internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc tege eoeg et2-plr-108144-02 date date legend state x the act political_subdivision political_subdivision political_subdivision political_subdivision political_subdivision political_subdivision political_subdivision facility current facility the statute facility officer dear this letter is written in response to your request on behalf of state x for reconsideration of our prior ruling requested by state x concerning the application of the continuing employment exception to the hospital insurance portion of the federal_insurance_contributions_act fica tax as set forth in internal_revenue_code code sec_3121 in state x's prior ruling_request state x asked us to rule that employees of the facility of political_subdivision who were continuously employed by the facility prior to date ceased to be eligible for the continuing employment exception when political_subdivision was abolished and employees of the facility were transferred to employment with state x after an in-depth review of the facts and law we ruled that plr-108144-02 the continuing employment exception no longer applied to the employees of political_subdivision following their transfer to employment with state x in your current request you ask that we reconsider our prior ruling in light of additional information that was not submitted with state x's original request you now request a ruling that employees of political subdivisions who were continuously employed prior to date retained eligibility for the continuing employment exception following the abolishment of political subdivisions and the employees' transfer to employment with state x facts the pertinent facts submitted with state x's prior ruling_request are as follows legislation mandated by the act resulted in the immediate abolishment of political_subdivision due to a fiscal emergency the act provided for the transfer to state x of all functions duties and responsibilities of political_subdivision including among other political_subdivision offices the operation and management of the facility all liabilities debts assets real and personal_property revenue leases and contracts of political_subdivision became the obligations and holdings of state x all employees of political_subdivision who were transferred to state x pursuant to the act became members of the state retirement_plan the retirement_plan assets of political_subdivision associated with such employees were transferred from the retirement_plan of political_subdivision to the retirement_plan of state x the terms of the commissioners of political_subdivision expired on the transfer date as set forth in the act the act provided for the transfer of employees of political_subdivision including the facility officer from employment with political_subdivision to employment with state x with no impairment of employment rights held immediately before the transfer date ie no impairment of seniority retirement or other employee rights no reduction of compensation or salary grade and no change in union representation the facility officer who had administrative and operational control_over the facility retained such control_over the current facility eligibility and coverage of insurance benefits eg group life and accidental plr-108144-02 death and dismemberment insurance health surgical medical dental and other health insurance benefits for employees who became state employees under the act were transferred from political_subdivision to state x without interruption of coverage political_subdivision employees who were members of a collective bargaining agreement on the transfer date continued to receive coverage as required by the terms of the agreement the human resources division of the executive office for administration and finance of state x assumed the obligation of political_subdivision to pay into the health and welfare trust fund of a collectively bargained agreement for members who were transferred to state x you submitted the following additional information with your current request political subdivisions were abolished by mandate of the statute which legislation codified other statutes similar to the act that mandated the abolishment of political_subdivision consequently the operation and management of the facilities of political subdivisions were transferred to state x creating state agencies numerous examples of state x’s financial reimbursements to political subdivisions of expenses for the operation and expansion of their facilities the comptroller of the revenue for state x is responsible for reporting withholding and paying employment_taxes on wages paid to all employees who transferred to state x employment pursuant to the act and the statute prior to the abolishment of political subdivisions the treasurers of political subdivisions were responsible for reporting withholding and paying employment_taxes for employees within each treasurer's area of authority a facility officer may negotiate a collectively bargained agreement as an employer but must submit the agreement to the governor of state x for funding and final approval if funding approval is not given after days the collective bargaining agreement must be renegotiated state x employees are not subject_to an agreement under sec_218 of the social_security act u s c sec_418 sec_218 agreement law and analysis fica_taxes consist of the old-age survivors and disability oasdi portion and hospital insurance portion medicare_tax and are computed as a percentage of wages paid_by plr-108144-02 the employer and received by the employee for employment code sec_3101 sec_3111 sec_3121 generally all remuneration paid_by an employer for services performed by an employee is subject_to fica unless the remuneration is specifically excepted from the term wages or the services are specifically excepted from the term employment code sec_3102 sec_3111 sec_3121 services performed by an employee of a state political_subdivision or wholly owned instrumentality not covered by a sec_218 agreement are exempt from employment for purposes of the oasdi portion of fica only if the employee is a member of a retirement_system of such state political_subdivision or wholly owned instrumentality code sec_3121 services performed by employees of a state local political_subdivision or wholly owned instrumentality who are hired after date that are not subject_to a sec_218 agreement are considered to be employment for purposes of applying medicare_tax code sec_3121 the code however provides a narrow exception to medicare_tax known as the continuing employment exception if specific requirements are met code sec_3121 for employment to qualify for the continuing employment exception an employee’s services performed for a state political_subdivision or wholly owned instrumentality must meet the following requirements the employee’s services must be excluded from the term employment as determined in code sec_3121 which exclusion applies only to an employee who is a member of a retirement_system of such state political_subdivision or wholly owned instrumentality see code sec_3121 with cross-reference to subparagraph a of code sec_3121 with cross-reference to code sec_3121 this rule is effective for services performed after date omnibus budget reconciliation act of publaw_101_508 b 101st cong 2d sess the employee performs substantial and regular services for compensation_for that employer before date the employee is a bona_fide employee of that employer on date the employee’s employment relationship was not entered into for purposes of meeting the requirements of code sec_3121 the employee’s relationship with that employer has not been terminated after march 1986_code sec_3121 emphasis added plr-108144-02 the code defines the term employer specifically for purposes of applying the continuing employment exception and provides that a state employer is a separate and different employer from a political_subdivision employer code sec_3121 specifically code sec_3121 sets forth the following definitions for purposes of subparagraph c under regulations - i ii all agencies and instrumentalities of a state as defined in sec_218 of the social_security act or of the district of columbia shall be treated as a single employer all agencies and instrumentalities of a political_subdivision of a state as so defined shall be treated as a single employer and shall not be treated as described in clause i emphasis added revenue rulings 1986_2_cb_172 and 1988_1_cb_343 provide guidelines for use in applying the continuing employment exception revrul_86_88 defines the term political_subdivision based on sec_218 of the social_security act to include a county city town village or school district u s c sec_418 the term political_subdivision employer is defined as a political_subdivision and any agency_or_instrumentality of that political_subdivision that is a separate employer for purposes of withholding reporting and paying the federal income taxes of employees revrul_86_88 defines a state employer as the state and any agency_or_instrumentality of that state that is a separate employer for purposes of withholding paying and reporting federal income taxes of employees in applying the continuing employment exception rule and the above definitions an employee hired before date does not qualify for the continuing employment exception if after date the employee transfers from a political_subdivision employer to a state employer q a-7 revrul_86_88 it does not matter that the employee is transferred to the state from a political_subdivision without a change in salary seniority or benefits see q a-7 revrul_86_88 the conclusions reached in revrul_86_88 are dispositive of the facts and issues in the instant case in your ruling_request you assert that since state x law provides that a facility officer is an employer even after the facility officer’s transfer to state x the continuing employment exception should apply because the employer is still the same as before the abolishment of political subdivisions however state x law in reference to the abolishment of political subdivisions refers to the transfer of political_subdivision employees to state employment in other words under state x law political subdivisions are the former employers of the transferred employees and state x is the current employer moreover according to state x law the final approval and funding authorization applicable to any negotiated collectively bargained agreement plr-108144-02 entered into on behalf of former employees of political subdivisions is reserved for the governor of state x the facts further establish that the responsibilities for reporting withholding and paying federal employment_taxes with respect to the employees’ compensation were transferred from the treasurers of political subdivisions to the comptroller of the revenue for state x a state employer this is another factor that establishes a change in employers for purposes of determining the application of the continuing employment exception revrul_86_88 consequently it is our view that the transfer of employees from political subdivisions to state x constitutes a termination of employment for purposes of determining eligibility for the continuing employment exception you claim that the employees who were transferred pursuant to the statute did not change employers in the traditional sense of the word but were transferred by operation of law from employment with political subdivisions to state x when political subdivisions were abolished thus employment was not terminated and the continuing employment exception should continue to apply to such employees you cite the holding in board_of education of muhlenberg county ky v united_states as authority for your position 920_f2d_370 6th cir rev’g 724_fsupp_472 w d ky in muhlenberg the court held that a merger of three school districts which were political subdivisions into a single new school district also a political_subdivision did not create a new employer within the meaning of code sec_3121 while the court acknowledged the legitimacy of the government’s argument that the school districts were political subdivisions and separate employers the court determined that the merger of two or more political_subdivision employers was not addressed in the statute consequently it turned to legislative_history the court concluded that congress did not intend to treat a merger of political subdivisions as creating a new employer for purposes of code sec_3121 the court after reviewing the house report noted that congress intended for moves from state government to local_government to constitute a termination of employment for purposes of applying the continuing employment exception which is directly applicable to the facts of this ruling_request muhlenberg pincite citing h_r no 99th cong part pincite house report the legislative_history for the enactment of the application of the medicare portion of fica to state and local_government employees shows that the house and the senate both agreed to stop the drain on the medicare hospital insurance program by state and local_government employees who qualify for medicare in their later employment years but who contribute little or no funds into medicare both houses proposed applying medicare_tax to state and local_government employment that had previously been excluded from the medicare portion of fica s rep no pincite explanation of s h_r no 99th cong part pincite the two legislative bodies however disagreed as to the extent of the application of the tax h_r conf_rep no pincite the house wanted mandatory plr-108144-02 coverage of newly hired state and local_government employees but the senate wanted mandatory coverage of all employees current and new id the enacted legislation adopted the house version id in the house report the committee explained that it was aware of the financial burden that mandatory coverage of all employees such as the senate version might present h_r rep no part i pincite therefore the committee selected a transitional application of medicare taxation by including the continuing employment exception in the legislation id this relief was to be temporary and applied at the time the states and political subdivisions were first brought under the legislation as the committee recognized there will be great pressure to avoid coverage id pincite the committee also recognized that defining entities as separate employers will be very complex id accordingly the committee explained that it will be generally true that employees who move between different jobs within a state government would be considered continuously employed while employees who move from state government employment to a job with a local township county or municipality or vice versa would be considered newly hired id in the instant case we assume that the retirement plans of political subdivisions and the retirement_plan of state x are retirement systems pursuant to code sec_3121 the employment of employees who were transferred to state x pursuant to the statute consisted of substantial and regular services performed for compensation_for political subdivisions prior to date such employees were bona_fide employees of the facilities of political subdivisions on date and such employees’ services were not entered into for purposes of avoiding medicare_tax thus the application of the continuing employment exception turns on whether or not the employees’ employment was terminated upon their transfer from employment with political subdivisions to employment with state x the facts show in the original request and in the current request for reconsideration that the employees who were transferred to state employment are not maintaining employment with the same employer as required by code sec_3121 the employees transferred from employment with political subdivisions to employment with a state according to the code revenue rulings and and legislative_history a state and a political_subdivision are two distinct and different employers for purposes of applying the continuing employment exception the code expressly denies treatment of a political_subdivision employer as a state employer and visa versa code sec_3121 in your request you do not refute the information submitted with the original request but allege that relevant information was lacking you submit for our review financial information concerning state x’s reimbursement to political subdivisions for expenses_incurred in the operation of the facilities of political subdivisions and assert that the level of financial dependence of a political_subdivision on a state creates plr-108144-02 an employment relationship so that the transfer of employees to state x is not a change in employers also you assert that the transfer of an employee by operation of law does not constitute a change in employment however these factors are not particularly relevant when considering the application of the continuing employment exception you also rely on the holding in muhlenberg which case involved the merger of three school districts which were political subdivisions into a new school district also a political_subdivision as noted above the court held that the continuing employment exception applied because the employer did not change the facts in the current request differ substantially from the facts in the muhlenberg case which is reflected in our analysis in the original private_letter_ruling the entities involved in the current case are political subdivisions and a state no merger of entities took place instead employees were transferred from political subdivisions to the state code sec_3121 explicitly provides that the continuing employment exception does not apply under these circumstances while the facts in muhlenberg are inapposite to the instant case the underlying reasoning of the court is helpful with the current request the court observed that employees’ who move between different jobs in a state government would be considered continuously employed by the state i n contrast employees who move from state government employment to a job with a local township county or municipality or visa versa would be considered to be newly hired muhlenberg pincite emphasis added the code revenue rulings and legislative_history and the analysis by the court in muhlenberg all establish that when an employee transfers to a state employer from a political_subdivision employer or visa versa the employee's employment relationship with the political_subdivision is terminated and the employee begins performing services for a different entity thus the continuing employment exception is not applicable to the facts of this case you also refer to the muhlenberg court’s analogy to the same desk rule which provides generally that employees who continue on the same job for a different employer as a result of a liquidation merger or consolidation of the former employer are not considered separated from employment for purposes of determining whether a lump sum distribution from an exempt employees' trust is made on account of an employee's separation_from_service within the meaning of code sec_402 retirement_plan rules in contrast to the facts in muhlenberg the facts in the instant case are clearly addressed under the plain language of the code which specifies that a state and a political_subdivision are two distinctly separate employers see code sec_3121 thus we see no need to look to other statutes that may be analogous to resolve an issue that is unambiguously answered in code plr-108144-02 u d conclusion after careful reconsideration of the issues presented and positions advocated in your ruling_request as well as a thorough review of state x's original request we conclude that the original determination was warranted by the facts and circumstances of the case no new facts law or legal arguments cause us to change or alter the conclusion we reached in the original ruling accordingly we affirm our prior ruling concluding that the employees of political_subdivision ceased to be eligible for the continuing employment exception following their transfer to employment with state x we further rule that employees of political subdivisions who were transferred to employment with state x are not eligible for the continuing employment exception the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely lynne camillo chief employment_tax branch office of assistant chief_counsel exempt_organizations employment_tax government entities moreover we note that the applicability of retirement_plan provisions to resolve the employment_tax issue presented in your ruling_request is tenuous at best see eg 26_f3d_1368 6th cir sixth circuit refused to apply its holding in muhlenberg to a case brought under the employee retirement income security act


t c summary opinion united_states tax_court patrick l o’brien petitioner v commissioner of internal revenue respondent docket no 8217-00s filed date patrick l o’brien pro_se william i miller for respondent pajak special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioner’s federal_income_tax in the amount of dollar_figure and a penalty under sec_6662 in the amount of dollar_figure respondent conceded that petitioner was not liable for dollar_figure of additional income or for the sec_6662 penalty the sole issue the court must decide is whether petitioner is liable for the 10-percent additional tax under sec_72 some of the facts in this case have been stipulated and are so found petitioner resided in schaumburg illinois at the time he filed his petition in petitioner patrick l o’brien petitioner received a distribution of a rounded amount of dollar_figure from a defined_benefit_plan and a distribution of a rounded amount of dollar_figure from an employee_stock_ownership_plan for a total of dollar_figure hereinafter both distributions will be referred to as one distribution on his federal_income_tax return petitioner reported that dollar_figure of the dollar_figure distribution was taxable respondent determined that the sec_72 additional tax on early distributions applied to dollar_figure the parties stipulated that this amount should have been dollar_figure the difference appears to be due to rounding and we shall use the stipulated amount respondent now concedes that dollar_figure of the distribution is not subject_to the sec_72 additional tax therefore respondent now asserts that only the taxable_amount of dollar_figure of petitioner’s distribution is at issue with respect to the sec_72 additional tax the funds were distributed to petitioner as a result of his termination of employment he does not contend that the distribution was made due to death disability a series of periodic_payments separation_from_service after attaining the age of or for the purpose of medical_expenses petitioner contends that the distribution is not subject_to the sec_72 additional tax because the distribution was made pursuant to a qualified_domestic_relations_order sec_72 provides for an additional tax of percent on any amount received as an early distribution from a gualified retirement_plan as defined in sec_4974 the sec_72 additional tax does not apply in certain situations and the sole exception on which petitioner relies is sec_72 c that section provides that distributions from qualified_retirement_plans are not subject_to the additional tax if they are made to an alternate_payee pursuant to a qualified_domestic_relations_order qdro within the meaning of sec_414 a qdro is a domestic_relations_order which in pertinent part creates an alternate payee's right to receive all or part of the benefits payable with respect to a participant under a plan clearly specifies certain facts and does not alter the amount of the benefits under the plan sec_414 a and a domestic_relations_order is defined in pertinent q4e- part as any judgment which relates to the provision of marital property rights to a spouse or former spouse of a participant and is made pursuant to a state domestic relations law sec_414 p b the circuit_court of cook county illinois entered a judgment for dissolution of marriage judgment with respect to petitioner and his former wife the judgment states that the parties acknowledged that petitioner’s retirement_plan was marital property the judgment determined that in consideration of petitioner’s waiver of his vested interest in the marital real_estate petitioner’s former wife hereby waives any and all right title claim or interest she may have in the retirement_plan in favor of petitioner the judgment relates to the marital property rights of petitioner and his former wife pursuant to the domestic relations laws of illinois it is a domestic_relations_order under sec_414 b the judgment did not award petitioner’s former wife any interest in the pension_plan distribution petitioner admits that the judgment did not require any distribution of his retirement_funds the distribution took place after petitioner’s divorce from his former wife only petitioner received the dollar_figure distribution what is most significant is that petitioner was not an alternative payee under his retirement_plan but was a participant in that plan for the foregoing - reasons the judgment is not a qdro under sec_414 petitioner’s distribution was not a payment to an alternate_payee pursuant to a qdro and does not fall within the sec_72 c exception to the sec_72 additional tax petitioner further argues that he is not liable for the t additional tax because he received a closing letter from the internal_revenue_service irs accepting the additional information he provided and informing him that he would not need to file a petition with the united_states tax_court to reconsider the tax he owed if you have already filed a petition the office of the district_counsel will contact you on sic the final closing of this case petitioner took this to mean that the case was closed based on the heading closing letter a closing letter is to be sharply distinguished from a closing_agreement entered under sec_7121 kiourtsis v commissioner tcmemo_1996_534 a closing_agreement is entered into by both the taxpayer and the commissioner and is binding in accordance with its terms id sec_7121 sets forth the exclusive procedure under which a final closing_agreement as to the tax_liability of any person can be executed 278_us_282 58_tc_69 reynolds v commissioner tcmemo_2000_20 - - sec_7121 envisages an agreement knowingly entered into by both parties 48_tc_939 affd on another issue 404_f2d_237 5th cir petitioner and respondent did not enter into a valid closing_agreement the closing letter issued by the irs to petitioner is not a closing_agreement under the provisions found in sec_7121 and does not affect petitioner’s liability for tax we hold that petitioner is liable under sec_72 for the additional percent tax on the dollar_figure of early distributions from his qualified_retirement_plans reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered under rule


department of the treasury washington dc person to contact telephone number refer reply to t ep ra t3 date jul internal_revenue_service attention legend union a city b fund d pian x dear this is in response to a letter from your authorized representative dated date requesting a ruling concerning the status of plan x under sec_414 of the internal_revenue_code plan x was established in as a defined contribution profit-sharing annuity plan it is financed exclusively by contributions from the city b and provides benefits exclusively to city b civil servants who are employed in job titles represented by union a employees do not contribute to plan x plan x was established as the result of collective bargaining agreements between city b and union a plan x a governmental_plan pursuant to sec_414 of the code was determined to be qualified under sec_401 in a determination_letter issued by the internal_revenue_service on tt t tteeee currently there are participants in plan x but several hundred more participants are expected to be added as annuity contribution page agreements supplemental to the basic collective bargaining agreements are concluded between union and city b five officers of union a constitute ex officio the board_of trustees of fund d the in their capacity as fund d trustees they set policy for and administer plan x plan x trust as union officers their job responsibilities exclusively are to represent city b in the titles represented by union a and to serve as trustees on separate tax-qualified benefit funds administering supplemental health benefits prepaid legal services benefits educational benefits and annuity benefits for these same union a represented employees four of the five fund d trustees are not considered employees of city b although all were employees of city b and are on leave of absence to serve as officers of union a one trustee presently remains a city b employee on what city b denominates as released-time to perform labor-management activities pursuant to which he works full-time as an union a officer city b is thus contributing to plan x on his behalf and he is a participant in plan x the five officers come from the ranks of city b employees in municipal job titles represented by union a since their elections the officers with the previously noted exception are employed by union a consequently the four officers of union a who are employed by union a are not eligibie to participate in plan x even though they are also trustees of fund d because plan x is limited to employees of city b at a meeting of the board_of trustees on the trustees of fund d determined that pian x should be amended to include as participants the trustees and to add union a as a contributing employer on behalf of the union a officers who are the trustees provided the internal_revenue_service will allow such amendment to plan x without jeopardizing the tax-qualified status of plan x plan x as so amended will be submitted to the appropriate area office of the irs for a new determination_letter based on the foregoing you request a ruling that the inclusion of the trustees of fund d employed by union a as plan x participants will not affect plan x's status as a governmental_plan under sec_414 of the code sec_414 of the code provides that for purposes of part i of subchapter_e of title of the code a governmental_plan means a plan established and maintained for its employees by the government of the united_states by the government of any state or political_subdivision thereof or by any agency_or_instrumentality of any of the foregoing under sec_413 certain modifications to the qualified_plan rules provided under sec_413 apply to a qualified_retirement_plan maintained pursuant to a collective bargaining agreement between employee_representatives and one or more employers for such a plan sec_413 through generally provide that the participation nondiscrimination exclusive benefit vesting funding deduction rules are applied as if all participants in the plan are employed by a single employer a governmental_plan would be affected similarly to the extent such rules are otherwise applicable pursuant to sec_413 employees of employee_representatives are treated as employees of an employer described sec_413 for purposes of applying the modifications to the qualified_plan rules provided under sec_413 under sec_1_413-1 of the income_tax regulations the pian and affiliated health and welfare plans are deemed to be employee_representatives 1s page if employees covered by sec_413 with respect to a plan that is otherwise a governmental_plan were to affect the plan's status as a governmental_plan significant changes in the application of many of the qualified_plan rules descried in sec_413 through would result it appears however that sec_44 b is intended to include employees of employee_representatives in applying the qualified_plan rules as modified pursuant to sec_413 through to a plan and not to cause significant changes to the application of these rules with respect to a plan in this case because plan x is a qualified governmental_plan maintained pursuant to a collective bargaining agreement between employee_representatives and city b it is subject_to sec_413 of the code thus under sec_413 the officers of union a would be eligible to be included in plan x accordingly we conclude that the inclusion of the fund d trustees who are employees of union a would not affect plan x’s status asa governmental_plan under sec_414 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours gener u feran frances v sloan manager technical branch group tax_exempt_and_government_entities_division cc


internal_revenue_service number release date index number -------------------------------------------- --------------------------------------------------------- ---------------------- -------------- ---------------------------------- department of the treasury washington dc person to contact -------------------------- id no ---------------- ------------------- telephone number ---------------------- refer reply to cc tege eb hw plr-107434-14 date date legend taxpayer ------------------------------------------------------------- ------------------------------------- county code ---------------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------- --------------------------------------------------------------- ---------------------------------- --------------------------------------- ---------------------------------------------------------------- ordinance plan a plan b plan c plan d dear ----------------- this is in reply to a letter dated date requesting rulings on behalf of taxpayer concerning the federal_income_tax treatment under sec_104 and sec_3121 of the internal_revenue_code code of certain payments provided to current and former employees of taxpayer pursuant to county code as amended by ordinance ordinance adopts certain changes to employee benefit arrangements under county code county code sets forth the disability benefits for eligible employees of taxpayer plr-107434-14 who suffer personal_injury_or_sickness in the line of duty according to county code these disability benefits are paid under the terms of plan a plan b plan c or plan d and determined as a percentage of an eligible employee’s compensation before the employee suffered personal_injury_or_sickness in the line of duty line of duty is defined to mean a disability or death resulting directly or indirectly from an act occurring or a thing done or a risk taken which was required of the employee in the performance of his or her duty county code further requires disability benefits to be reduced by the amount of social_security disability benefits workers compensation benefits and earned_income during disability sec_104 of the code excludes from gross_income amounts that are received by an employee under a workmen's_compensation_act or under a statute in the nature of a workmen's_compensation_act that provides compensation to employees for personal injuries or sickness incurred in the course of employment sec_1_104-1 of the income_tax regulations provides that the exclusion from income of amounts described in sec_104 also applies to compensation which is paid under a workmen's_compensation_act to the survivor or survivors of a deceased employee this exclusion however is not available and does not apply to a retirement pension or annuity to the extent that it is determined by reference to the employee's age or length of service or the employee's prior contributions even though the employee's retirement is occasioned by an occupational injury or sickness in revrul_80_44 1980_1_cb_34 a statute in the nature of a workmen’s compensation act provided for an allowance of the greater of a of the individual’s average final compensation or b the amount to which the individual would be entitled under the normal years_of_service retirement_plan the ruling concluded that the benefits under the statute were excludable under sec_104 of the code to the extent that they did not exceed of the final_average_compensation any excess over of final_average_compensation was attributable to length of service and therefore not excludable from gross_income sec_3121 of the code excludes from the definition of wages for purposes of the federal_insurance_contributions_act fica any payment made to or on behalf of an employee on account of sickness or accident disability if received under a worker’s compensation law accordingly based on the information submitted and representations made and authorities cited above we conclude as follows county code as amended by ordinance is a statute in the nature of a workmen’s compensation act plr-107434-14 disability benefits paid pursuant to county code as amended by ordinance and in accordance with the terms of plan a plan b plan c or plan d are not considered taxable_income to the employee under sec_104 of the code disability benefits paid pursuant to county code as amended by ordinance and in accordance with the terms of plan a plan b plan c or plan d are excluded from the definition of wages under sec_3121 of the code no opinion is expressed or implied concerning the federal tax consequences under any other provision of the code or regulations other than those specifically stated above these rulings are directed only to the taxpayer who requested them sec_6110 of the code provides that they may not be used or cited as precedent sincerely harry beker chief health welfare branch office of division counsel associate chief_counsel tax exempt and government entities


id office uilc cca-990853-08 -------------- number release date from ------------------- sent tue am to ----------- cc --------------------------------------------------------------------------------------------------------------------------- ------------------------- subject re tefra statute are you sure we issued an fsaa tefra procedures for s_corporations were repealed in if we issued an fpaa to the partners of ------------ partnership which defaulted we can properly assess direct and indirect partners see sec_6231 last sentence the form 872-i keeps the statute open for assessment but does not prevent us from making an assessment that is otherwise valid


internal_revenue_service number release date index number ------------------------------------------------------- -------------------------------------------------------- --------------------------------------------- ----------------------------------------------------- ----------------------------- --------------------------------------- ---------------------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number ---------------------- refer reply to cc psi b5 plr-116599-14 date date legend agency taxpayer address bins year year year x y z a -------------------------------------------------------- ------------------------ ----------------------------------------------------------------- ------------------------ -------------------------------- ------------------------------- ---------------------------------------------------- ---------------------------------------------- ------- ------- ------- ---- -- -- ------------ plr-116599-14 b c --------------- --------------- dear ------------------------------------- this letter responds to a letter dated date submitted on behalf of agency and taxpayer by their authorized representatives requesting permission under sec_42 of the internal_revenue_code and sec_1_42-13 of the income_tax regulations for agency to correct an administrative error or omission relating to the allocation of low-income_housing_credit dollar amounts in year agency issued taxpayer a reservation certificate reserving a total of dollar_figurea of low-income_housing_credit for a project to be completed at address the reservation certificate required taxpayer to place all of the project buildings in service no later than the end of year the project consists of x buildings y of the buildings were placed_in_service in year and the remaining z buildings were placed_in_service in year agency issued a year carryover allocation of dollar_figureb of low-income_housing_credit to the project and assigned bins to the x buildings agency issued a second carryover allocation of dollar_figurec of low-income_housing_credit to the project in year listing the same x buildings identified by bins as those listed in the year carryover allocation agency and taxpayer represent that both the year and year carryover allocations contain the information for carryover allocations required in sec_1_42-6 i - x the year and year carryover allocations total dollar_figurea of low-income_housing_credit and neither of the carryover allocations indicate specific amounts of low-income_housing_credit to any of the x buildings identified by bins in year agency issued two forms low-income_housing_credit allocation and certification to each of the x buildings identified by bins intending to specify how much each building received from the dollar_figurea in total low-income_housing_credit allocated to the project the forms reflect dollar_figureb of credit allocations from agency’s year credit ceiling and dollar_figurec of credit allocations from agency’s year credit ceiling totaling the intended allocation amount of dollar_figurea of low-income_housing_credit for the project some forms incorrectly attribute credit from agency’s year credit ceiling to the y buildings that were placed_in_service in year agency represents it intended that each building’s allocation amount for year and year was as follows year housing_credit allocation bin number ---------------------------- ---------------------------- -------------------------- plr-116599-14 -------------------------- ---------------------------- ---------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- ---------------------------- year housing_credit allocation bin number ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- sec_42 provides the secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section including regulations providing the opportunity for housing_credit agencies to correct administrative errors and omissions with respect to allocations and record keeping within a reasonable period after their discovery taking into account the availability of regulations and other administrative guidance from the secretary sec_1_42-13 provides that an agency may correct an administrative error or omission with respect to allocations and recordkeeping as described in sec_1 b within a reasonable period after the agency discovers the administrative error or omission whether a correction is made within a reasonable period depends on the facts and circumstances of each situation the administrative errors and omissions do not include for example any misinterpretation of the applicable rules and regulations under sec_42 sec_1_42-13 provides that an administrative error or omission is a mistake that results in a document that inaccurately reflects the intent of the agency at the time the document is originally completed or if the mistake affects a taxpayer a document that inaccurately reflects the intent of the agency and the affected taxpayer at the time the document is originally completed under sec_1_42-13 a state_agency must obtain the secretary’s approval to correct an administrative error or omission as described in sec_1_42-13 if the plr-116599-14 correction is not made before the close of the calendar_year of the error or omission and the correction-- a is a numerical change to the housing_credit_dollar_amount allocated for the building or project b affects the determination of any component of the state’s housing_credit ceiling under sec_42 or c affects the state’s unused housing_credit carryover that is assigned to the secretary under sec_42 based solely on the representations and the relevant law and regulations set forth above we conclude that agency committed an administrative error that resulted in documents that inaccurately reflected the intent of the agency and the affected taxpayer at the time the documents were originally completed further agency attempted to correct the administrative error within a reasonable_time after discovery the correction was not made before the close of the calendar_year of the error and the correction results in a numerical change to the housing_credit_dollar_amount allocated to the x buildings identified by bins we approve of agency correcting its administrative error to correct this administrative error agency must do the following file amended forms to reflect that low-income_housing_credit from its year credit ceiling is allocated to each of the x buildings identified by bins in the following amounts year housing_credit allocation bin number ---------------------------- ---------------------------- -------------------------- -------------------------- ---------------------------- ---------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- ---------------------------- file amended forms to reflect that low-income_housing_credit from its year credit ceiling is allocated to each of the z buildings identified by bins in the following amounts bin number ---------------------------- ---------------------------- year housing_credit allocation plr-116599-14 ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- to the extent the corrections permitted by this ruling affect any information provided by agency on any previously filed form_8610 annual low-income_housing_credit agencies report agency must file amended form s to provide corrected information that is consistent with this ruling except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion on whether the forms for the x buildings identified by bins were timely or correctly filed or whether any of the x buildings identified by bins otherwise qualify for credit under sec_42 this ruling is directed only to the agency and taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the powers of attorney on file with this office a copy of this letter is being sent to the authorized representatives the rulings contained in this letter are based upon information and representations submitted by agency and taxpayer and accompanied by penalty of perjury statements executed by the appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely christopher j wilson senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 468a -------------------------- ---------------------------- -------------------------------------- --------------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number ---------------------- refer reply to cc psi b6 plr-111475-14 date date re revised schedule of ruling amounts and schedule of deductions -------------------------------------- legend taxpayer plant parent director location x commission a commission b commission c agency state a b c d e f g h i j --------------------------------------------------------------------------------- ------------------------------------------ -------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------------ -------- ------------------------------------------------- -------------------------------------- ------------------------- ------------------------------------------------------- ------------------------------------------------------- --------------------- -------- -------- -------- ------ ------ ---- -- ------ ---- ---- plr-111475-14 k l m report study ---- ---- ---------- ------------------------------------------ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- settlement_date a date b date c date d amount a amount b amount c amount d amount e amount f amount g year a year b year c year d year e year f year g method fund ------------------------------------------------------ --------------------------- ------------------------ -------------------------- ------------------- ---------------------- ---------------------- -------------- ------------------ ------------------ -------------- -------------- ------- ------- ------- ------- ------- ------- ------- ----------------------- -------------------------------------------- dear -------------- this letter responds to your request dated date for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations and for a schedule of deduction amounts pursuant to sec_468a of the internal_revenue_code and sec_1_468a-8 taxpayer was previously granted a schedule of deductions on date the request for a revised schedule of ruling amounts is mandatory within the meaning of sec_1_468a-3 information was submitted pursuant to sec_1_468a-3 plr-111475-14 taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts and its request for a schedule of deduction amounts as follows taxpayer a subsidiary of parent is included in a consolidated_return filed by parent taxpayer has a joint and undivided ownership_interest of x percent in the plant taxpayer is also the operator of the plant the plant is situated at location plant’s amended operating license is scheduled to expire on date a the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method taxpayer is subject_to the regulatory jurisdiction of commission a commission b and commission c in addition taxpayer has a contractual agreement to sell power to agency the operations of plant are allocated as follows commission a a percent commission b b percent commission c c percent and agency d percent on date b taxpayer filed an application_for a general rate increase with commission a as part of the application taxpayer sought an increase in the amount of its annual nuclear decommissioning expense in state based on assumptions set out in report which in turn were based upon the study commission a proposed that some of the assumptions proposed by taxpayer be revised and following negotiations commission a and taxpayer agreed on a settlement on date c the settlement reduced the amount taxpayer sought initially for its annual decommissioning expense the assumptions used by taxpayer to calculate the schedule of ruling amounts approved herein are those approved by commission a further commission b has included with respect to plant in cost of service for ratemaking purposes for year a and beyond amount c since the last amended schedule of ruling amounts there have been no new ratemaking proceedings before any of the other commissions based on the assumptions used by commission a it is estimated that assets in the fund will earn a pre-tax rate of return of e percent prior to the decommissioning period and f percent for the first seven years of decommissioning and g percent for the remainder of the decommissioning period further the cost of decommissioning the plant will escalate at h percent per year until the year in which costs are incurred the total cost of decommissioning plant is estimated to be dollar_figureamount a in future dollars based on the year of anticipated expenditure of which taxpayer’s share is dollar_figureamount b also in future dollars for commission a and commission b the funding_period for plant extends from year b to year c plr-111475-14 with respect to the schedule of deductions taxpayer received on date d a schedule of deductions in that schedule under ratemaking assumptions used during the first proceeding before commission a commission b commission c and agency the plant would no longer be included in rate base in year d in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to the estimated_useful_life of the plant is i years year e-year f and the estimated period for which the fund is to be in effect is j years year g-year f thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was k percent the issued schedule of deductions allowed taxpayer to transfer to the fund the additional l percent of the total decommissioning costs a total of amount d over several years of which amount taxpayer actually transferred amount e taxpayer now seeks to transfer to the fund the present_value of the remaining m percent of the total estimated decommissioning costs or amount f sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to plr-111475-14 fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1 provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2 provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no plr-111475-14 such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3 provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3 further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3 provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3 provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3 if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3 provides that if the nuclear plant is not described in sec_1_468a-3 the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3 any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in plr-111475-14 sec_1_468a-3 sec_1_468a-3 provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3 provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 describes those situations in which a taxpayer must request a revised schedule of ruling amounts sec_1_468a-3 provides that any taxpayer requesting a schedule of deduction amounts under sec_1_468a-8 must also request a revised schedule of ruling amounts for that fund such a request must be made in accordance with the rules of sec_1_468a-3 sec_1_468a-8 provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage sec_1_468a-8 provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1 468a- b i the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8 the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8 provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s plr-111475-14 decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute --- percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre- amount that was denied under the law prior to the act thus taxpayer is able to contribute the additional ---percent of the amounts necessary to decommission its ownership share of plant taxpayer has made contributions pursuant to a previous schedule of deductions of almost the entire l percent however taxpayer now seeks to contribute the present_value of the remaining m percent in a single special transfer in year a taxpayer’s share of the total future decommissioning costs is dollar_figureamount b future dollars and the present_value of m percent of that amount is dollar_figureamount f a special transfer may be made in year a of dollar_figureamount f we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude as set forth below year a schedule of deduction amounts deduction amount dollar_figureamount f the special transfer amount stated above is the maximum permitted to be transferred to the fund under sec_468a for that special transfer if taxpayer transfers a lesser amount to the fund the taxpayer may deduct the lesser amount in year a further in the event that the taxpayer transfers a lesser amount in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount actually transferred taxpayer must request a new schedule of deduction amounts and that in that request must take all special transfers made into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the transfer is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property furthermore regarding taxpayer’s request for a revised schedule of ruling amounts we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations plr-111475-14 thereunder based solely upon these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission a and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund pursuant to sec_1_468a-3 taxpayer has demonstrated that by following the assumptions approved by commission a the proposed schedule of ruling amounts is consistent with the principles of sec_468a and the regulations thereunder and that such schedule is based on reasonable assumptions the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts year each year year a-year c ruling_amount dollar_figureamount g approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action plr-111475-14 became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your designated representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7 a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch office of the associate chief_counsel passthroughs special industries


department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc fip b02 plr-122999-10 date date internal_revenue_service number release date index number -------------------- ----------------------------- ---------------------------------- ------------------------------------------- ---------------------------- -------------- ---------------------------------------- legend fund fund fund fund fund fund ----------------------------------------------------------------------------------------------------- ---------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ---------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ---------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ---------------------- ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- ---------------------- -------------------- trust trust ------------------------------------------------ plr-122999-10 date date date index a b c d e f g ------------------ ------------------- ------------------- ------------------------------------------------------------------------------------------------- --------- ------------------------------- ---------------------------------------------------------------------------------------------- ---- -- ----------------------------------------- ------ dear ------------- this responds to the request dated date submitted by your authorized representative on behalf of fund fund fund fund fund and fund each a fund and collectively the funds the funds request that the internal_revenue_service rule that income and gain from the commodities-linked notes described in this letter constitute qualifying_income to the funds under sec_851 of the internal_revenue_code_of_1986 as amended the code facts fund fund fund fund and fund are series of trust and fund is a series of trust trust and trust are business trusts organized under the laws of state and open-end management investment companies registered under the investment_company act of u s c 80a-1 et seq as amended the act each fund qualifies as a regulated_investment_company ric under sec_851 of the code each fund uses an accrual_method of accounting and has an annual_accounting_period ending on date the funds intend to invest in commodities-linked notes each having the following terms and conditions the note the note will be issued at its par_value of plr-122999-10 dollar_figurea the term of the note will be b the note will pay monthly coupon interest at a rate equal to c the note’s payout will be determined by reference to index a total return index each fund as holder of a note will have the right to put the note to the issuer on any day before date at the redemption price based on the settlement price of index on the next business_day after notification to the issuer or the same day if such notification is made by a specified hour if on any day the settlement price of index falls to a level that is d or less of the initial value the note will knockout and automatically redeem at the redemption price based on the settlement price of index on the next business_day if the note has not been redeemed by date the note will mature on date and the holder will receive the redemption price based on the settlement price of index on date the note’s redemption price upon maturity redemption or knockout is determined under a formula that provides for a return of the note’s face_amount plus the product of the face_amount a leverage factor and the adjusted index return over the applicable_period which product may be positive or negative the note will have a leverage factor of e the adjusted index return means the change in the index during the applicable_period expressed as a portion of the starting value of index reduced by an interest rate factor based on f and by fees equal to g per annum in addition to the redemption price described above upon maturity redemption or knockout the issuer will pay any coupon interest accrued since the most recent interest payment_date the funds make the following representations with respect to the note the issuer of the note will receive payment in full of the purchase_price of the note from each fund substantially contemporaneously with the delivery of the note to such fund the funds will not be required to make any payments to the issuer in addition to the purchase_price whether as margin settlement payment or otherwise during the life of the note or at maturity the issuer of the note is not subject by the terms of the note to mark-to- market margining requirements of the commodities exchange act u s c as amended the cea and the note is not marketed as a contract of sale of a commodity for future delivery or option on such a contract subject_to the cea law and analysis sec_851 provides that a corporation shall not be considered a ric for any taxable_year unless it meets an income test under this test at least percent of its gross_income must be qualifying_income derived from certain enumerated sources under sec_851 a corporation’s qualifying_income includes - plr-122999-10 dividends interest payments_with_respect_to_securities_loans as defined in sec_512 and gains from the sale_or_other_disposition of stock_or_securities as defined in sec_2 of the act or foreign_currencies or other income including but not limited to gains from options futures or forward contracts derived with respect to its business of investing in such stock securities or currencies sec_2 of the act defines the term security as - any note stock treasury_stock security future bond debenture evidence_of_indebtedness certificate of interest or participation in any profit-sharing agreement collateral-trust certificate preorganization certificate or subscription transferable share investment contract voting-trust certificate certificate of deposit for a security fractional undivided_interest in oil gas or other mineral rights any put call straddle option or privilege on any security including a certificate of deposit or on any group or index of securities including any interest therein or based on the value thereof or any put call straddle option or privilege entered into on a national securities exchange relating to foreign_currency or in general any interest or instrument commonly known as a security or any certificate of interest or participation in temporary or interim certificate for receipt for guarantee of or warrant or right to subscribe to or purchase any of the foregoing sec_2 of the cea provides that the cea is not applicable to a hybrid instrument that is predominantly a security sec_2 of the cea provides that a hybrid instrument shall be considered to be predominantly a security if - a the issuer of the hybrid instrument receives payment in full of the purchase_price of the hybrid instrument substantially contemporaneously with the delivery of the hybrid instrument b the purchaser or holder of the hybrid instrument is not required to make any payment to the issuer in addition to the purchase_price paid under subparagraph a whether as margin settlement payment or otherwise during the life of the hybrid instrument or at maturity c the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements and d the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery or option on such a contract subject_to the cea plr-122999-10 sec_2 of the cea provides that for purposes of sec_2 of the cea mark-to-market margining requirements do not include the obligation of an issuer of a secured debt_instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt_instrument to secure the repayment obligations of the issuer under the secured debt_instrument conclusion based on the facts as represented we rule that income and gain arising from the note constitute qualifying_income to each of the funds under sec_851 of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed with regard to whether the funds qualify as rics under subchapter_m of the code this ruling is directed only to the taxpayers who requested it and is limited to the facts as represented by the taxpayers sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely david b silber david b silber chief branch office of associate chief_counsel financial institutions and products


department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date cc ita b04 saiskow conex-101958-05 o f f i c e of chief_counsel number info release date uil ------------------- state representative ------------------ ------------------------------- dear ------------ i am responding to your request dated date you asked whether re- classifying a tuition voucher as a tax_refund would increase an individual’s federal taxable_income based on the limited information you provided i can only give you general information not a definitive answer however it appears that the internal_revenue_service would not treat a tuition voucher as a tax_refund solely because the colorado legislature reclassified it as such by definition a tax_refund is generally understood to mean a refund of tax paid_by the recipient merely calling a tuition voucher a tax_refund should not affect the recipient’s federal_income_tax liability gross_income does not include any amount received as a qualified_scholarship by an individual who is a candidate_for_a_degree at an educational_organization described in sec_170 of the internal_revenue_code a qualified_scholarship is any amount an individual receives as a scholarship or fellowship_grant and used for qualified_tuition_and_related_expenses qualified_tuition_and_related_expenses are tuition and fees required for the enrollment or attendance of a student at an educational_organization described in sec_170 of the internal_revenue_code i am enclosing relevant pages from publication tax benefits for education which contains information on scholarships the question of whether the tuition vouchers are qualified scholarships is beyond the scope of this letter which is for informational purposes only and does not constitute a ruling see section dollar_figure of revproc_2005_1 2005_1_irb_1 the irs will consider a request for a private_letter_ruling after the taxpayer meets all the requirements of section of the revenue_procedure you can access revproc_2005_1 at www irs gov irb conex-101958-05 i hope this information is helpful if you have any further questions please contact ---------- ----------------------- identification_number ------------- at -------------------- sincerely enclosure robert a berkovsky branch chief office of associate chief_counsel income_tax accounting