in the meantime, can we perhaps be given the option to override this, so that those of us who believe we are not subject to the tax can zero this out?
