internal_revenue_service te_ge technical_advice_memorandum release number release date date uil code area manager taxpayer's name taxpayer’s address taxpayer's identification_number year involved pre-conference held legend x o d o state x s e n n n n n n n n n n is revenue that taxpayer receives from the federal universal service fund fusf and the state universal service fund susf income to the taxpayer and if it is income is it excluded from the percent member income test under sec_501 of the internal_revenue_code code as income received or accrued from a nonmember telephone company for the performance of communication services that involve members of the taxpayer our position is that the revenue that taxpayer received from the fusf and the susf is income to the taxpayer but is excluded from the percent member income test pursuant to sec_501 of the code facts taxpayer is a telephone cooperative company organized under the laws of state and is exempt from federal_income_tax under sec_501 of the code taxpayer is a local exchange carrier lec that provides regulated landline telecommunications services to rural low population areas in state at per-subscriber like all lecs taxpayer costs that are significantly higher than the national average owns and operates the infrastructure that allows telephone users within its designated - service area to call each other and to call subscribers of other telephone_companies for its tax_year ending december y1 y1 tax year’ taxpayer reported a total of xdollar_figure in gross_receipts about x percent of this amount constituted fusf and susf revenues in order to maintain its status as an organization exempt under sec_501 during its y1 tax_year taxpayer had to receive at least percent of its income from members for the sole purpose of meeting losses_and_expenses hereinafter the percent member income test during that year c a il r c section in order to properly classify taxpayer's fusf and susf revenues for purposes of sec_501 it is necessary to briefly review the history of the fusf and susf’s emergence many of the costs incurred in providing local service to an lec’s subscribers are joint or common with the provision of long distance services until the 1980s the portion of joint and common costs of independent lecs like taxpayer allocated to long distance were partial v offset by contractual payments called which at the settlements’ from time had a virtual monopoly on the long distance business in the united_states these customers with settlement payments compensated an lec for providing access to the lec’s subscribers through the lec’s facilities operating subsidiaries or one of its or _ lecs such as taxpayer are regulated on the federal interstate level by the federal communications commission fcc and on the state level by a state regulatory commission in state the state public_utilities commission puc’ since the 1940s the fcc has in conjunction with state commissions such as the puc been apportioning lecs’ joint and common costs between the interstate jurisdiction regulated by the fcc and the intrastate jurisdiction regulated by state regulators such as the puc in order to make local service affordable to as many households as possible and thus foster the fcc’s goal of achieving universal service the fcc created implicit subsidies by apportioning an artificially high proportion of the ioint and common costs to the interstate jurisdiction these allocations permitted artificially high long-distance toll rates and its interstate toll revenues were placed into an interstate settlements pool from which lecs such as taxpayer were allowed to recover the portion of their costs allocated to the interstate jurisdiction the implicit subsidies achieved through this revenue sharing settlements process was an especially to charge significant source of support for small rural lecs which often could recover a large share of their costs from the interstate toll revenue pool see generally in re high-cost universal serv support fcc red app a p a-70-71 j n because many rural lecs were receiving such a larne portion of their revenues in the form of settlement payments from the internal_revenue_service eventually had to address how cooperative_telephone_companies described in sec_501 should treat this settlement revenue under the percent member income test settlement amounts due to a cooperative for long distance calls made or paid-for by it did so in revrul_74_362 1974_2_cb_170 where it concluded that and or the re customers constituted nonmember income for purposes of the percent in as a direct response to revrul_74_362 congress member income test enacted sec_501 which provided that for post-1974 taxable years income received or accrued from a nonmember telephone company for the performance of communication services which involve members of the mutual or cooperative telephone company would be excluded from the percent member income test publaw_95_345 92_stat_481 see also s rep pincite explaining that the new provision was a response to rev_rul in the more than years since revrul_74_362 and the enactment of sec_501 telecommunications policy in the united_states has slowly evolved from the provision of most telecommunications services by a government-sanctioned monopoly to the competitive provision of most telecommunications services this evolution has gradually changed the way that lecs in rural or other high-cost areas recover their joint and common costs and more generally the methods that the fcc and state regulators employ to achieve universal service these changes have occurred in several major steps first in order to facilitate competitinn between long distance companies associated with the court-ordered break-up of converted the settlemente nder would apply not only to _ distance companies such as report and order f c c 2d created a new association of lecs known as the national exchange carrier association neca to administer the access charges see eg mts and wats market structure third and bocs but also to emerging competitor long as part of this change the fcc contracts to tariffed access charges which the fcc the puc also required contractual payments for intrastate long distance to be converted to tariffed access charges docket no around the same time the fcc adopted a new formula under which it allocated a fixed percent of lec plant costs to the interstate jurisdiction plus an additional allocation to the interstate jurisdiction for companies with higher than average costs-per- line such as rurallecs this additional allocation to the interstate jurisdiction was designated the universal service fund and had the purpose of allowing carriers with high costs of local facilities to be able to maintain reasonable local rates amendment of part of the commission’s rules and establishment of a joint board cc doc no fcc 2d the next major development in the evolution of subsidies to achieve universal service occurred in when congress passed the telecommunications act of pub_l_no 110_stat_56 the act the primary purpose of the act was to increase competition in telecommunications markets and to provide for an orderly transition from a regulated market with state-sanctioned monopolies to a competitive and deregulated market the implicit subsidy mechanisms that had been achieving the fcc’s goal of universal service before the act were uniquely suited to a regulated market with state-sanctioned monopolies and congress believed that these mechanisms would need to be re-examined with the introduction of local competition see hearing as a result congress directed the fcc to convene a federal-state joint board to recommend new specific predictable and sufficient federal and state mechanisms to preserve and advance universal service u s c sections a b the act further provided that e very telecommunications carrier that provides interstate telecommunications services shall contribute on an equitable and nondiscriminatory basis to the specific predictable and sufficient mechanisms established by the fcc to preserve and advance universal service that these mandatory_contributions can be paid only to eligible telecommunications carriers etcs designated by the states and that the etcs must use the universal service support only for the provision maintenance and upgrading of facilities and services for which the universal service support is intended u s c sections d - e the fcc subsequently established that the federal universal service support mechanism will support and that every etc must offer the following communication services and functionalities voice grade access to the public switched network local usage dual tone multi-frequency signaling or its functional equivalent single-party service or its functional equivalent access to emergency services access to operator services access to interexchange service access to directory assistance and toll limitations for qualifying low-income consumers c f_r sec_54 a - b fcc regulations further provide that all entities providing interstate telecommunications services to the public or to such classes of users as to be effectively available to the public for a fee must contribute to the universal service support mechanisms in proportion to their share of end-user telecommunications revenues see c f_r sec_54 a - b in the matter of fed -state joint bd j an independent subsidiary of on universal serv f c c r neca the universal service administrative company usac was established to administer the federal universal service support mechanisms or federal universal service fund fusf and is responsible for billing contributors collecting contributions and disbursing fusf support to etcs c f_r sec_54 b fusf support is provided to recipients under four programs two of which are relevant here the high cost support program and the low income support program see c f_r sec_54 the high cost support program aims io enable carriers to provide service in high cost areas through a number of mechanisms including interstate common line support icls local switching support lss and high-cost loop support hcls both the icls which recovers the portion of the cost of lines serving subscribers that is allocated to the interstate jurisdiction by the fcc and the lss which provides support to lecs with big_number or fewer access lines to help defray the higher switching costs of small lecs are updated versions of programs that pre-date the act and are intended to replace support that had been implicitly included in access charges prior to see fed -state joint bd on universal serv universal service monitoring report cc docket no pp hereinafter monitoring report the hcls also a version of a program that pre-dates the act provides funding to etcs with above-average loop costs ie the costs of the physical wire that connects a caller to the etc’s central switching station based on an allocation of above-average loop costs to the interstate jurisdiction id pincite to the low income support program is designed to ensure that quality telecommunications services are available to low-income customers at affordable rates to receive funding from the low income support program relevant here - the lifeline program -- recipient etcs must offer specified universal services at reduced charges to qualifying low-income consumers cfr sec_54 etcs receive universal service support reimbursement for each qualifying low-income consumer served cfr sec_54 b established by the fcc at the end of monitoring report pincite the lifeline program predates the act having first been the passage of the act caused the state legislature and in turn the puc to also shift from tariffed access charges to a state universal service fund mechanism susf similar to the fusf like the fusf the susf assists telecommunications providers in providing basic local telecommunications service at reasonable rates in high cost rural areas and reimburse s a telecommunications carrier providing lifeline state pura similar to the fusf the susf is services described in the act funded by a statewide charge payable by each telecommunications provider that has access to the customer base the new rules also reduced or eliminated the previous cost_recovery mechanisms such as access charges and various toll rates to offset these reductions the puc authorized the establishment of a make whole mechanism referred to as per line per month susf support see puc puc report to the 80th state legislature review and evaluation of the state universal service fund pursuant to pura sec_1 from the susf for each of its qualifying low-income lifeline customers receiving services required under the federal lifeline program puc provides reimbursements for reduced rates for intralata local access and transport area interexchange high capacity service for educational institutions libraries nonprofit telemedicine centers and public or non-for-profit hospitals intra-lata services support’ pura sec_2 in addition under the lifeline credit program an etc receives a credit finally the susf also the susf administrator for state is x taxpayer is an etc serving a high cost rural_area of state thus it is due a most of this money represents amounts collected from portion of the fusf and susf fees paid_by telecommunication providers to usac and x respectively telecommunications providers other than taxpayer usac and x remit these fusf and susf amounts to taxpayer and other etcs on a periodic basis taxpayer does not record these remittances from usac and x as member income since they do not represent amounts collected from its members for telephone and other telecommunications services taxpayer follows the uniform system of accounts prescribed by the fcc in its y1 tax_year taxpayer accounted for all of its fusf according to which it is required to account for fusf receipts as access revenue under the same account number account that it recorded the access charge revenues before passage of the act see responsible accounting officer letter released date receipts in four categories under account reflecting the four different fusf mechanisms discussed above icls lss hcls and lifeline taxpayer booked all susf receipts into one general ledger account all susf receipts taxpayer received in y1 represent the susf categories described above ie either per line per month as noted above susf support lifeline credits or intra-lata services support taxpayer's fusf and susf receipts accounted for percent of taxpayer's total receipts in its y1 tax_year law sec_118 of the code provides that in the case of a corporation gross_income does not include any contribution_to_the_capital_of_the_taxpayer the committee reports accompanying what is now sec_118 indicate the provision was intended to codify existing law as it had developed through court and administrative decisions see eg h_rep_no pincite s rep no pincite sec_501 of the code provides for the exemption from federal_income_tax of benevolent_life_insurance_associations of a purely local character mutual_ditch_or_irrigation_companies mutual_or_cooperative_telephone_companies or like organizations but only if percent or more of the income consists of amounts collected from members for the sole purpose of meeting losses_and_expenses sec_501 of the code states that in the case of a mutual or cooperative telephone company sec_501 shall be applied without taking into account any income received or accrued from a nonmember telephone company for the performance of communication services which involve members of the mutual or cooperative telephone company sec_1_501_c_12_-1 of the income_tax regulations provides that an organization described in sec_501 of the code must receive at least percent of its income from accounts collected from members for the sole purposes of meeting losses_and_expenses sec_1_501_c_12_-1 of the regulations provides that for taxable years of a mutual or cooperative telephone company beginning after date the percent member income test described in sec_1_501_c_12_-1 is applied without taking into account income received or accrued from another telephone company for the performance of communication services involving the completion of long distance calls to from or between members of the mutual or cooperative telephone company revrul_74_362 1974_2_cb_170 applied sec_501 to an agreement for the division of long distance toll revenues between a telephone cooperative and a nonmember telephone company the service held that the cooperative's share of the toll revenues collected by the telephone company either for calls the company’s customers made to cooperative members or collect calls received by the company’s customers from cooperative members was nonmember income for purposes of the percent member income test this ruling has been made obsolete by publaw_95_345 enacting sec_501 as implemented by revrul_81_291 1981_2_cb_131 revrul_81_291 1981_2_cb_131 states that for taxable years of a mutual or cooperative telephone company beginning after the percent member income test for exemption under sec_501 of the code is applied without taking into account income received or accrued from another telephone company for the performance of communications_services involving the completion of long distance calls to from or between members of the mutual or cooperative telephone company revrul_2007_31 2007_1_cb_1275 provides that fusf payments received by a corporation do not represent nonshareholder contributions to capital under sec_418 of the code and are income to the receiving corporation because the motivation underlying the fusf support is to compensate the carriers for the shortfall in operating income for providing services at a discount to certain customers and or providing services to customers in high cost areas at below cost rates in 483_fsupp2d_1232 s d ga affd 514_f3d_1184 cir the court held that fusf payments and similar payments from the georgia susf are not non-shareholder contributions to capital under sec_118 of the code and thus are income to the corporation analysis a whether the revenue taxpayer received from fusf and susf is income under coastal utilities f_supp 2d pincite the court determined that fusf payments and similar payments from the shareholder contributions to capital under sec_118 and were thus income to the corporation similarly the irs determined in revrul_2007_31 that fusf payments received by a corporation are not non-shareholder contributions to capital under sec_118 of the code revrul_2007_31 states that the payments are instead income to the receiving corporation and all carriers are required by the fcc to record their fusf receipts as revenue for financial_accounting purposes ’ susf were not non- therefore pursuant to coastal utilities and revrul_2007_31 the revenues received by the taxpayer from fusf and susf constitute income to the taxpayer b whether the income the taxpayer received from fusf and susf should be excluded from the calculation of the percent member income test under sec_501 of the code in order for fusf and susf payments received by a cooperative telephone company to be excluded from the percent membership income test under sec_501 of the code they must be from a nonmember telephone company and for the performance of communication services that involve members of the cooperative telephone company all telecommunications carriers are required to contribute to the fusf in proportion to their interstate retail revenue after collecting the revenue usac acting as the fcc-designated collection and disbursement agent disburses the revenue to lecs such as taxpayer in accordance with the amount the lec is due the susf operates in a similar manner through x thus taxpayer's net fusf and susf revenues are all coming from nonmember telephone_companies with usac and x respectively acting as intermediaries therefore the taxpayers fusf and susf revenue constitutes income received or accrued from nonmember telephone_companies in addition taxpayer's fusf and susf revenue represents compensation_for the performance of specified communication services that involve taxpayer's members see eg revrul_2007_31 concluding that fusf payments compensate carriers for the provision of universal telecommunications services taxpayer must use fusf support for example only for the provision maintenance and upgrading of facilities and services for which the support is intended u s c e and the fcc regulations specify that the support is intended only for communication services c f_r a listing the communications_services to be supported by fusf the services or functionalities supported by fusf payments that all etcs must provide to their members subscribers include access to long distance carriers so that taxpayer's members subscribers can call and be called by any subscriber of the nonmember telephone_companies that contribute to fusf see eg c f_r a by providing their members subscribers with access to long distance carriers etc like taxpayer also benefits each contributing nonmember telephone company by increasing the total number of subscribers that can connect to their networks and thereby increasing the value of such networks the fusf also benefits contributing nonmember interexchange carriers by lowering access charges and therefore long distance charges finally fusf and susf revenues represent the functional equivalent of the portion of the at t boc settlements in effect during the 1970s that implicitly subsidized universal service and that congress intended sec_501 to exclude from the percent member income test therefore we conclude that the fusf and susf revenue received by taxpayer is properly categorized as excluded income under sec_501 of the code conclusion for the reasons set forth above we conclude that non-member revenue that the taxpayer receives from the fusf and susf is excluded from the percent member income test under sec_501 of the code because it is income received or accrued from a nonmember telephone company for the performance of communication services which involve the members of the taxpayer a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 of the code provides that it may not be used or cited as precedent - end -


department of the treasury internal_revenue_service washington d c employer_identification_number person to contact and id number contact telephone number tax exempt and government entities wvision number release date date date u ll legend association dear this is in response to your ruling_request dated a regarding whether certain payments by association will adversely affect its exempt status under sec_501 c of the internal_revenue_code facts association a business league recognized as exempt under sec_601 c of the code is a state-wide association of bs that is affiliated with c members of association are automatically members of c another business league exempt under sec_601 association brought three lawsuits the lawsuits which alleged that anticompetitive and fraudulent activity damaged the compensation and employment of bs in d and nationwide association states that the lawsuits were substantially funded by contributions from association's members and various non-members association's ability to fund the lawsuits was limited to resources available from i contributions from individuals and other state association associations and il proceeds from a seties of advances from c the c loans established a separate bank account for funds collected and used in connection with the lawsuits association incurred substantial attorneys’ fees costs and related expenses from the lawsuits at the inception of the lawsuits association entered into an agreement with members of the association litigation committee requiring that association distribute insofar as practicable a portion of any recovery to those individuals who facilitated the lawsuits either by participating as plaintiffs or by advancing funds to commence the antitrust action association's counsel recommended that twelve individual bs be named as plaintiffs the participating plaintiffs along with association some of its members who alleged to have been terminated from their emplayment due ta anticompetitive behavior to participate individually in the lawsuits ten such association members elected to participate as plaintiffs the ten terminated plaintiffs the initial complaint prepared by association's counsel also named two individual association members who had not been terminated and who remained employed at the time the lawsuits commenced - e and f together the named risk plaintiffs association understands that e ‘was told that her participation in the lawsults was requested by counsel because of her upcoming term as president of association association further understands that f was told that her participation as a plaintiff was requested by counsel because she was employed by an employer which had terminated its bs and which was a named defendant association asked in order to facilitate the lawsuits and at the request of association's attorney the participating plaintiffs agreed to irrevocably assign their rights to any recovery to association in return for such rights and services association contractually agreed to pay claimed damages of certain amounts to the participating plaintiffs out of the proceeds of the lawsuits specifically the participating plaintifis executed an irrevocable assignment the assignment pursuant to which they irrevocably assigned to association i proceeds which may be recovered arising out of the cause of causes of action against the prospective defendants and ii the sole and exclusive right and power to conduct and to manage the litigation association states that similarly the named risk plaintiffs contributed to association their right to any procesds that might have been received in the lawsuits at about the same time association's board_of directors established a litigation committes to monitor oversee and consult with litigation counsel an behalf of association the committee consisted of various association officials and the named risk plaintiffs members of the committee then entered into a settlement distribution agreement that provided that there shall be a reasonable and equitable distribution of any financial recovery from the lawsuits insofar as practicable in the following order of priority association and a to pay any indebtedness undertaken by association to finance the litigation including attorneys’ fees and expense b to compensate those prospective plaintiffs identified as named risk plaintiffs up to the value of their career loss value as that term is defined by the actuary retained by counsel to compensate the ten terminated piaintiffs eight of whom lost severance_pay benefits upon termination of their employment to rebate to members and other persons the amount of their financial contributions to association for purposes of funding the litigation d pursuant to the settlement agreement the defendants agreed to pay to subsequently there was a global_settlement and release of the lawsuits among all the parties to the lawsuits plaintiffs dollar_figure milion association disbursed that portion of the settlement proceeds necessary to pay attorneys’ fees and costs arising from the lawsuits and li obligations to c under the c loans as of a association retained approximately dollar_figurey million of the gross settlement payment made to it the net settlement proceeds pursuant to the global_settlement of the lawsuits plus interest eamed thereon association understands that e was terminated from her position after she joined the lawsuits she found alternative employment months later assooiation understands that f received severance for six months and she obtained alternative employment nine months later association alleges and e and f state that their terminations resulted from their participation as plaintiffs in the lawsuits and their outspoken participation in plaintiffs attempts to report and prosecute defendants’ misconduct pursuant to the settlement distribution agreement an independent actuary has determined the amount of actual damages he believes e and f incurred arising from their terminations particular the actuary has determined the amount the named risk career loss value as dollar_figurex for e and dollar_figurew for f association asserts that its participation in the lawsuits resulted in numerous benefits to it and the public the anticompetitive acts of the defendants were publicized defendants were enjoined from further illegal conduct the federal government prevailed in related litigation and received several million dollars in false claims act damages and the reputation and power of association to obtain benefits for its members were augmented association proposes to pay as damages to each of the named risk plaintiffs the namad risk career loss value in the amount determined by the actuary as the named risk career loss value in ‘association proposes to pay as damages to each of the ten terminated plaintiffs an amount equal to the amount of the severance payment lost by such plaintiff upon his or her termination association proposes to pay each contributor whether or not an association member the amount such contributor contributed to fund the lawsuits association intends to pay the contributors to the lawsuits on a pro_rata basis in proportion to each contributor’s contributed amount and not to exceed the amount contributed by each such contributor rulings requested association's prospective payments to the participating plaintiffs will not constitute prohibited inurement and will not disqualify association from qualification for recognition of exemption under sec_501 of the code association's prospective payments to the contributors to the lawsuits will not constitute prohibited inurement and will not disqualify asseciation from qualification for recognition of exemption under sec_501 c law sec_501 c of the code provides for the exemption from federal_income_tax of business_leagues nat organized for profit and no part of the net eamings of which inures to the benefit of any private_shareholder_or_individual sec_1 c -1 of the income_tax regulations provides that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily cartied on for profit in revrul_67_175 1967_1_cb_130 noxious fumes from a factory in a region were damaging crops and trees with widespread effect on the agricultural economy of the area the organization hired attomeys to represent individual property owners some of whom were members of the organization in a suit for an injunction requiring the factory to take necessary steps to prevent the air pollution the service ruled that the prosecution of the injunction suit under the circumstances described was an activity promoting the common business_interest of the members of the organization and was directed toward the improvement of business conditions in a particular line_of_business accordingly the organization's exemption as one described in sec_501 of the code was not affected by subsidizing the lawsuit rev_rul c b association to member and nanmember exhibitors who participate in the association's annual industry trade_show that represent a portion of an advance floor deposit paid_by each exhibitor to insure the show against financial loss and which are made to all exhibitors on the same basis and which may not exceed the amount of the deposit do not adversely affect the association's exempt status under sec_501 c of the code holds that cash rebates made by an exempt business rey rul 1981_1_cb_336 holds that a refund of excess dues to members of an exempt agricultural_organization in the same proportion as the dues are paid does not constitute inurement under sec_1_501_c_5_-1 of the regulations and therefore does not disqualify an organization from exemption under sec_801of the code the revenue_ruling states that this position is consistent with the treatment of organizations exempt under sec_501 under the rationale of 37_bta_288 that case stated that pro_rata refunds of excess dues to members do not affect an association's status as an exempt business ‘eague rev prac 2009_1_irb_14 provides that the service does not issue letter rulings in certain areas because of the factual nature of the problem rev_proc 2009_1_irb_115 similarly states that rulings will not be issued on any matter in which the determination requested is primarily one of fact the ravenue procedure also states that rulings will not be issued on the tax effect of a transaction if any part of the transaction is involved in litigation among the parties affected by the transaction in 305_us_188 the supreme court held that amounts received in settlement of a lawsuit fave the same character for federal tax purposes as the judgment amounts that the taxpayer would have received if it had prevailed analysis i whether the payments to the contributors constitute permissible rebates or refunds it is well settled that a nondiscriminatory pro_rata refund of dues is not inurement to members the service has ruled that an exempt business league may generally make cash distributions to its members without loss of exemption where such distributions reprasent no more than a reduction in dues or contributions previously paid to the league to support its activities rul supra rev the proposed payments to contributors will merely return to the contributors their pro rate portion of contributions to association used to finance the lawsuits these proposed payments will be made ta both association members and nonmembers without discrimination the proposed payments will be made on a pro_rata basis in proportion te the amount of contributions made by contributors and will nat exceed the amount of such contributions as such these payments represent a permissible nondiscriminatory pro_rata refund of prior contributions ii whether payments to the named risk plaintiffs and the ten terminated plaintiffs constitute inurement at the beginning of the lawsuits association and the participating plaintiffs entered into an assignment contract respecting their respective rights and duties the participating plaintiffs agreed to assign to association whatever damages they might recover and to allow association to direct the lawsuits in return association agreed to pay all lawsuits expenses direct the lawsuits and pay the participating plaintiffs negotiated amounts the ten terminated plaintiffs agreed to receive the amounts they would have received as severance but for their participation in the lawsuits association represents that the named risk plaintiffs agreed to a different negotiated formula amount that reflected their different circumstances including their participation on the litigation committee and their apparent difficulty in finding comparable new employment after their termination from the jobs with their employers association represents that if the plaintiffs had prevailed in the lawsuits the participating plaintiffs’ recoveries on the antitrust and other claims cauld have amounted to many times the settlement amount association also represents that by entering into the assignment contract the participating plaintiffs gave up this potentially larger recovery and entered into a contract to accept a lesser recovery for federal tax purposes any amounts paid to the participating plaintiffs have the same character as the amounts they might have recovered if they nad prevailed in the lawsuits lyeth v hoey supra ‘whether the amounts of the contemplated payments to the named risk plaintiffs and the ten terminated plaintiffs constitute the actual amount of damages suffered by each participating plaintiff and whether these amounts are in any case reasonable and do not constitute inurement present factual questions on which the service declines to rule under rev procs and supra ruling based on the information submitted we rule as follows association's prospective payments to the contributors will not constitute prohibited inurement and will not disqualify association from qualification for recognition of exemption under sec_501 this ruling will be made available for public inspection under action of the code after certain deletions of identifying information are made for details see enclased notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our propased deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the understanding there will be no material changes in the facts upon which itis based any changes that may have a bearing upon your tax status should be reported to the service this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because this letter coutd help resoive any future questions about tax consequences of your activities you should keep a copy of this ruling in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power of attomey and oeclaration of representative currently on file with the service we are sending a copy of this letter to your authorized representative enclosure notice sincerely yours ronald j shoemaker manager exempt_organizations technical group


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 3-plr-106315-99 date date legend corporation state d1 d2 shareholders plr-106315-99 dear this responds to your letter dated date as supplemented submitted on behalf of corporation requesting rulings under sec_1361 and sec_2701 of the internal_revenue_code facts the following facts have been represented corporation was incorporated under the laws of state on d1 corporation elected to be taxed as an s_corporation on d2 corporation currently has a single class of common voting_stock all of the shares of which are held by shareholders for business reasons corporation proposes to undergo a recapitalization intended to qualify as a tax-free reorganization under sec_368 pursuant to the recapitalization the shareholders will receive one share of voting and shares of nonvoting common_stock for every share of voting common_stock currently held it is represented that the voting and nonvoting shares received by each shareholder will have shareholder rights similar to those voting shares given up additionally the only distinction between the two types of common_stock received in the proposed recapitalization will be as to voting rights all shares of stock will have identical rights to distributions and liquidation proceeds rulings requested the voting and non-voting stock which will be identical in all other respects will not be treated as different classes of stock within the meaning of sec_1361 and the existing s status will not terminate and sec_2701 does not apply to the proposed recapitalization law and analysis sec_1361 provides that for purposes of the code the term s_corporation means with respect to any_tax year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other things have more than one class of stock sec_1361 indicates that a corporation shall not be treated as having more than one class of stock solely because there are differences in voting rights among the shares of common_stock sec_1_1361-1 of the income_tax regulations provides that subject_to certain exceptions a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds it has been represented that the sole plr-106315-99 difference between the voting and nonvoting common_stock that corporation will issue pursuant to the recapitalization will be voting rights therefore the voting and nonvoting_stock will not be considered two classes of stock for purposes of sec_1361 sec_2701 contains special valuation rules to determine the amount_of_the_gift when an individual transfers an equity_interest in a corporation or a partnership to a member of the individual’s family sec_2701 provides that solely for purpose of determining if a transfer of an interest in a corporation or partnership to or for the benefit of a member of the transferor’s family is a gift and the value of such transfer the value of any right - - a that is described in sec_2701 or sec_2701 and b that is with respect to any applicable_retained_interest that is held by the transferor or an applicable_family_member immediately_after_the_transfer shall be determined under sec_2701 sec_2701 provides that sec_2701 does not apply to any right with respect to an applicable_retained_interest if - - a market quotations are readily available as of the date of the transfer for such interest on an established_securities_market b such interest is of the same class as the transferred interest or c such interest is proportionally the same as the transferred interest without regard to nonlapsing differences in voting power or for a partnership nonlapsing differences with respect to management and limitations in liability sec_2701 defines an applicable_retained_interest as any interest in an entity for which there is - - a a distribution_right but only if immediately before the transfer the transferor and applicable family members hold after application of sec_2701 control of the entity or b a liquidation_put_call_or_conversion_right sec_2701 provides that for purposes of sec_2701 in the case of a corporation the term control means the holding of at least percent by vote or value of the stock of the corporation plr-106315-99 sec_2701 provides that for purposes of sec_2701 the term applicable_family_member includes any lineal descendant of any parent of the transferor or the transferor’s spouse sec_25_2701-2 of the gift_tax regulations provides that an applicable_retained_interest is any equity_interest in a corporation or partnership with respect to which there is either an extraordinary_payment_right as defined in sec_25_2701-2 or in the case of a controlled_entity as defined in sec_25_2701-2 a distribution_right as defined in sec_25_2701-2 an extraordinary_payment_right is any put call or conversion_right any right to compel liquidation or any similar right the exercise or nonexercise of which affects the value of the transferred interest a distribution_right is the right to receive distributions with respect to an equity_interest but does not include - - any right to receive distributions with respect to an interest that is of the same class as or a class that is subordinate to the transferred interest any extraordinary_payment_right or certain other rights as described in sec_25_2701-2 sec_2701 provides that except as provided in regulations a contribution_to_capital or a redemption recapitalization or other change in the capital structure of a corporation or a partnership is treated as a transfer of an interest in such entity to which sec_2701 applies if the taxpayer or an applicable_family_member a receives an applicable_retained_interest in such entity pursuant to such transaction or b under regulations otherwise holds immediately after such transaction an applicable_retained_interest in such entity sec_2701 does not apply to any transaction other than a contribution_to_capital if the interests in the entity held by the transferor applicable family members and members of the transferor’s family before and after the transaction are substantially identical sec_25_2701-1 provides that except as provided in sec_25_2701-1 a transfer subject_to the rules of sec_2701 includes a redemption recapitalization or other change in the capital structure of an entity a capital structure transaction if - - the transferor or an applicable_family_member receives an applicable_retained_interest in the capital structure transaction plr-106315-99 the transferor or an applicable_family_member holding an applicable_retained_interest before the capital structure transaction surrenders an equity_interest that is junior to the applicable_retained_interest a subordinate interest and receives property other than an applicable_retained_interest or the transferor or an applicable_family_member holding an applicable_retained_interest before the capital structure transaction surrenders an equity_interest in the entity other than a subordinate interest and the fair_market_value of the applicable_retained_interest is increased sec_25_2701-1 provides that for purposes of sec_2701 a transfer does not include the following transactions i a capital structure transaction if the transferor each applicable_family_member and each member of the transferor’s family holds substantially the same interest after the transaction as that individual held before the transaction for this purpose common_stock with nonlapsing voting rights and nonvoting common_stock are interests that are substantially the same ii a shift of rights occurring upon the execution of a qualified_disclaimer described in sec_2518 iii a shift of rights occurring upon the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment described in sec_2514 except to the extent the release exercise or lapse would otherwise be a transfer under chapter sec_25_2701-1 provides that sec_2701 does not apply if the retained_interest is of the same class of equity as the transferred interest or if the retained_interest is of a class that is proportional to the class of the transferred interest a class is the same class as is or is proportional to the class of the transferred interest if the rights are identical or proportional to the rights of the transferred interest except for nonlapsing differences in voting rights or for a partnership nonlapsing differences with respect to management and limitations on liability in this case the shareholders of corporation propose to exchange all of their stock in corporation for new stock in corporation pursuant to a plan of recapitalization intended to qualify as a tax-free reorganization under sec_368 as discussed above pursuant to the plan of recapitalization for each voting share that a shareholder currently owns the shareholders will receive one new share of voting common_stock and new shares of nonvoting common_stock in all cases the rights with respect to the stock transferred by each shareholder will be identical to the rights with respect to the stock received by each shareholder therefore in accordance with sec_25_2701-1 and sec_25_2701-1 sec_2701 will not apply to the proposed recapitalization plr-106315-99 conclusion based solely on the facts submitted and the representations made we hold that the voting and nonvoting common_stock that will be issued in the recapitalization will not be considered different classes of stock within the meaning of sec_1361 therefore assuming corporation’s s election is otherwise valid the issuance of the voting and nonvoting common_stock will not terminate corporation’s s election sec_2701 will not apply to the proposed recapitalization this ruling expresses no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or any effects resulting from the transaction that are not specifically covered by the above rulings in particular this ruling expresses no opinion as to whether the proposed exchange of voting common_stock for a combination of voting common_stock and non-voting common_stock constitutes a corporate recapitalization within the meaning of sec_368 of the code revproc_2000_3 2000_1_irb_107 sec_3 and whether corporation is in fact an eligible s_corporation this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent sincerely william p o’shea branch chief branch office of assistant chief_counsel passthroughs and special industries enclosures copy of letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------ --------------------------------- ---------------- -------------------------------- legend 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 b01 plr-137451-14 date date x ------------------------------------------- ------------------------------ d ---------------------- state -------------- dear ------------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated on d under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the proper election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s plr-137451-14 corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d if within days from the date of this letter x submits a properly completed form_2553 election by a small_business_corporation with a copy of this letter attached to the appropriate service_center 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 no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-137451-14 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s authorized representative sincerely laura fields laura fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


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 br1 plr-143509-10 date date ty ------- ty ------- legend taxpayer ---------------------------- country x entity ------------------------------------------------- llc ---------------------------------- fp --------------------------------------------- date ---------- date ---------- year --------------------------------------------------------- date ----------------------- date --------------------------- date ----------------------- date -------------------------- dear ---------------------------- this replies to a letter dated date as supplemented by correspondence dated date date date and date from your authorized representative in which you request an extension of time under sec_301_9100-1 and sec_301_9100-3 to file a form_8848 consent to extend the time to assess the branch_profits_tax under regulations sec_1_884-2t and c taxpayer was a country x entity that was treated as a corporation for u s tax purposes taxpayer held interests in a domestic limited_liability_company llc that was treated as a partnership for u s tax purposes llc held partnership interests in two domestic partnerships that were engaged in a u s trade_or_business as a consequence taxpayer was engaged in a u s trade_or_business for all years including year llc withheld percent income_tax on taxpayer’s allocable share of effectively_connected_income as required by sec_1446 plr-143509-10 taxpayer’s sole shareholder was fp a country x entity that was classified as a partnership for u s tax purposes on date in year certain of fp’s owners sold all of their interests in fp to third parties pursuant to the purchase agreement taxpayer was required to make an election under sec_301_7701-3 to be classified as an entity disregarded as separate from its owner and to file form_8832 entity classification election effective date of year the close of taxpayer’s year of complete termination pursuant to sec_301_7701-3 as a consequence of the election taxpayer was deemed to have distributed all of its assets and liabilities to fp its single member owner in complete_liquidation taxpayer had three different tax advisors which led to confusion as to which of the advisors was responsible for preparing the tax returns for year taxpayer’s final form 1120-f u s income_tax return of a foreign_corporation for year was due on or before date one of taxpayer’s tax advisors discovered the failure_to_file form f around date on or about date taxpayer remitted to the irs an estimated_tax payment with respect to year taxpayer filed its form 1120-f for year on date taxpayer included a completed but unsigned form_8848 with its return along with a disclosure statement informing the service that it would be seeking relief for its untimely filing of form_8848 under sec_301_9100-1 and sec_301_9100-3 taxpayer now requests that relief taxpayer represents as required by sec_1_884-2t as of date of year taxpayer held no u_s_assets neither taxpayer nor a related corporation within the meaning of sec_1_884-2t used directly or indirectly in the conduct_of_a_trade_or_business in the united_states at any time during the three-year period following date of year a any of taxpayer’s u_s_assets b any property attributable to taxpayer’s u_s_assets or c any property attributable to the effectively_connected_earnings_and_profits of taxpayer for year taxpayer did not have any income that was or was treated as effectively_connected_income during the three-year period following date of year the entities that sold all of their interests in fp to third parties also represent that they did not use directly or indirectly any of the income attributable to the sale of fp in the conduct of a u s trade_or_business at any time during the three-year period following date of year including investing in stock in a domestic_corporation or loaning to a related corporation or used as security for any indebtedness of a related corporation in the conduct of a u s trade_or_business the noncorporate entities further represented that none of the sales proceeds were reinvested directly or indirectly in a u s trade_or_business through a corporation sec_1_884-2 provides that the waiver referred to in sec_1_884-2t must be executed on form_8848 on or before the date including plr-143509-10 extensions prescribed for filing the foreign corporation's income_tax return for the year of complete termination and extend the period of assessment of the branch_profits_tax for the year of complete termination to a date not earlier than the close of the sixth taxable_year following that taxable_year sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the standards 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_9100-1 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_9100-3 provides standards for extensions of time for making regulatory elections when the deadline for making the election is other than a due_date prescribed by statute sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the 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 and the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 and is granted an extension of time to file a signed form_8848 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 as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file form_8848 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-143509-10 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 sincerely elizabeth u karzon branch chief branch international cc


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 b02 plr-146529-10 date date x ------------------------------------------------------------------------------------------------------ ------------------------ state ------------------ d1 d2 d3 ----------------------- ------------------------- -------------------------- dear ------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 and sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 it was intended that x elect s_corporation treatment effective d1 however a form_2553 election by a small_business_corporation was not timely filed for x on d2 the shareholders of x entered into a formal shareholders’ agreement the adoption of the shareholders’ agreement may have terminated x's s_corporation_election by creating a second class of stock on d3 a corporation purchased x causing x's s_corporation_election to terminate if it was not already terminated on d2 x represents that it did not intend to create a second class of stock and that the possible termination was not motivated by tax_avoidance x also represents that it and its shareholders timely and consistently filed their tax returns consistent with the treatment of x as an s_corporation plr-146529-10 law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not have more than one class of stock sec_1_1361-1 of the income_tax regulations provides that a corporation is generally treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds sec_1_1361-1 provides that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter articles of incorporation bylaws applicable state law and binding agreements relating to distribution and liquidation proceeds collectively the governing provisions a commercial contractual agreement such as a lease employment agreement or loan agreement is not a binding agreement relating to distribution and liquidation proceeds and thus is not a governing provision unless a principal purpose of the agreement is to circumvent the one class of stock requirement although a corporation is not treated as having more than one class of stock so long as the governing provisions provide for identical distribution and liquidation rights any distributions including actual constructive or deemed distributions that differ in timing or amount are to be given appropriate tax effect in accordance with the facts and circumstances sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the plr-146529-10 secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply sec_1362 provides that a in general an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation and b any termination under sec_1362 shall be effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 in addition based solely on the facts submitted and the representations made we conclude that x's s_corporation_election may have terminated on d2 because x may have had more than one class of stock however we conclude that if x's s_corporation_election was terminated such termination was inadvertent within the meaning of sec_1362 consequently we rule that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d2 to d3 provided x makes a valid s_corporation_election effective d1 and provided that the election was not otherwise terminated under sec_1361 plr-146529-10 except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code in particular we express no opinion as to whether x otherwise qualifies as a subchapter_s_corporation under sec_1361 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


o f f i c e o f t h e c h i e f c o u n s e l 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 w a s h i n g t o n d c date number release date cc ita conex-136252-15 uil ------------------------- ------------------------------------------------ ----------------------------------------------- ----------------------- ------------------------------------- dear --------------- i am responding to your inquiry dated date about the federal_income_tax treatment of payments received by individual care providers under minnesota’s consumer support grant program you forwarded an inquiry from a fiscal intermediary who pays individual care providers under the state-funded consumer support grant program the inquiry refers to notice_2014_7 2014_4_irb_445 which concludes that certain medicaid waiver payments received by an individual care provider are excludable from gross_income under sec_131 of the internal_revenue_code the code as difficulty_of_care_payments the text of the notice is available on our website at www irs gov irb 2014-4_irb ar06 html the notice specifically addresses payments made under section c of the social_security act relating to home and community-based services waivers and does not specifically address the tax treatment of payments received under other state programs whether the irs will treat payments received under a state program other than a section c program as difficulty_of_care_payments depends on the nature of the payments and the purpose and design of the program see q a1at www irs gov individuals certain-medicaid-waiver-payments-may-be-excludable-from- income conex-136252-15 if the fiscal intermediary would like the irs to address whether payments made under minnesota’s consumer support grant program or another program are excludable from gross_income under sec_131 it may request a private_letter_ruling on its information reporting obligations under sec_6041 for payments under that program revproc_2015_1 2015_1_irb_1 and the first revenue_procedure of each year provides the procedures and fees for a taxpayer to request a private_letter_ruling i hope this information is helpful if you have questions please contact me or -------------- --------- identification_number -------------------- ---------------- at sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


internal_revenue_service number info release date uilc date dear this letter is in response to your inquiry to senator about the federal tax consequences to state of employees resulting from the use of state-provided vehicles the senator’s office asked us to respond directly to you in your letter you question whether the value of the use of state-provided vehicles should be exempt from federal_income_tax in light of the state’s policy against the personal_use of state vehicles i hope the following general information will be helpful to you commuting-use value is generally included in income gross_income means all income from whatever source derived including but not limited to compensation_for services including fees commissions and fringe_benefits sec_61 of the internal_revenue_code the code gross_income does not include any fringe benefit that qualifies as a working_condition_fringe benefit the term working_condition_fringe means any property or services provided to an employee of the employer to the extent that if the employee paid for such property or service such payment would be allowable as a deduction under sec_162 trade_or_business_expenses sec_132 and sec_132 of the code use of a state-owned vehicle to perform official duties is a working_condition_fringe and thus does not result in income to the employee however an employee’s costs of commuting between home and work generally are nondeductible personal expenses under sec_1_162-2 and sec_1_262-1 of the income_tax regulations regulations thus the value of the commuting use of an employer-provided vehicle is generally income to the employee an exception to this rule exists if the vehicle is a qualified_nonpersonal_use_vehicle qualified nonpersonal use vehicles the value of the use of a qualified_nonpersonal_use_vehicle as described in sec_1_274-5t of the temporary regulations copy enclosed is generally excluded from gross_income as a working_condition_fringe benefit sec_1_132-5 of the regulations the term qualified_nonpersonal_use_vehicle means any vehicle which by reason of its nature ie design is not likely to be used more than a de_minimis amount for personal purposes vehicles which are qualified nonpersonal use vehicles include in part clearly marked police and fire vehicles sec_1_274-5t of the temporary regulations document you refer to describes the many types of qualified nonpersonal use vehicles you ask specifically about item of the document which describes certain pick-up trucks and vans pick-up trucks and vans are not qualified nonpersonal use vehicles unless the truck or van has been specially modified with the result that it is not likely to be used more than a de_minimis amount for personal purposes sec_1_274-5t of the temporary regulations thus the design of the pick-up or van determines whether it is a qualified_nonpersonal_use_vehicle the state of policy against personal_use does not cause state vehicles to be qualified nonpersonal use vehicles to summarize whether using a state-owned vehicle results in income to the employee depends upon whether the value of the use is a working_condition_fringe use of the vehicle for official state business is a working_condition_fringe but the commuting value of using a state-owned vehicle is not a working_condition_fringe unless the vehicle is a qualified_nonpersonal_use_vehicle whether a vehicle is a qualified_nonpersonal_use_vehicle depends upon the design of the vehicle irrespective of the employer’s policy on personal_use this letter will be available for public inspection under the freedom_of_information_act after names addresses and other identifying information have been deleted i hope this information will be helpful to you if we can be of further assistance please contact me at or john richards id of this office at sincerely mary oppenheimer assistant chief_counsel exempt_organizations employment_tax government entities enclosure


department of the treasury internal_revenue_service washington d c dec tax_exempt_and_government_entities_division uniform issue list seit ep rah legend taxpayer a irab ira annuity c account d financial_institution e financial_institution f financial_institution g amount dear this is in response to your request dated date as supplemented by correspondence dated date and date in which you request through your authorized representative a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution equal to amount from ira annuity c which was issued by financial_institution f taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to taxpayer a’s medical_condition taxpayer a suffered from a serious medical_condition that impaired her ability to handle her financial affairs after consulting with her financial advisor on date taxpayer a requested a form to surrender her ira annuity c an ira annuity_contract issued by financial_institution f and held in ira b ira b was maintained by financial_institution e on date financial_institution f transferred the surrender_value of ira annuity c equal to amount to non-ira account d account d was taxpayer a’s checking account maintained by financial_institution g in february of taxpayer a received a form 1099-r for the distribution of amount which alerted her to the fact that the distribution was a taxable_distribution taxpayer a contacted her advisor who assured her that the distribution was not taxable and the form 1099-r was issued in error on further investigation taxpayer a learned that her advisor was incorrect and contacted an attorney to help her rectify the mistake subsequently on date taxpayer a was diagnosed with several other serious illnesses taxpayer a represents that amount has not been used for any other purpose based on the above facts and representations taxpayer a requests a waiver of the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount from ira annuity c sec_408 of the code defines an ira to mean a_trust created or organized in the united_states and requires that the trustee be a bank or an approved non- bank trustee sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money or any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 effective date all of an individual's iras are aggregated for purposes of applying the one rollover per year limit set forth in sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonabie control of the individual subject_to such requirement revproc_2003_16 r b provides that the service will issue a ruling waiving the 60-day rollover requirement in cases where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable contro of the taxpayer in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a are consistent with her assertion that the failure to complete a rollover of the distribution of amount from ira annuity c was due to taxpayer a’s medical_condition during the 60-day rollover period therefore pursuant to sec_408 of the code the service waives the 60-day rollover period with respect to the distribution of amount from ira annuity c taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount to an ira provided ail other requirements of sec_408 except the 60-day requirement are met with respect to such contribution the contribution of amount into an ira will be considered a rollover_contribution within the meaning of sec_408 this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact at please address all correspondence to se t ep ra t1 sincerely yours carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter


department of the treasury internal_revenue_service washington d c date number release date uil cc p si 6cramsey cam-121533-97 memorandum for industry director natural_resources lm nr from chief branch cc p si subject withdrawal of application_for change in accounting_method in accordance with a of revproc_2001_1 2001_1_irb_1 this chief_counsel_advice advises you that a taxpayer within your jurisdiction has withdrawn a form_3115 application_for change in accounting_method pursuant to sec_6110 k this chief_counsel_advice is not to be cited as precedent legend a b c this memorandum advises you that certain issues set out in a form_3115 submitted on behalf of a were withdrawn a did not give any reason for the withdrawals a filed the form_3115 to request permission to change its method of computing depreciation for right-of-way easement costs for electric power lines from using the straight-line method and a useful_life of or years under sec_167 to using an accelerated_depreciation method and the recovery periods for asset classe sec_49 dollar_figure of revproc_87_56 or rev_proc or no class_life under sec_168 of the code at the time of withdrawal we were tentatively adverse because revrul_72_403 specifically states that right-of-way costs are costs paid for intangible assets and thus ineligible for depreciation under sec_168 and must be depreciated under sec_167 also a withdrew its request for permission to change its method_of_depreciation for street lighting assets from depreciating as an asset described in asset class dollar_figure to depreciating as an asset having no class_life or as an asset described in asset class cam-121533-97 at the time of withdrawal we were tentatively adverse because the provision of street lighting is part of electric distribution described in asset cla sec_49 distribution is the final step in the sale of electricity until recently users of electricity generally did not pay for distribution separately from the charge for the generation although in setting rates public_utility commissions took into account costs of both generation and distribution the street lights consume electricity the amount of electricity used for a particular light over the period of a year or less can be estimated with a high degree of accuracy based on the average number of hours of use no separate metering is necessary running separate lines is frequently unnecessary in the simplest case the lighting fixture is simply placed on existing distribution poles where needed the utility has electricity at the point street lighting is needed thus the utility provides the electricity for producing the light as a part of its business of distributing the electricity providing street lighting is part of the activity described in asset cla sec_49 the three revenue rulings consistent with the view that street lighting is part of distribution are briefly mentioned below revrul_78_67 c b discusses expenditures_for light watchmen a lighting fixture containing a photoelectric cell installed on a pole usually on a customer’s premises similar in appearance to a street light revrul_78_67 concludes that expenditures_for the light watchmen are additions to a utility’s distribution system and are subject_to the repair_allowance provision that applied to adr property revrul_83_146 c b discusses propane storage tanks and related customer installations leased by retailer of propane and finds the propane storage tanks and related customer installations are related to the taxpayer’s business of furnishing gas to customers finally in revrul_77_476 c b an oil pipeline used by a public_utility to move oil to an inland generation plant from the utility’s dock is determined to be part of the activity of generation of electricity rather than pipeline transportation this ruling shows that the asset classification system looks at activities broadly and is not intended to divide a taxpayer’s business in a myriad of activities clearly under sec_1_167_a_-11 property shall be classified according to primary use even though the activity in which such property is primarily used is insubstantial in relation to all the activities of a taxpayer however for an activity to be classified as a separate activity the activity must be substantial although it may be insubstantial in relation to all of other activities of the taxpayer significant and separate not as here merely part of the activity in question providing street lighting is simply part of distribution of electricity to the ultimate consumer finally a withdrew its request to change its method_of_accounting for certain assets a capitalized into ferc account sec_316 and for tax purposes a included these assets in asset classe sec_49 or the withdrawal applied to assets not described in the asset classes for specific assets used in all business activities that is asset class dollar_figure through asset class the withdrawal applied to assets such as stores equipment tools shop and garage equipment and laboratory equipment at the time of withdrawal we were tentatively adverse because these assets appear to be described in asset classe sec_49 or merely because cam-121533-97 an item of property is not specifically mentioned in these asset classes but is mentioned in certain ferc accounts does not mean the item is excluded from the scope of the asset classes the depreciation asset classes are generally much broader than ferc accounts the method changes would have been effective with the taxable_year beginning b and would have resulted in a negative sec_481 adjustment decrease in taxable_income in excess of c if you have any questions on this matter do not hesitate to call me at charles b ramsey chief branch office of associate chief_counsel passthroughs special industries


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 teb plr-140763-02 date date legend authority department state year year a dear this is in response to your request for an extension of time under sec_301_9100-1 of the procedure and administrative regulations to file form_8328 carryforward election of unused private_activity_bond volume_cap to make a carryforward election under sec_146 of the internal_revenue_code with respect to dollar_figurea of authority’s unused year volume_cap facts and representations you make the following factual representations authority is a political_subdivision of state authorized to finance among other things certain types of exempt facilities under sec_142 department administers the system established by state pursuant to sec_146 to allocate state’s volume_cap in year department approved an allocation and carryforward of dollar_figurea in year volume_cap to authority for the purpose of financing qualified residential rental projects the projects however authority inadvertently failed to file the form_8328 for dollar_figurea in year volume_cap before the due_date in year authority did not realize its error until june of year before this request was filed the irs had not discovered authority’s failure to timely file the form_8328 law and analysis sec_146 provides that if an issuing authority's volume_cap for any calendar_year after exceeds the aggregate amount of tax-exempt private_activity_bonds issued during the calendar_year by the authority the authority may elect to treat all or any portion of the excess as a carryforward for one or more carryforward purposes the election is made by filing form_8328 with the internal_revenue_service center ogden ut under notice_89_12 1989_1_cb_633 form_8328 must be filed by the earlier of february of the calendar_year following the year in which the excess_amount arises or the date_of_issue of bonds issued pursuant to the carryforward election the election must identify the purpose for which the carryforward is elected and specify the amount to be carried forward for that purpose sec_146 carryforward elections and any identifications or specifications stated therein are irrevocable sec_146 sec_301_9100-1of the procedure and administrative regulations provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements for automatic extensions in sec_301_9100-2 must be made under the rules of sec_301_9100-3 requests for relief will be granted if the taxpayer provides evidence establishing to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides in part that the taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer requested relief under that section before the failure to make the regulatory election is discovered by the irs sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability than the taxpayer would have had if the election had been made timely taking into account the time_value_of_money conclusion under the facts and circumstances of this case we conclude that authority acted reasonably and in good_faith and that granting an extension of time under sec_301 to file form_8328 to carryforward dollar_figurea of unused volume_cap from year will not prejudice the interests of the government authority is granted an extension of time to days from the date of this letter_ruling to file the form_8328 to carry forward unused year volume_cap in the amount of dollar_figurea for the projects the ruling contained in this letter is 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 a ruling it is subject_to verification on examination 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 this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel exempt_organizations employment_tax government entities by rebecca l harrigal chief tax exempt bond branch


department of the treasury internal_revenue_service washington d c date number release date uilc cc dom fs p si spr-109135-99 memorandum for district_counsel from assistant chief_counsel field service division cc dom fs subject lease_stripping this memorandum responds to your request dated date this advice is not binding on examination or appeals and is not a final case determination such advice is advisory and does not resolve service position on an issue or provide the basis for closing a case the determination of the service in the case is to be made through the exercise of the independent judgment of the field_office with jurisdiction over the case legend a b c d e f g h j k l m n o date date date date date dollar_figure dollar_figure dollar_figure issue is this transaction a lease-stripping transaction as described in irs notice_95_53 1995_2_cb_334 for which the claimed tax treatment may be disregarded conclusion we believe that the facts submitted indicate that this transaction is structured in a lease-strip form that does not produce the tax consequences desired by the parties and that is subject_to challenge as contemplated by notice_95_53 facts b invested in a large number of leases between date and date the lease assets consisted mostly of c in the early years of the leases b recognized a significant amount of losses because of depreciation on the lease assets when the lease assets were fully depreciated for tax purposes the leases were expected to generate significant taxable_income for b in date d approached b with a plan to contribute certain lease assets to a partnership under the proposed plan the lease income that would have been reported on b’s returns for date and subsequent years would be allocated to a foreign tax exempt partner on date b and a subsidiary formed a a limited_liability_company treated for federal tax purposes as a partnership with its principal office in e b contributed to a its interest in leases with fully-depreciated assets e the foreign_partner contributed dollar_figure in cash under the terms of a’s operating_agreement percent of lease income for a specific year was to be allocated to e until the total amount of income and gain allocated to e for the tax_year and all prior tax years equaled a specified percentage of e’s cash contribution plus any losses allocated to e in prior tax years any additional income was to be allocated percent to b and its subsidiary respectively under the agreement partnership cash could only be used for certain low risk low return investments which earned percent this is in contrast to the percent the partnership was obligated to pay e thus a was not generating a profit nor could it under the agreement the agreement provided that capital accounts will be respected on liquidation of the partnership or any partner’s interest in the partnership the agreement also provided for the mandatory redemption of e’s partnership_interest on date if a’s assets were sold b would be allocated most of the appreciation in the assets under sec_704 to the extent there was any gain above the sec_704 built-in_gain the agreement provided that e may share in the gain only to the extent necessary to generate the specified return discussion irs notice_95_53 begins with the following discussion the internal_revenue_service understands that certain persons have entered into or may be considering multiple-party transactions intended to allow one party to realize rental or other income from property or service contracts and to allow another party to report deductions related to this income it then describes examples of lease-strips including a transferred_basis transactions b transfers of an interest in a partnership and c other variations such as licenses of tangible_property service contracts leaseholds or other non-fee interests in property or prepayment front-loading or retention of rights to receive future payments although the current transaction does not explicitly fall within these examples these are examples only and are not meant to limit the transactions which are considered lease-strips under the notice specifically this transaction falls under the following description included in the notice t he parties to stripping transactions generally claim that one party realizes the income from property or services and that another party is entitled to take related depreciation rental expense or other deductions the service believes however that the claimed tax treatment improperly separates income from related deductions and that stripping transactions generally do not produce the tax consequences desired by the parties in this transaction b has claimed the depreciation while e a tax-exempt_entity is allocated most of the income the facts reveal that there is no economic purpose behind this allocation absent the benefit of depreciation b cannot make a profit on this transaction because of this the separation of income from related deductions is improper and the transaction falls squarely within irs notice_95_53 case development hazards and other considerations by harve m lewis chief passthroughs special industries branch field service division