Let's not confuse state tax issues with federal. An S election is federal. It may be possible for a state to not allow flow through taxation but I do not know of any state that does that. If the IRS didn't have the S election form at the time the corp was started it is not likely the state did either. If you kept the same federal EIN you may be able to pull the past tax returns. If the IRS has been accepting the returns in the past you have a case. Good luck.

You may need to contact an attorney and have him/her look at the business's past tax filings, how it is registered in your state, changes in IRS regulations, etc. If TN doesn't recognize S-corps, or didn't when the owners decided to file taxes that way, and the business was never registered with the state as an S-corp, you may have a problem.

I was told by the Dept. of State in TN, that I would need to get in touch with the IRS to receive the 385C. The IRS say they have no form indicating our company is a S Corp. The owners of my business saywhen they started the business, in 1978,  they decided they were going to file as a S Corp, and that the IRS didn't have you fill out forms at that time. It was up to businesses to decide how they wanted to be set up. It was in the late 80's the IRS had business fill out forms and decided if you qualified to be a S Corp.   Is this true? If so, should my buisness not be 'grandfathered' in?   Any info would be great!   Robbie

Some states do not recognize S-Corps as a tax designation, so first clarify whether this is an issue with your state department of revenue or the IRS. If the IRS, determine if your business will qualify as an S-Corp under the IRS stipulations. An S Corp is a corporation that has received the Subchapter S designation from the IRS. A business must first be chartered as a corporation in the state where it's headquartered to be considered an S Corp, so check with your state's entity registration office (scroll to the bottom for a listing by state) to see how the business is registered.