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 b6 plr-108441-10 date date legend taxpayer corp a corp b corp c corp d corp e --------------------------------------------------------------- ------------------------ ------------------------------- ----------------------------- ---------------------------------------- ---------------------------------------------------- -------------------------------------------------------- ------------------------------------- ----------------------- corp f ----------------------------------------- corp g corp h state year year xdollar_figureydollar_figurestation technology -------------------------- authority --------------- -------------------------- ------------- ------- ------- ---------------- --------------- ------------------ ---------------------------------------------------- plr-108441-10 dear ------------------------ this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below facts taxpayer is a limited_liability_company organized under the laws of state taxpayer has not and will not elect to be classified as an association_taxable_as_a_corporation and accordingly taxpayer is classified as a partnership for federal_income_tax purposes taxpayer’s annual_accounting_period ends on december of each year and its overall_method_of_accounting is the accrual_method taxpayer owns the refined_coal facility ies the facilities and each a facility located adjacent to the station owned by authority the taxpayer is owned by i corp a a state limited_liability_company as a member holding --- of the outstanding membership interests ii corp b a state corporation as a member holding --- of the outstanding membership interests and ii corp c as a member holding --- of the outstanding membership interests the only material asset of corp a is its interest in taxpayer and other similar operating companies corp a is owned by i corp b as a member holding of the outstanding membership interests and ii corp d a state limited_liability_company as a member holding --- of the outstanding membership interests corp e a state corporation owns ----- of the stock of corp b corp e is a publicly traded corporation corp e is one of the world's ------------------------------------------ ----------------------------------------- firms corp b has extensive experience in developing technologies and making investments in the clean and alternative_fuel sectors and beginning in year partnered in numerous projects that generated tax_credits under sec_29 of the internal_revenue_code code nearly all of these projects are continuing to operate today some supplying energy to industries such as hospitals mines and factories while others use generators to supply electricity to the grid corp e met and partnered with technology developers as a consequence of its investment and development of sec_29 fuel projects it has invested in various clean energy technology companies that are developing coal gasification retrofits for older utility boilers and chemical scrubbing systems for co2 emissions one of the technology companies that corp e invested in was a company called corp g initially corp e funded the preliminary research that was performed to show the potential of the technology the technology once the technology was proven in the lab however it plr-108441-10 needed to be taken to the field corp e was instrumental in introducing negotiating with and financing the full-scale testing that resulted from the lab tests eventually corp e became the managing member of corp g and has brought its experience in working with the utilities to assist in the commercialization of the technology ------------------------- ---------------------------------------------------------------------------------------- corp b has also negotiated and closed five licenses on behalf of corp g for use of the technology in full-scale applications corp d is owned by corp f a state limited_liability_company corp d is treated as a disregarded_entity for federal_income_tax purposes and as a division of corp f corp f is the holding_company for a ------------------------firm better known as corp h which is one of the world’s largest -----------------firms corp f and a related company have collectively invested in several energy projects initially in year as a passive investor in projects that generated income_tax credits under sec_29 of the code and later as an active operator of numerous oil_and_gas projects with a net_worth of approximately xdollar_figure corp d is a special purpose entity created for the purpose of entering into the transactions described herein corp d’s sole asset is the corp a membership interest purchased from corp b pursuant to a membership interest purchase agreement mipa between corp b and corp d corp b sold to corp d a --------------- percent ----- --- membership interest in corp a in exchange for a purchase_price closely approximating corp d’s proportionate share of the total cost of constructing and installing the facilities corp a and each other member of the taxpayer is obligated under the llc operating_agreement to contribute to taxpayer as the operating company its proportionate share of the operating costs including the sub-license royalties defined below each member of corp a is obligated to contribute to corp a amounts sufficient to enable corp a to make these contributions to taxpayer and corp d explicitly assumes the obligation to make its share of these contributions in the mipa in connection with the mipa corp e and corp f will guarantee certain of the obligations of corp b and corp d executed transaction documents for the facilities taxpayer as operating company has constructed and installed the facilities and has commercially deployed the technology described below at the station taxpayer has entered into a site lease the lease with authority that allows taxpayer to construct and locate the facilities at the station pursuant to the terms of the lease taxpayer has rights of ingress and egress as appropriate plr-108441-10 taxpayer owns the facilities at the station each facility generally consists of the following ----------------------------- -------------------------- ---------------------- ---- ----------------------------- ------------------ -------------------------------- ------------------- --------------------------------------------- and --------------------- the total capital costs of constructing and installing the facilities at the station was approximately ydollar_figure with respect to each facility taxpayer has entered into a coal supply agreement whereby it will purchase coal feedstock from authority at the station the coal supply agreement does not prohibit the taxpayer from purchasing feedstock coal from third parties and does not prohibit taxpayer from purchasing more feedstock coal than authority would expect to buy from the taxpayer in the form of refined_coal the feedstock coal purchased by taxpayer from authority will be coal that authority itself purchased from third party vendors consistent with its coal procurement specifications the coal specs authority typically issues an offer to purchase coal that satisfies its composition specifications ie the coal specs pursuant to this procurement methodology authority regularly purchases coal meeting the coal specs at the least expensive price from one or more of approximately ------------------- mines as relates to the station the authority coal specs generally specify a maximum sulfur percentage content for the feedstock coal of ---- to ---- and a maximum moisture content of --- at each facility taxpayer or a subcontractor will buy feedstock coal from authority and apply technology to the coal feedstock in this regard an operating and maintenance contract o m contract has been entered into with a third party operator to operate the facilities on behalf of taxpayer the operator is not related to authority corp a taxpayer or the members of corp a or taxpayer thereafter the taxpayer will sell the resulting refined_coal to authority pursuant to a refined_coal sale agreement pursuant to this agreement authority will purchase from taxpayer an amount of refined_coal estimated to be produced by the facilities to the extent that the actual production of refined_coal exceeds this estimated amount authority has the right to purchase the excess production if authority declines to purchase the excess production then taxpayer has the right to sell the excess production portion of refined_coal produced to one or more third parties each ton of refined_coal sold to authority pursuant to the refined_coal sale agreement will be sold for a price that is -----------------------------------per ton less than the price paid_by taxpayer for the feedstock coal pursuant to the coal supply agreement this subsidy in the price is designed to compensate authority for the risk to its boilers and its generation process in general from the use of refined_coal rather than its traditional feedstock coal and to induce it to use the output from the facilities plr-108441-10 description of the technology and licensing sublicensing corp b owns certain licensing rights to a proprietary coal-refining process referred to as the technology when the technology process is applied as part of an electric and steam generating facility by adding chemicals to coal prior to burning the coal in a furnace it has the effect of reducing emissions of certain pollutants from the burning of the resulting refined_coal increasing fuel efficiency and reducing boiler maintenance the by-product of this process is a valuable fly ash which can be used in a diverse array of applications in the steel mining and cement industries the technology is a dual-injection sorbent system in which separate sorbents for mercury and nox control are added to and mixed with input coal technology’s patent- pending process starts with several chemical additives being added to coal prior to its combustion in a furnace the additives provide the chemical structure to create a ceramic matrix using chemical bonds to capture emissions of regulated pollutants the matrix has a certain structure of chemicals in certain positions at the interior corners of the matrix the structure will pick up and hold pollutants such as mercury arsenic or lead the structure also picks up and includes elements such as oxygen chlorides and fluorides which are freely available in a boiler's gas stream when they have been released from the coal during combustion but become locked up in the ceramic matrix as the gas stream starts to cool the chemical bonds form into a very strong matrix because the matrix was created under extremely high temperatures it can only be broken at similar temperatures in conventional combustion mercury and many other heavy metals are vaporized in the combustion process and are emitted into the atmosphere with the flue gas in the technology process mercury and many other heavy metals are removed as part of the fly ash the mercury and other heavy metals are entrapped in the fly ash as described above in a non leachable form for safe disposal further in conventional combustion nitrogen oxides are produced as the fuel is burned under oxidizing conditions the levels produced are a function of many factors including excess air fuel nitrogen content flame temperature burner configuration and combustion air staging among others it can even be affected by ambient air temperatures technology’s sorbent technology provides nox reductions via several mechanisms lowering flame temperature adsorption of nox species and chemical capture of nox species the primary mechanism appears to involve adsorption and capture of nox species within the altered fly ash this results in a significant reduction in the nox species that are released into the air corp b has entered into an agreement sub-license agreement to sub- license the technology to taxpayer as taxpayer utilizes the technology to produce refined_coal taxpayer will make royalty payments to corp b the sub-license royalties the sub-license royalties will be payable in amounts equal to --------------- ---------------- per dollar of refined_coal credit arising from the operations of taxpayer plr-108441-10 reduced by any other operating costs incurred by taxpayer from this amount corp b must pay to corp g ---------------per ton of refined_coal for the first three years of production and thereafter the greater of ----- cents per ton or ---- of the sec_45 tax_credits available per ton corp b retains the balance pilot scale testing of the technology with respect to the station during the calendar_year the technology was tested the pilot scale testing periodically at a world renown testing center testing center the testing center is recognized as one of the world's leading developers of cleaner more efficient energy and environmental technologies to protect and clean air water and soil in connection with this testing an emissions monitoring system was used to measure the effect of the technology on nox co and o2 emissions in addition the mercury weight content of the fly ash was tested to measure mercury capture by the technology during the pilot scale testing coal was burned in one of the boilers at the testing center's boiler house the boiler and the combustion conditions were designed to replicate the combustion and other operating conditions for the station moreover the feedstock coal used for testing the tested coal was of the same type source or rank as the coal that is currently burned at the station in particular the tested coal tested during the pilot scale testing was consistent with authority’s coal specs the combustion of the tested input coal after applying the technology ie refined_coal resulted in a nitrous oxide emissions reduction in excess of ------------------- ------------------------------------------------------------- similarly the combustion of the tested input coal after applying the technology ie refined_coal resulted in a mercury emissions reduction in excess of ------------------------------------------------------------------------- ----------- rulings requested based on the foregoing taxpayer has requested that we rule as follows the refined_coal produced by using the technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 of the code pursuant to b of notice_2010_54 the notice taxpayer may satisfy the redetermination requirement of dollar_figure of the notice by laboratory analysis establishing that the s and hg content of both the feedstock coal and the refined_coal on average do not vary by more than ten percent from the s and hg content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of dollar_figure of the notice plr-108441-10 the taxpayer may rely upon pilot scale testing and subsequent permitted laboratory testing as required for a redetermination to satisfy the qualified_emission_reduction test of sec_45 of the code regardless of subsequent normal fluctuations in operating conditions for the station law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 irb date provides that the term refined_coal means a fuel which -- i is a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii is sold by the taxpayer with the reasonable expectation that it will be used for purpose of producing steam and iii is certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date in the case of production at a facility placed_in_service before date a reduction of at least percent of the emissions of nox and at least percent of the emissions of either so2 or hg released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of the notice generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i if performed plr-108441-10 by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieved the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining and are actually applied by a taxpayer in any part of the taxpayer's process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 of the code or any necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing though a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to removed free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b of the notice section of the notice provides that methods other than cems field testing may be used to determine the emissions reduction if a method other than cems field testing is used the service may require the taxpayer to provide additional proof that the emission reduction has been achieved the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it established that the method accurately measures the emission reduction that would be achieved in a boiler described in section a a i of the notice and a qualified_individual verifies the test results in a manner that satisfies the requirements of section c i ii v and vi of the notice b a laboratory analysis of the feedstock coal and the refined_coal that complies with a currently applicable epa or astm standard and is permitted under section b i or ii of the notice section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure of the notice applies to plr-108441-10 production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of feedstock coal that occurs after the date of such determination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure of the notice must use a method that meets the requirements of section dollar_figure of the notice in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that - a the sulfur s or hg content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the s or hg content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process b the s or hg content of both the feedstock coal and the refined_coal do not vary by more than percent from the s and hg content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice finally section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attached to its tax_return on which the credit is claimed a certification that contains the following a a statement that the fuel will result in a qualified emissions reduction when used in the production of steam b a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel and that there have been no changes in the source or rank of feedstock coal used or in the process of producing refined_coal from the feedstock coal since the emissions reduction was determined or was most recently determined and a declaration signed by the taxpayer in the following form under penalties of perjury i declare that i have examined this certification and to the best of my knowledge and belief it is true correct and complete with respect to the first issue the technology starts with several chemical additives added to the feedstock coal prior to its combustion in a furnace the additives provide the chemical structure to create a ceramic matrix using chemical bonds to capture pollutants section dollar_figure of the notice provides generally that a qualified plr-108441-10 emission reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as further defined in the code if performed by the mine owner or operator sec_613 of the code describes certain treatment processes that are not considered as mining unless they are provided for in sec_613 of the code or are necessary or incidental to a process provide for in sec_613 of the code for example of the notice provides in part that any cleaning process such as the application of liquid hydrocarbons or alcohol to the surface of the fuel particle or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal will be considered mining in the instant case the technology is not a mining process further section dollar_figure of notice_2010_54 clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with an additive or additives thus additive processes which mix certain chemicals or other additives with the coal in order to achieve emission reductions may qualify for the production_tax_credit for refined_coal accordingly we conclude that the refined_coal produced by using the technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 of the code with respect to the second issue of the notice provides that any permissible testing method provided for in the notice can be used in emission testing for any pollutant that is a taxpayer can use different testing methods for each of nox so2 or hg provided the method used for any pollutant is a permissible method section of the notice provides that an emission test establishing a qualified_emission_reduction qualifies the refined_coal for a six-month period provided there is no change in the process for producing the refined_coal or in the source or rank of the feedstock coal therefore a taxpayer must redetermine the emission reductions to qualify for the succeeding six-month period using one or more approved methods section of the notice provides that in the context of redetermination that the redetermination requirement may be satisfied by laboratory analysis establishing either that i the s or hg content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least in the case of facilities placed_in_service after date in comparison to the s or hg content of the amount of useful thermal energy excluding any dilution caused by materials combined or added during the production process or ii the s or hg content of both the feedstock coal and the refined_coal do not vary by more than from the s or hg content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the testing methods for emissions reductions in dollar_figure of the notice in the instant case as each train of coal purchased by authority arrives at station authority takes a sample of such coal from each train load and tests its sulfur content to ensure that such coal satisfies the authority coal specs the delivered coal is then added to a coal pile owned and maintained by authority thus each coal pile is comprised of coal that meets the authority coal specs and may have been purchased by authority from a number of different mines thereafter taxpayer purchases coal from authority coal pile processes this feedstock plr-108441-10 coal into refined_coal and sells the refined_coal to authority after purchasing the refined_coal authority takes samples of it each day and analyzes the sulfur content of a composite of such refined_coal samples each week moreover at the direction of taxpayer pilot scale testing will be performed on this feedstock coal from authority coal pile and the refined_coal produced from such feedstock coal to initially confirm that the qualified_emission_reduction testing is satisfied as a part of the testing samples of the feedstock coal and refined_coal are analyzed and s and hg content are noted subsequently based upon the redetermination requirements set forth in the notice either authority or taxpayer will test the s and hg content of samples from i each train load of feedstock coal or a weekly composite of such samples and ii a weekly composite sample of refined_coal thus taxpayer will average the results of the s and hg laboratory analysis testing over a six month period to determine whether a combustion redetermination is required in the event the s or hg content of the feedstock coal or the refined_coal on average were to change by more than this ten percent permissible variation additional combustion testing instead of laboratory analysis will be performed as required for a redetermination pursuant to the notice accordingly we conclude that pursuant to b of the notice taxpayer may satisfy the redetermination requirement of dollar_figure of the notice by laboratory analysis establishing that the s and hg content of both the feedstock coal and the refined_coal on average do not vary by more than ten percent from the s and hg content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of dollar_figure of the notice with respect to the third issue the discussion relating to the second issue is also applicable in particular of the notice requires that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination under dollar_figure of the notice must meet the requirements of dollar_figure of the notice while a redetermination required because of the earlier of i the lapse of six months from the date of such determination or redetermination and ii a change in the source or rank of feedstock coal that occurs after the date of the determination or redetermination may be satisfied by laboratory analysis described in a or b based on our understanding of taxpayer’s practice we do not believe that normal fluctuations in the operating conditions occurring at the station should be construed as resulting in a change in the process of producing refined_coal from feedstock coal accordingly we conclude that taxpayer may rely upon pilot scale testing and subsequent permitted laboratory testing as required for a redetermination described in a or b of the notice to satisfy the qualified_emission_reduction test of sec_45 of the code regardless of subsequent normal fluctuations in operating conditions for the station based on the foregoing we conclude as follows plr-108441-10 the refined_coal produced by using the technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 of the code pursuant to b of the notice taxpayer may satisfy the redetermination requirement of dollar_figure of the notice by laboratory analysis establishing that the s and hg content of both the feedstock coal and the refined_coal on average do not vary by more than ten percent from the s and hg content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of dollar_figure of the notice taxpayer may rely upon pilot scale testing and subsequent permitted laboratory testing as required for a redetermination described in a or b of the notice to satisfy the qualified_emission_reduction test of sec_45 of the code regardless of subsequent normal fluctuations in operating conditions for the station no opinion is expressed regarding any other issue not specifically addressed in this ruling letter in particular no opinion is expressed with respect to whether taxpayer is the owner of the facility for federal_income_tax purposes further no opinion is expressed whether the transaction meets the requirements of sec_7701 of the code relating to economic_substance finally no opinion is expressed whether any particular facility has been placed_in_service prior to date in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent we are sending a copy of this letter_ruling to the industry director sincerely peter c friedman peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries


internal_revenue_service department of the treasury number release date index no mr washington dc person to contact sean m dwyer id no telephone number refer reply to cc ita - cor-116128-01 date date dear mr this is in response to your letter dated date requesting a general information_letter on the deductibility of health club_dues as medical_expenses under sec_213 of the internal_revenue_code as you may know an information_letter calls attention to a well-established interpretation or principle of tax law it is advisory only and is not a binding determination by the internal_revenue_service sec_262 provides that except as otherwise expressly provided by the code no deduction is allowed for personal living or family_expenses items of a personal living or family nature are deductible as medical_care expenses to the extent expressly provided by sec_213 sec_213 of the code allows a deduction for expenses paid during the taxable_year not compensated by insurance or otherwise for medical_care of the taxpayer a spouse or a dependent to the extent that those expenses exceed percent of the taxpayer’s adjusted_gross_income sec_213 defines medical_care to include amounts paid for the diagnosis cure mitigation treatment or prevention of disease or for the purpose of affecting any structure of function of the body sec_1_213-1 of the income_tax regulations further states that medical_care under sec_213 is strictly limited to expenses_incurred primarily for the prevention or alleviation of a physical or mental disease or defect an expenditure that is merely beneficial to the general health of an individual is not for medical_care and therefore is a nondeductible personal_expense rev_rul 1955_1_cb_307 states that fees paid to a health institute at which the taxpayer takes exercise rubdowns etc are ordinarily a personal_expense however fees paid to health institutes may be deductible as a medical expense if such treatments are prescribed by a physician and are substantiated by a statement by the physician that the treatments are necessary for the alleviation of a physical or mental defect or illness of the individual receiving the treatments thus in a particular situation fees for specific services provided by a health club may be deductible if the requirements discussed above are met however sec_274 specifically provides that no deduction shall be allowed for federal_income_tax purposes cor-116128 for membership in any club organized for business pleasure recreation or other social purpose i hope this information is helpful please call sean dwyer at the number above if you have any questions sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch


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 corp plr-113527-12 date date legend us parent --------------------------------------------------- ---------------------------------------------------------- ------------------------------------------ sub --------------------------------------------------- ---------------------------------------------------------- ---------------------------------- sub --------------------------------------------------- ----------------------------------------------------------- ----------------------------- sub --------------------------------------------------- ----------------------------------------------------------- ---------------------------------------- --------------------------------- fsub --------------------------------------- -------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------- dre --------------------------------------------------- --------------------------------------------------------------------------- ---------------- plr-113527-12 dre ----------------------- --------------------------------------------------- --------------------------------------------------------------------------- state a state b country a a b c nols --------- ----------- ------------- ------------ -------- -------- -------- ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ ----------------- dear --------------- this letter responds to a date letter requesting rulings on certain federal_income_tax consequences of the proposed transactions defined below the information provided in that letter and in later correspondence is summarized below summary of facts us parent a privately held state a corporation is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return us parent group us parent wholly owns dre a state b limited_liability_company disregarded as separate from its owner for federal_income_tax purposes under sec_301_7701-3 dre wholly owns sub a state b corporation which in turn wholly owns dre a state b limited_liability_company disregarded as separate from its owner for federal_income_tax purposes under sec_301_7701-3 dre owns a percent of the only class of outstanding_stock of sub a state b corporation the remaining stock of sub is owned by unrelated persons us parent also wholly owns sub a state a corporation which in turn wholly owns fsub a country a entity classified as a corporation for u s federal_income_tax purposes under sec_301_7701-3 us parent sub sub and sub are all members of the us plr-113527-12 parent group however sub has incurred certain nols that arose in separate_return years of sub proposed transactions the taxpayer has proposed the following transactions proposed transactions i ii us parent will transfer a note to dre in exchange for b percent of the outstanding_stock of sub in an arm’s length transaction intended to be treated as a taxable transaction for federal_income_tax purposes stock purchase us parent will transfer the stock of sub received in the stock purchase to sub which will in turn transfer such stock to fsub in transactions that are each intended to qualify under sec_351 subsequent to the proposed transactions the us parent group will own c percent of the outstanding_stock of sub and sub will file a separate_return for federal_income_tax purposes ruling sec_1 after the proposed transactions sub will not be a member of the us parent group in taxable years after the proposed transactions sub will not be subject_to the limitations of sec_1_1502-21 unless it becomes a subsidiary of a consolidated_group caveats the ruling contained in this letter is based on 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 plr-113527-12 procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this ruling letter in accordance with the power_of_attorney on file in this office a copy of this ruling letter is being sent to your authorized representative sincerely gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh date date number release date legend b high school c university w number x dollars amount dear you asked for advance approval of your scholarship grant procedures under sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request you are operating a scholarship program to graduates of b for higher education you wish to honor achievements of qualified students and encourage their higher education and to put a meaningful dent in their debt incurred for higher education the scholarship will be awarded to reduce tuition in the first semester at a year or year college or university of technical vocational school in the united_states whose tuition and mandatory letter catalog number 58263t fees charged to the student do not exceed those of the highest charged to in-state residents at c b promotes your scholarship program via a bulletin board located in the main hallway of its building in addition information about your scholarship program along with other scholarships is posted on b's website and in its college and career database emails are also sent to students and parents regarding scholarship opportunities furthermore b has made the application available electronically through a web page on its website in order to be eligible applicants must be a senior at b and plan to attend college or trade school in the following fall semester which is described in sec_170 have a cumulative gpa of in grades at the time of the application students must also submit the completed application by the deadline to the guidance office at b as part of the application applicants must provide an explanation on why they need financial assistance explain their career goals intended major in college and or academic fields of interest provide a statement explaining how they are a well-rounded person provide a list of extracurricular activities as well as any honors and awards for any accomplishments attach of copy their fafsa free application_for federal student aid to their application arrange for two teachers to provide references to you arrange for the guidance office at b to provide you a copy of their transcript your selection committee will consist of your founding trustee and family members who are graduates of b the founding trustee may also invite others at her discretion to participate committee members of your selection committee must be interested and committed to reviewing and rating prioritizing applications relatives of the trustees of substantial contributors and of members of the selection committee are not eligible for scholarships there is no intent to favor scholarship applicants that are friends or neighbors of disqualified persons although it is possible that members of the selection committee may be acquainted with a few of the applicants the committee will evaluate each applicant's academic performance financial need extracurricular activities difficulties of family situation career aspirations sat or act scores and recommendations of teachers coaches and guidance counselors of b in addition when ranking applicants the following criteria will be used when discussing and ranking applicants letter catalog number 58263t to what extent will the student's higher education likely need to be financed with debt your scholarships are aimed at persons who anticipate financing their education wholly or primarily with debt is the student hard-working as evidenced by the application including references does the student have substantial extracurricular activities whether in sports an outside job clubs or other activities the committee reserves the right to interview a small number of finalists before a final_decision is made the scholarship recipients will be announced at b's end-of-year awards ceremony in addition the recipient must not have accepted another full or partial scholarship grant at the time of the payment of the grant you intend to make payment directly to the schools as long as the grantee is enrolled in good standing and not under academic or other probation the school must agree to use the grant funds to defray the grantee's tuition only prior to distribution of the grant you will require proof of enrollment if a student drops out in the first semester you will require that you will have priority in any refund you will obtain an agreement from the student and his her parents or guardian on this matter prior to paying the grant you will retain case histories and records pertaining to all scholarship grants you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees' assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring you represent that you will maintain the following all records relating to individual grants including information obtained to evaluate grantees identify a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant letter catalog number 58263t the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey i cooper director exempt_organizations rulings and agreements letter catalog number 58263t