tax_exempt_and_government_entities_division number release date date date uil department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years all dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance with their we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice action if you agree with our deletions you do not need to take any further in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number tax_exempt_and_government_entities_division date uil legend academy date date year year county state dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below you were incorporated on date under the laws of the state you were formed a month after a court ordered desegregation of school districts in county and other counties in state article v of your charter of incorporation provides that your purposes shall be exclusively charitable and educational and to accomplish such purposes you shall exercise such rights and powers that include the following e establish organize own administer and operate one or more kindergarten primary secondary schools e e select and employ such principals teachers professors instructors and other employees as you may deem necessary and advisable and provided that no person shall have a right to be employed or retained as a principal teacher professor instructor administrator or other employee but any such employment or retention is solely at your will pleasure and desire and may be denied or terminated at your will and fix the curricula for the school an the standards and qualifications for admission of pupils and students and for their retention in the school and to reject any applicant for admission or to expel any person so enrolled and attending for any cause whatsoever it being your intent and purposes that no person making application or already enrolled shall have a right to be admitted but that any person so admitted or retained solely in accordance with your will and desires and not otherwise you operate a school in county of state and currently offering grades k3 - offered grade sec_1 each school years thereafter respectively county’s population consists approximately black - during your first years and since then have added k5 k4 and k3 after other minority groups white and initially you you have been operating for more than years providing academic and sports program to your students in this regard your letter dated date states we have never had the opportunity to have a black student participate in our sports program because we cannot entice them to become students at our school it would please us very much to have black students both in the academic program and sports program but so far we have been unsuccessful in this endeavor us more than to have black students attend our school but we are at a loss as to how we can persuade them to become a part of our educational facility nothing would please in addition you stated the following as possible reasons for your lack of enrolled black students t hey black students prefer to go to a school where the test scores show that the school is failing where they are not be ing held accountable for making good grades where they do not have to furnish their own transportation where they are provided free lunches and where they do not have to pay any money to receive a good education if we would change this we would we have a situation here where it is not that we do not want the blacks to attend school at our school but the blacks prefer to attend to a school where they are not expected to perform well maybe this is the fault of the state and maybe this is the reason the state has so many schools that are not rated failing but we do not feel this is something that our school should suffer for in your prior letter dated july you stated the following t he reason the blacks do not attend our school is not because they think they would be mistreated they know they are welcome and they know they would be treated fairly and equitably they simply do not want to pay for an education the people who send their children to our school do so because they know this can be proven by public school test scores that their children get a better education at our school this is sad because all of us both black and white pay taxes to educate our children regardless of where they go to school the people who go to our school pay taxes and pay tuition but they feel this is justified by the quality of education they receive the decision of whether or not to send your child to our school is most often not based on the financial ability to do so but simply the they already pay taxes and the public school offers more opportunities that do not have to be paid for --- for example free lunches free transportation etc moreover in your letter dated october _ you stated the history of the education process in county you will find that even there was our school in the county the black students went to one school and the white children went to another school this was not mandatory simply put it was a matter of choice the students were friends they just simply wanted to go to the school of their choice your emphasis school are friends they interact with each other from an athletic standpoint many of the athletic teams that we play football basketball softball have black players they will attest to the fact that they are welcomed to our campus and treated just like the same as any white player their parents are welcomed as a spectator and are treated no different from anyone else the black and white children of the public school and our student enrollment data for school years though20 show sec_1 black student enrollment in one year the data show non-black minority students in your total enrollments in black and non-black minority students in your total enrollment in and non-black minority students in your total enrollment in also ina letter dated january you stated beginning the new semester after the holidays we have a new minority student registered and attending classes in your school operation you do not have a black person on your faculty or administrative staff the data on faculty staff for school year show a racial composition of white of the total faculty staff members in your letter dated december __ you stated there has never been a black teacher to apply for a teaching job at our school if one should apply we would use the same screening process that is used to hire any teacher our only concern in hiring teachers is to employ teachers who are the best qualified and who concentrate on the best means of teaching the students our emphasis is placed on the best possible environment possible for a student regardless of his color or nationality to learn your prior letter dated october on the subject stated the following our school has never had a black applicant for a faculty or administrative position were this to happen the person would be considered on the same standard as a white or someone of another race there is not much turnover in the staff or faculty at our school many of the teachers have been here for many years if you check you will find there is not much advertisement activity securing faculty either in the public school or the academy inasmall rural county most people do not change jobs often because of the number of teachers involved in public school s they have more difficulty getting teachers than our school does our school does not offer retirement nor pay any toward the health insurance of teachers so this does not encourage applicants to apply for a job so this may be one of the reasons we have not had any black applicants while you are lagging in the enrollment of black students and employing black teachers and administration staff you have however hired black contract laborers performing janitorial services in through and in several prior years in this regard you state the fact that these men are black has nothing to do with why they are doing the work it is simply because they would do the best job and for the least amount of money nine years ago in year your board_of directors passed a resolution adopting a policy of not discriminating on the basis of race color national and ethnic origin in the administration of educational and administration policies scholarship and loan programs athletic and other school-administered programs in the county your website student handbooks and some brochures and flyers this policy is included in your advertisements on newspapers at that time you also created an outreach committee with a mission to inform the area minority community of your nondiscriminatory policy and to pursue minority enrollment and participation in all your programs the outreach committee was tasked to engage in hosting an annual open house advertising in area newspapers your nondiscriminatory policies distributing brochures and newsletters to minority organizations the area and making available presenters to visit minority organizations however you stated that the outreach committee was never active as we would like it to be you submitted a sample flyer which contains the following statement in bold large capital letters you're invited to open house at come check us out this does not obligate you to register your child to attend school at on date from until p m underneath is a statement of your nondiscriminatory policy in small capital letters you did not however indicate where how and when the flyers were actually distributed you have also submitted copies of similar advertisements on newspapers for your open house for date from pm to 00pm the advertisement is an open invitation to visit your campus with availability of staff to answer any questions the advertisement does not specifically mention the invitation for black and other minority groups rather it described offered classes and daycare services fundraising sales and promoted your academic excellence the advertisement included your nondiscriminatory policy statement written in small letters the state has a program established in providing for the distribution and free loan of textbooks to students of any participating public private and other nonpublic schools under the rules promulgated by the state board_of education an eligible school must have received accreditation status and documented that it operates in a non-discriminatory manner in its admission and enrollment practices notwithstanding the benefits that the program will provide your students and the school you indicated that you are not members of the textbook program stating we have never participated and have never submitted an application_for or requested participation sec_501 of the code provides in part for the exemption from federal_income_tax of organizations organized and operated exclusively for educational charitable or other exempt purposes sec_1_501_c_3_-1 of the income_tax regulations regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more of the purposes unless it serves a public rather than a private interest revrul_71_447 1971_2_cb_230 provides that a private school which does not have a racially_nondiscriminatory_policy_as_to_students does not qualify for exemption from federal_income_tax under sec_501 of the code it defines a racially nondiscriminatory policy to mean the school admits the students of any race to all the rights privileges programs and activities generally accorded or made available to students at that school and that the school does not discriminate on the basis of race in administration of its educational policies admissions policies scholarship and loan programs and athletic and other school-administered programs revproc_75_50 1975_2_cb_587 sets forth guidelines and recordkeeping requirements for determining whether private_schools that are applying for recognition of exemption from federal_income_tax under sec_501 of the code or are presently recognized as exempt from tax have racially nondiscriminatory policies as to students section dollar_figure provides that a schoo must show affirmatively both that it has adopted a racially_nondiscriminatory_policy_as_to_students that is made known to the general_public and that since the adoption of that policy the school has operated in accordance therewith section dollar_figure provides that a school must make its racially nondiscriminatory policy known to all segments of the genera community served by the school a school may demonstrate that it follows a racially nondiscriminatory policy by showing enrollment of student of racial minority groups in meaningful numbers and whether that is satisfied will be determined on the basis of facts and circumstances of each case actual enrollment however is a meaningful indication of a racially nondiscriminatory policy in the case in which schools become subject_to desegregation orders of a federal court or otherwise expressly became obligated to implement a desegregation plan under the terms of any written contracts or other commitment to which any federal_agency was a party section dollar_figure of revproc_75_50 also provides that the existence of a racially discriminatory policy with respect to employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students in green v connally f_supp d d c affd sub nom 404_us_997 92_sct_564 30_led_550 and in the revised injunction orders issued on may and date the internal_revenue_service is prohibited from and from continuing the tax-exempt status now enjoyed by all according private_schools or the organizations that operate them which have in the past been determined in adversary or administrative proceedings to be racially discriminatory or were established or expanded at or about the time the public school districts in which they are located or which they serve were desegregating and which cannot demonstrate that they do not racially discriminate in admissions employment scholarships loan programs athletics and extra-curricular programs the existence of conditions set forth in paragraph herein raises an inference of present discrimination against blacks such inference may be overcome by evidence which clearly and convincingly reveals objective acts and declarations establishing that such is not proximately caused by such school's policies and practices such evidence might include but is not limited to proof of active and vigorous recruitment programs to secure black students or teachers including students' grants in aid or proof of continued meaningful public advertisements stressing the school's open admissions policy or proof of meaningful communication between the school and black groups and black leaders within the community concerning the school's nondiscrimination policies and any other similar evidence calculated to show that the doors of the private school and all facilities and programs -therein are indeed open to students or teachers of both the black and white races upon the same standard of admission or employment in 478_fsupp_107 d d c affd d c cir date cert_denied 450_us_944 101_sct_1408 67_led_376 the court held that private_schools administering racially discriminatory admissions policies are excluded from tax-exempt status under sec_501 of the code the court further held that the foundation had failed to meet is burden of establishing its entitlement to exemption under sec_501 because the foundation's record was completely devoid of evidence that it was administering a nondiscriminatory admissions policy the court also stated that the inference that the plaintiff administered a racially discriminatory policy may be drawn from the circumstances surrounding the school's establishment similar inferences as to the existence of a racially discriminatory policy based on facts surrounding a school's establishment and lack of minority enrollment have been drawn by other courts in 382_fsupp_921 n d miss on remand from the supreme court 413_us_455 93_sct_2804 37_led_723 and 425_fsupp_528 e d la the courts held that a prima facie case of racial discrimination arises from proof a that the schools’ existence began close upon the heels of the massive desegregation of public schools within its locale and b that no blacks are or have been in attendance as students and none is or has ever been employed as a teacher or administrator at the private school in 461_us_574 103_sct_2017 76_led_157 the supreme court found that petitioner a nonprofit private school that prescribes and enforces racially discriminatory admissions standards on the basis of religious doctrine did not qualify as a tax-exempt_organization under sec_501 of the code the court held that racially discriminatory private_schools violate a fundamental public policy and cannot be viewed as conferring a public benefit within the meaning of common_law standards of charity and congressional intent underlying sec_501 in 94_tc_284 the tax_court held that a private school failed to show that it operated in good_faith in accordance with a nondiscriminatory policy toward black students and concluded that the school did not qualify for exemption under sec_501 of the code the school was formed at the time of desegregation of the public schools and never enrolled a black student or employed a black teacher the school and its students participate in some educational and vocational programs and other school-sponsored activities that directly involved blacks the court noted in today's world interaction with persons of another race in interscholastic and community activities is unavoidable by all but the most reclusive or isolated groups petitioner's burden is not met by showing that it interacts with outsiders the relevant criteria deal with restrictions on those who may become insiders ie students at the school the court also noted the following petitioner has also admitted some american-oriental petitioner places great emphasis on its teacher and students of oriental descent labeling this evidence perhaps the most telling petitioner has hired and continued to employ a japanese-american teacher who has been subjected to no discriminatory practices since his hiring students nonetheless that petitioner does not discriminate against those of oriental descent which we assume to be true for present purposes implies nothing about petitioner's policy toward blacks group in the local community is the black population petitioner's argument that american-orientals are more of a minority than blacks while certainly true for its county is totally without significance here we decline to embrace the notion grounded in an erroneous application of a fortiori logic that acceptance of a given minority group implies acceptance of all larger minority groups petitioner concedes that the largest nonwhite racial an organization applying for exemption under sec_501 must establish that it is organized and operated exclusively for an exempt_purpose and in the case of a school must include establishing that it has a racially_nondiscriminatory_policy_as_to_students consistent with the guidelines set forth in rev_proc and findings by the courts the information submitted indicates that you were formed around the time the court handed the desegregation of schools in the county where you operate a private school as such the strict mandate in 330_fsupp_1150 d d c applies to you in prohibiting us of according tax exempt status unless you clearly and convincingly demonstrate overcoming the inference of racial discrimination against black students in this regard we find that while you have operated a school for more than only decided in the last policy you have included the statement of your nondiscriminatory policy in your advertisements on local newspapers your website student handbooks and brochures and flyers also during the last tasked to inform the area minorities of the existence of your nondiscriminatory policy and pursue minority enrollment and participation in all your programs years of your existence and operation to adopt a racially discriminatory years you decided creating an outreach committee which was _-years since the court-ordered desegregation you while you have adopted a racially nondiscriminatory policy and even created an outreach committee your school operation however failed to show enrollment of black students in which you stated that the failure to entice them to become students at your school as not yours instead you suggested putting the blame on the black students themselves and their parents --- black students do not want your offered good education they prefer schools where they are not held accountable for making good grades and that it provided free lunches transportation and where they do not have to pay you even suggested that it is a traditional choice in the area that black students go to one school and the white students go to another school we believe however that the lack of black students and also that of teachers and administrative staff in your school is because of your failure to make intensive comprehensive and good_faith efforts to reach the black community for their enrollment and employment you have not provided us sufficient evidence supporting any such efforts in your submitted materials moreover we think it is suffice with you to interact with the blacks only outside of your classroom like in participation in sports with them however such interaction is unavoidable and does not prove that you have implemented your nondiscrimination policy the relevant criteria deal here is with restrictions on those who may become insiders ie students at your school see 94_tc_284 furthermore rev_proc at sec_4 provides that the existence of a racially discriminatory policy with respect to employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students years of existence and operation you have not employed any black teacher or administrative staff instead all your teachers and administrative staff member are whites in this regard you stated that your only concern in hiring teachers is to employ teachers who are the best qualified and who concentrate on the best means of teaching the students also you indicated that your emphasis is placed on the best possible environment possible for a student regardless of his color or nationality to learn to date even with therefore although you have adopted a policy of nondiscrimination and made created an outreach committee it appears that your adoption of a nondiscriminatory policy and creation of an outreach committee are merely done for compliance in form purposes and not in good_faith also any efforts toward outreach to the black community are minimal we have also considered your admission of a few non-blacks as students in your school we think however that your admission of these non-blacks implies nothing about your policy toward blacks see 94_tc_284 moreover we think that the presence of your school discriminatory policy is evident in your decision not to participate in or become a member of the state’s free textbook program because of its strict requirement that participating schools must be documented to be operating in a non-discriminatory manner in its admission and enrollment practices based on the foregoing we conclude that you failed to demonstrate that you have taken sufficient steps to overcome inference of racial discrimination sets forth in the court cases cited herein as a school without a nondiscriminatory policy to students as such term is defined in revrul_71_447 you are not considered operated exclusively for exempt purposes under sec_501 of the code therefore you do not qualify for exemption under sec_501 of the code you must file federal_income_tax returns contributions to you are not deductible under sec_170 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications for more information about representation see publication practice_before_the_irs if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service se t eo ra t constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert choi director exempt_organizations rulings agreements


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 psi b05 - plr-101199-07 date date taxpayer project city city state seller a b legend legend --------------------------------------- ------------------------------------------------- ---------- ------------------------------------------------- ---------------------------------- ----------------------- ------------------------------- -------------------------- ---------------------------------- -------------- ------------------------------------- --------------- ------------------------------------------------- ---------------------------------- ----------------------- ---------------- ----- plr-101199-07 year ------- year ------- c d e f ---------------------- ------------------ -------------------------- ---- dear ----------- this letter responds to taxpayer’s letter dated date and subsequent correspondence from taxpayer’s authorized representative requesting a ruling that will waive for project buildings the 10-year holding_period for existing buildings under sec_42 of the internal_revenue_code pursuant to the authority for the acquisition of certain federally-assisted buildings provided in sec_42 the internal_revenue_service office that will have examination jurisdiction over taxpayer is located in city the relevant facts as represented by taxpayer in these submissions are set forth below facts taxpayer is a state limited_partnership formed to acquire rehabilitate develop own and operate project project consists of b units in f buildings located in city the street address of each of the b units is provided in attachment a and is incorporated by reference into this ruling on a taxpayer entered into a binding contract to purchase project taxpayer intends to use bond proceeds to rehabilitate project buildings and qualify project buildings for both the acquisition and rehabilitation_credit under sec_42 of the code project was originally purchased and placed_in_service by seller in year in year as a result of a tender and merger of limited_partnership interests in seller there was a 100-percent change_of_ownership in seller thus resulting in a new placed_in_service_date for project for federal_income_tax purposes the current mortgage loan on project as of c in the amount of dollar_figured is insured by the department of housing and urban development hud project also receives plr-101199-07 substantial federal assistance under section of the united_states housing act of in a letter dated e hud stated that project is a federally assisted project identified the source of project’s federal financing stated that it believes a waiver of the 10-year holding requirement under sec_42 is necessary to avert federal mortgage funds being at risk and designated project as a troubled project taxpayer makes the following representations concerning project taxpayer’s acquisition of project buildings will be by purchase within the meaning sec_179 as applicable under sec_42 to the best of taxpayer’s knowledge there have been no nonqualified substantial improvements to project buildings since they were last placed_in_service as of the date of taxpayer's application project buildings are federally assisted buildings as defined in sec_42 and sec_1_42-2 of the income_tax regulations project buildings were not previously placed_in_service by taxpayer or by a person who was a related_person as defined in sec_42 to taxpayer at the time project buildings were last placed_in_service to the best of taxpayer's knowledge no prior owner of project buildings were allowed a sec_42 low-income_housing tax_credit and to the best of taxpayer's knowledge federal mortgage funds for project buildings are at risk within the meaning of sec_1_42-2 ruling requested taxpayer requests the service to waive for project buildings the 10-year holding_period requirement of sec_42 under the authority of the exception provided in sec_42 and sec_1_42-2 law and analysis sec_38 provides for a general_business_credit against tax that includes the amount of the current_year_business_credit sec_38 provides that the amount of the current_year_business_credit includes the low-income_housing_credit determined under sec_42 for an existing_building to qualify for the 30-percent present_value housing tax_credit sec_42 requires there be a period of at least years between the date plr-101199-07 of the building's acquisition by the taxpayer and the later of the date the building was last placed_in_service or the date of the most recent nonqualified_substantial_improvement of the building sec_42 provides an exception to the 10-year holding_period requirement of sec_42 it states that a waiver may be granted for a federally- assisted building if the secretary determines that the waiver is necessary - i to avert an assignment of the mortgage secured_by property in the project of which such building is a part to the department of housing and urban development or the farmers home administration now rural housing service usda-rhs or ii to avert a claim against a federal mortgage_insurance fund or such department or administration with respect to a mortgage which is so secured sec_42 defines the term federally-assisted_building as any building that is substantially assisted financed or operated under i section of the united_states housing act of ii sec_221 or of the national housing act or iii sec_515 of the housing act of as such acts are in effect on the date of enactment of the tax_reform_act_of_1986 date sec_1_42-2 contains requirements that must be satisfied before the secretary will grant the waiver referred to in sec_42 taxpayer’s representations including a written representation dated from hud indicate that these requirements have been satisfied based solely upon the above facts taxpayer’s representations and the representations from hud we have determined that project buildings are federally- assisted within the meaning of sec_42 and that federal funds are at risk under sec_42 and sec_1_42-2 therefore we rule as follows the 10-year holding_period requirement of sec_42 is waived for taxpayer's acquisition of project buildings no opinion is expressed or implied regarding the application of any other provision in the code or regulations specifically no opinion is expressed or implied regarding whether taxpayer's costs of acquisition and rehabilitation of project buildings will otherwise qualify for the low-income_housing_credit under sec_42 this ruling is directed only to the taxpayer which requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be plr-101199-07 filed with the federal_income_tax return for taxpayer and its partners for the first taxable_year in which the low-income_housing_credit for project buildings are claimed enclosure copy sincerely yours susan reaman chief branch passthroughs and special industries cc plr-101199-07 unit ---- ---- -- ---- ---- -- ---- ---- ---- ---- -- ---- ------ -- ------ ------ ------ ------ -- ------ ------ -- ------ ------ ------ ------ -- ------ ------ -- ------ ------ ------ ------ -- ------ ------ -- ------ attachment a address -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- building number ---- ---- -- ---- ---- -- ---- ---- ---- ---- -- ---- ---- -- ---- ---- ---- ---- -- ---- ---- -- ---- ---- ---- ---- -- ---- ---- -- ---- ---- ---- ---- -- ------ ------ -- ------ plr-101199-07 address -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- ----------------------------- -- -- -- ----------------------- -- ----------------------- -- ----------------------- -- ----------------------- -- ----------------------- -- ----------------------- -- ----------------------- -- ----------------------- -- -- -- ----------------- -- ------------------- -- ------------------- -- ------------------- -- ------------------- -- -- -- ----------------- -- ----------------- -- ----------------- unit ------ ------ ------ ------ ------ -- ------ ------ -- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -- ------ ------ ------ ------ ------ ------ ------ ------ -- ------ ------ ------ ------ ------ -- ------ ------ ------ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- building number ------ ------ ------ ------ ------ -- ------ ------ -- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -- ------ ------ ------ ------ ------ ------ ------ ------ -- ------ ------ ------ ------ ------ -- ------ ------ ------ plr-101199-07 address -- ------------------- -- ------------------- -- ------------------- -- ------------------- -- ------------------- -- ------------------- -- ------------------- -- -- -- ---------------------------- -- ---------------------------- -- -- -- ---------------------------- -- -- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- -- -- ---------------------------- -- -- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- -- -- ---------------------------- -- -- -- ---------------------------- -- ---------------------------- -- -- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- -- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- -- ---------------------------- unit ------ ------ ------ ------ ------ ------ ------ -- ------ ------ -- ------ -- ------ ------ ------ ------ -- ------ -- ------ ------ ------ ------ -- ------ -- ------ ------ -- ------ ------ ------ ------ ------ ------ -- ------ ------ ------ -------- -------- -------- -------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- building number ------ ------ ------ ------ ------ ------ ------ -- ------ ------ -- ------ -- ------ ------ ------ ------ -- ------ -- ------ ------ ------ ------ -- ------ -- ------ ------ -- ------ ------ ------ ------ ------ ------ -- ------ ------ ------ ------ ------ ------ ------ plr-101199-07 address -- ---------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- -- -- --------------------------- -- --------------------------- -- --------------------------- unit -------- -- -------- -------- -- -------- -------- -- -------- -------- -------- -------- -- -------- -------- -- -------- -------- -------- -------- -- -------- -------- -- -------- -------- -------- -------- -- -------- -------- -- 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internal_revenue_service number release date index number ------------------ -------------------------- --------------------- -------------------------------- ------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc intl plr-163862-03 date april taxpayer legend legend ---------------------------------------------------------------------------------------------- ------------------------ ------------------- ----------------------- ------------------------------ ---------------------------------------- individual a individual b cpa firm cpa firm dear ------------ this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the statements described in sec_1_1503-2 in accordance with schedule a which is attached and made a part of this ruling letter the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is the vice president and chief financial officer of taxpayer as such individual a is responsible for all federal tax compliance duties of taxpayer and its subsidiaries these duties include reviewing filing and signing of all federal_income_tax plr-163862-03 returns and any forms schedules or other statements necessary to comply with the internal_revenue_code the tax department of taxpayer prepared the federal_income_tax returns for the tax years at issue individual a reviewed and signed those returns and believed that the returns as prepared correctly reported the dual consolidated losses of taxpayer however individual a was not aware that the statements pursuant to sec_1 g were required in order for taxpayer to properly claim the dual consolidated losses on its tax returns individual b is a partner with cpa firm and was responsible for its engagement with taxpayer this engagement required cpa firm to review the federal_income_tax returns prepared by taxpayer’s tax department for the tax years at issue to ensure that all forms schedules and statements required by the code and income_tax regulations were appropriately attached to the tax returns when individual b reviewed the tax returns individual b did not realize that statements pursuant to sec_1_1503-2 were required to be included with those returns cpa firm was engaged to review taxpayer’s tax_return for a tax_year subsequent to the tax years at issue this review in turn lead to a review of the tax returns at issue and the determination that the statements pursuant to sec_1_1503-2 should have been filed with respect to the dual consolidated losses reported on the tax returns at issue sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith within the meaning of sec_301_9100-3 subject_to the conditions set forth in sec_301_9100-3 and the grant of relief will not prejudice the interests of the government within the meaning of sec_301_9100-3 plr-163862-03 in the present situation the statements described in sec_1_1503-2 are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief as set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the statements described in sec_1_1503-2 in accordance with schedule a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the statements sec_301_9100-1 a copy of this ruling letter should be associated with the statements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representative sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer enclosures schedule a copy for purposes plr-163862-03 schedule a a a ruling is requested for each entity listed below to file the election and agreement described in sec_1_1503-2 for the respective tax years indicated below b a ruling is requested for each entity listed below to file annual certification described in sec_1_1503-2 for the respective tax years indicated below --------------------- --------------------- --------------------- --------------------- -------------------- -- -- ----- ----- 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t c summary opinion united_states tax_court marsha k huggins petitioner v commissioner of internal revenue respondent docket no 4878-00s filed date marsha k huggins pro_se ralph w jones for respondent dean 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 unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority - - respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for taxable_year the sole issue for decision is whether petitioner is entitled to exclude from income the payments she received from a former spouse incident to a divorce proceeding this case was submitted fully stipulated without trial under rule the accompanying exhibits are incorporated herein by reference background petitioner resided in astoria oregon at the time her petition was filed in this case petitioner's marital relationship with her former husband was dissolved by a decree of dissolution of marriage decree by the circuit_court of the state of oregon the final and effective date of which was date the decree includes a provision providing that her former husband will pay to her a sum of money equaling one-half of monthly net amount after deductions for federal and state taxes of the u s coast guard retirement pension received by petitioner's former husband payment to petitioner shall not be included as taxable_income to petitioner nor shall such payments be deductible by petitioner's husband the decree directs that the payments be made directly to petitioner and continue until the mortgage on the marital home is paid or the marital home is sold or foreclosed upon by the mortgage holder during petitioner received the court-ordered payments directly from the u s coast guard ’ petitioner filed timely a federal_income_tax return for that did not report as income the receipt of the payments she received under the decree on date the internal_revenue_service irs received an amended tax_return from petitioner reporting total pensions and annuities of dollar_figure but showing the taxable_amount as zero discussion respondent determined in the statutory_notice_of_deficiency that petitioner must include in income the payments received from the u s cost guard as a result of the decree respondent argues that what petitioner got under the decree is simply a right to receive a future stream of income under the law of oregon the court may issue a decree of marital dissolution which provides for the division or other_disposition between the parties of their real or personal_property as may be just and proper or rev stat sec_107 added to or rev stat in see richardson ‘by federal statute the payments end in accordance with the court order but not later than the date of death of the retiree or the former spouse to whom payments are being made see u s c sec d v richardson p 2d or a retirement_plan or pension or an interest therein shall be considered as property or rev stat sec_107 f the u s coast guard retirement_system is a government pension_plan u s c sec_9502 b under the authority of u s c sec c payment of retired or retainer pay in compliance with court orders the state of oregon may treat military’ pension benefits as marital property see valley v valley p 2d or ct app wood v wood p 2d or ct app gross_income includes income from pensions sec_61 singleton v commissioner tcmemo_1988_508 in general income is taxable in the year in which it is received see sec_451 congress has provided specialized rules in the employees' plan area under sec_402 the general_rule is that a distribution from an exempt employees' trust under a tax-qualified employees' plan is taxed to the distributee under sec_72 which generally provides for current taxation of distributions as ordinary_income the statute does not define the word distributee as used in sec_402 neither do the regulations the court has concluded that a distributee of a distribution under a plan the coast guard is a military service and a branch of the armed_forces_of_the_united_states at all times see u s c sec_1 ordinarily is the participant or beneficiary who under the plan is entitled to receive the distribution see 97_tc_51 estate of machat v commissioner tcmemo_1998_154 smith v commissioner tcmemo_1996_292 sec_402 a however provides an exception to this general_rule sec_402 a provides that an alternate_payee who is the spouse or former spouse of the plan participant shall be treated as the distributee of any distribution or payment made to the alternate_payee under a qualified_domestic_relations_order qdro as defined in sec_414 therefore a distribution made to such an alternate_payee under a qdro will be taxable to that alternate_payee and not to the plan participant because sec_402 a treats the alternate_payee as the distributee as originally enacted the qdro rules did not affect governmental plans see h rept in however congress amended the tax rules relating to governmental plans to conform them to the qualified_plans discussed above applying the qdro rules to distributions from governmental plans omnibus budget reconciliation act of obra publaw_101_ sec a stat sec_414 is applicable to transfers of marital interests after the date of enactment of obra date - - for tax years ending after the date of enactment see obra sec a 103_stat_2428 the court order in this case was issued in it precedes the effective date of sec_414 and cannot qualify as a qdro the decree provided that petitioner is to receive a sum of money equaling one-half of her former spouse's coast guard retirement pension after deduction of federal and state taxes and that such amount is not to be taxable_income to her or deductible by her former spouse the language of the court's direction that the amount not be taxable to petitioner or deductible by her former spouse disqualifies the payments from being considered as alimony see sec_71 b the payments are to continue until the mortgage is paid or the house is sold the payments constitute a division of marital property 112_tc_317 affd without published opinion sub nom schutter v commissioner 242_f3d_390 10th cir the language of the decree also meets the requirement of u s c sec a c for direct payment to petitioner out of the retired pay of petitioner's former spouse in the case of a division of property the court order specifically provides for the payment of an amount expressed in dollars or as a percentage of disposable retired pay from the disposable retired pay of a_ member to the spouse or former spouse of that member emphasis supplied - jj - the supreme court in 453_us_210 held that federal statutes governing military retirement pay prevented state courts from treating military retirement pay as community_property in direct response to mccarty congress in enacted the uniform services former spouses' protection act act u s c sec although enacted to authorize state courts to treat disposable retired or retainer pay of a member of the armed_forces as community_property the language also covers property divisions in common_law or eguitable distribution states see 490_us_581 n see s rept pincite for purposes of the act the term disposable retired pay means the monthly retired pay to which a member is entitled less stated amounts u s c sec a the term spouse or former spouse means the husband or wife or former spouse of a member who was married to the member before the court order u s c sec a under u s c sec c payments to a spouse with respect to a division of retired pay as the property of a member and the member's spouse under this subsection may not be treated as -the definition of disposable retired pay under u s c sec a changed after the date of the decree see national defense authorization act for fiscal_year publaw_101_510 e stat --- - amounts received as retired pay for service in the uniformed_services the above referenced language of the act leads to the conclusion that although a state court may treat disposable retired pay payable to a member as property of the member and his spouse for state law purposes the retired pay is that of the member the act itself does not give the former spouse an interest in the retired pay here the court ordered payments to petitioner out of the disposable retired pay of her former spouse the decree did not and could not make her the recipient of retired pay see u s c sec c and petitioner received a division of property in the form of monthly payments this was not a taxable_event see sec_1041 as oregon is not a community_property_state the decree here did not have the effect of dividing a preexisting community ownership of the retired pay of petitioner's former spouse see 101_tc_489 97_tc_51 because the retired pay out of which petitioner received her payments is that of petitioner's former spouse he remains taxable on his retired see eg swan v swan p 2d or wood v wood p 2d or ct app --- - pay see sec_61 82_tc_586 respondent's position is not sustained and petitioner may exclude from income amounts received in as a division of property incident_to_divorce reviewed and adopted as the report of the small_tax_case division decision will be entered for petitioner