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-111104-00 date date legend company authority date date date date date date date date bonds lessor vendor a b c dear this letter is in reply to your request for rulings that an allocation of bond proceeds may be disregarded and certain expenditures are not capital expenditures within the meaning of sec_144 of the internal_revenue_code facts and representations you make the following factual representations the company has a facility where it manufactures various steel products recently the company expanded that facility using the proceeds of the bonds the bonds were issued by the authority on date and the authority elected to apply the dollar_figure million limitation for exempt small issues under sec_144 to the bonds some of the bond proceeds were to be used by the authority to acquire equipment the equipment from the vendor which was to be leased to company for the facility to execute this plan on date the company issued a purchase order the vendor purchase order to the vendor that order specified that the price of the equipment was dollar_figurea and required progress payments to be paid to the vendor at various dates as of date the authority had the trustee for the bond issue pay dollar_figureb from the bond proceeds in progress payments for the equipment about date which was about the same time that the authority had made the progress payments the company discovered that it had understated the aggregate amount of capital expenditures to be paid for the facility when the error was corrected the company realized that the relevant capital expenditures when aggregated with the bond proceeds would exceed the dollar_figure million limitation to correct the problem the company determined that it would need to make some of the capital expenditures from the bond proceeds instead of from other sources of funds as a result there would not be enough bond proceeds to pay these capital expenditures and to purchase the equipment accordingly the company planned to have an unrelated third party the lessor purchase the equipment and lease it under an operating_lease to the company on or about date lessor entered into a letter of understanding with the company that provided that the company would lease the equipment from the lessor under a previously executed master lease agreement on date the company entered into a progress payment agreement the progress payment agreement with the lessor providing that the company assigned to the lessor its right to purchase the equipment from the vendor and the lessor agreed to make progress payments for the equipment to the vendor on behalf of the company the progress payment agreement provided that these payments were loans from the lessor to the company the lessor paid dollar_figurec to the vendor on behalf of the company on date which was within months of date vendor returned to the trustee the dollar_figureb that the trustee had paid the vendor from the bond proceeds the trustee deposited this money into the construction fund on date the authority the company and the vendor entered into another agreement which was intended to clarify and supercede any prior agreements to the extent that the date agreement was inconsistent with the prior agreements under the date agreement the vendor purchase order and the progress payment agreement were canceled the vendor agreed to refund to lessor the dollar_figurec that was paid under the progress payment agreement and the lessor agreed to purchase the equipment from the vendor on its own behalf also on that date the vendor refunded dollar_figurec to lessor as of the date of this ruling_request the lessor had not fully paid the vendor for the equipment and the equipment has not been delivered to the facility the authority requests rulings that the allocation of dollar_figureb of bond proceeds to progress payments may be disregarded and the dollar_figurec that was paid_by the lessor on behalf of the company under the progress payment agreement which was then later refunded to the lessor is not a capital_expenditure within the meaning of sec_144 law sec_103 provides that gross_income does not include interest on a state_or_local_bond sec_103 provides in part that sec_103 does not apply to any private_activity_bond unless it is a qualified_bond under sec_141 sec_141 provides in part that a qualified_small_issue_bond is a qualified_bond sec_144 provides that the term qualified_small_issue_bond means any bond issued as part of an issue the aggregate authorized face_amount of which is dollar_figure or less and percent or more of the net_proceeds of which are to be used for the acquisition construction reconstruction or improvement of land or property of a character subject_to the allowance for depreciation or to redeem a prior issue that was used for those purposes sec_144 provides in general that at the election of the issuer with respect to any issue sec_144 shall be applied by substituting dollar_figure for dollar_figure and in determining the aggregate face_amount of such issue by taking into account certain prior bond issues and the aggregate amount of capital expenditures with respect to certain facilities paid_or_incurred during the 6-year period beginning years before the date of such issue and ending years after such date sec_1_148-6 provides that an issuer may use any reasonable consistently applied accounting_method to account for gross_proceeds investments and expenditures of an issue sec_1_148-6 provides in part that an issuer must account for the allocation of proceeds to expenditures not later than months after the later of the date the expenditure is paid or the date the project if any that is financed by the issue is placed_in_service this allocation must be made in any event by the date days after the fifth anniversary of the issue_date or the date days after the retirement of the issue if earlier in revrul_79_248 1979_2_cb_41 a corporation purchased equipment that is ordinarily leased sold the equipment to an unrelated leasing company before it was installed or placed_in_service and leased it back under a operating_lease for use in its manufacturing plant which had been financed with industrial_development_bonds the ruling holds that for purposes of the exempt small issue limitation of sec_103 of the internal_revenue_code of the predecessor to sec_144 the cost of the equipment is a capital_expenditure made on the date of purchase by the corporation in revrul_80_162 1980_1_cb_26 a corporation ordered custom-made equipment and paid a deposit and down payment for the equipment from its own funds the corporation then discovered that its purchase of the equipment would cause the dollar_figure exempt small issue limit to be exceeded the corporation immediately entered into an agreement with an unrelated corporation whereby the other corporation would purchase the custom-made equipment from the same vendors and lease it to the first_corporation under a operating_lease agreement the vendors terminated their contracts and refunded the down payments and deposits to the first_corporation the ruling holds that the down payments and deposits are not capital expenditures because the corporation did not purchase the equipment revrul_79_248 is distinguished on the grounds that in revrul_79_248 the purchase of the equipment was completed the corporation had paid the full purchase_price whereas in this ruling the corporation did not actually complete the purchase of the equipment analysis neither the code nor the regulations contain any rules under sec_144 for allocating bond proceeds to expenditures nevertheless we consider the principles underlying the allocation rules of sec_148 for guidance on the allocation rules for sec_144 under sec_148 allocations of expenditures must occur within months of the later of the date the expenditure is paid and the date the project is placed_in_service but in no event later than days after the earlier of the fifth anniversary of the issue_date and the retirement date of the issue by not requiring allocations to be determined when the expenditure is paid_or_incurred the regulations acknowledge that day-to-day practicalities require some flexibility for when issuers must make allocations we conclude that these practicalities also require flexibility for certain corrections to allocations particularly if those corrections are made immediately after the error is discovered and soon after the allocation is made for similar reasons we conclude that some flexibility is necessary for allocations under sec_144 in the instant case the authority entered into the vendor purchase order for the equipment and allocated dollar_figureb of bond proceeds to the progress payments it made to the vendor at about the same time the company discovered that it had erred in calculating the capital expenditures that would count toward the dollar_figure million limitation within months of the date the progress payments were made and the error was discovered the authority received the dollar_figureb refund from the vendor we conclude that the authority is permitted to disregard its allocation of bond proceeds to the progress payments the authority took steps to correct the error immediately after it was discovered moreover the authority received the progress payments back within a short time of paying them we also conclude that based on revrul_80_162 the dollar_figurec that was paid_by the lessor on behalf of the company under the progress payment agreement and that was later refunded to the lessor should not be treated as a capital_expenditure for purposes of sec_144 on date within a short_period after the calculation error was discovered the company entered into an agreement under which the lessor would purchase the equipment and lease it to the company this agreement also terminated the vendor purchase order the dollar_figurec paid_by the lessor on behalf of the company was refunded to the lessor and the progress payment agreement was terminated eliminating any obligation the company had to the lessor under that agreement as of date the vendor had not been fully paid for the equipment and the equipment had not been delivered to the facility conclusions based on the foregoing analysis we conclude that the allocation of the dollar_figureb of proceeds of the bonds to progress payments under the vendor purchase order is disregarded and the dollar_figurec that was paid_by the lessor on behalf of the company under the progress payment agreement which was then later refunded to the lessor is not a capital_expenditure for purposes of sec_144 except as specifically ruled above no opinion is expressed concerning this transaction under any provision of the code or regulations thereunder specifically no opinion is expressed concerning whether interest on the bonds is excludable from gross_income under sec_103 we do not address any issues under sec_148 including any issues that may arise because the allocation of bond proceeds to the progress payments is disregarded this ruling letter is addressed only to the taxpayer who requested it sec_6110 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 is being sent to the company’s authorized representative sincerely yours assistant chief_counsel exempt_organizations employment_tax government entities by rebecca l harrigal chief tax exempt bond branch


internal_revenue_service number release date index number 468b ------------------------------------------------------------ ---------------------- ------------------------------------------------------------ ----------------------------------------------- ------------------------------------ ---------------------------------- ----------------------------------------- - 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 ita b06 plr-132932-05 date december ------------------------------------------------------------------------------------------------ ----------------------- ----------------------------------------------------------------- legend fund -------------------------------------------------------------------------------------------------------------- court defendant ------------------------------------------------------- state year year year date dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree dollar_figuref dollar_figureg dollar_figureh m n p q r dear -------------- ------------------ ------- ------- ------- --------------------- ----------------- ----------------- ----- --------- ----- ------- ------------ ----- ----------- ----------- ----------- -------- --------- plr-132932-05 this is in reply to a request for rulings dated date concerning the establishment of fund pursuant to an order of settlement approved by the court in connection with a class action lawsuit brought against defendant for declaratory and injunctive relief and equitable restitution for alleged violations of the employment retirement income security act of erisa as amended specifically you have requested the following rulings income_tax regulations revenue code for distributions made to class members and fund does not have a reporting obligation to class members under sec_6041 of the code for amounts paid from fund for administration costs and attorneys’ fees paid to class counsel fund does not have a reporting obligation under sec_6041 of the internal fund is a qualified_settlement_fund described in sec_1_468b-1 of the facts defendant is a nonprofit corporation located in state engaged in the business of providing insurance coverage for employer-sponsored health and welfare_benefit plans for employees the plans are governed under erisa among other federal and state laws in year individual policyholders participants and beneficiaries in employer- sponsored health and welfare_benefit plans provided and administered by defendant filed a lawsuit in the court against defendant alleging among other things that defendant violated erisa and related plan contractual obligations with covered individuals by causing them to overpay for services provided by defendant and or by failing to fully reimburse individual policyholders for medical costs and services the lawsuit was certified as a class action in year with an estimated m class members in year after several years of pre-trial litigation the parties to the class action lawsuit agreed to settle the case on date the court entered an order approving the stipulation of settlement among other things total of dollar_figurea into fund to be used to settle all claims of the class members it also provides that costs of administering the settlement and class counsel attorneys’ fees will be paid from fund after administration costs and attorneys’ fees fund will have approximately dollar_figureb to distribute to individual class members in accordance with the terms of the stipulation of settlement the fund administrators estimate that n class members out of a total of approximately m will receive cash distributions from the settlement the fund the stipulation of settlement provides in pertinent part that defendant will pay a plr-132932-05 administrators used a database provided by defendant to identify and locate potential claimants and mailed out p notices to class members at their last_known_address the information from defendant’s database also included social_security numbers for nearly of potential class members be made from fund to claimants an initial cash distribution will be sent to the n class members referred to above to the last_known_address no other requirement is necessary to be entitled to receive an initial cash distribution since all n class members will automatically be sent initial distributions and no similar litigation has been initiated by or on behalf of any individual no actual opt_out or request for exclusion is necessary as part of the settlement or as an element in the notice to class members the fund administrators estimate that at least two separate cash distributions will the initial cash distribution is scheduled to be made in year pending the fund makes the following additional representations approximately r of the n class members will be eligible to receive a second cash outcome of this ruling based on estimates initial cash distributions to individual claimants will range from as low as dollar_figurec to as high as dollar_figured with an average initial cash distribution of dollar_figuree about q class members entitled to an initial cash distribution will receive distributions of dollar_figuref or more distribution to receive a second cash distribution a claimant must provide a current address and a signature the second cash distribution likely will be made in year the fund administrators also estimate that approximately dollar_figureg will be available for the second cash distributions with an average cash distribution to individual claimants of approximately dollar_figureh experience based on data submitted by defendant to the fund administrators the fund administrators believe it is unnecessary impractical and hopelessly expensive to record or to calculate the actual amount of each distribution attributable to any single claim individual damage amounts have been both reduced on a percentage basis and pro rated at least twice a distribution amount therefore could include small segments of damage amounts attributable to dozens even hundreds of individual claims with some being of one type eg drug co-pay and some of another type eg office visits that can provide any assistance in determining whether the amounts paid_by any covered policyholder by way of co-pay or payment for office visit was ever itemized on a tax_return or reimbursed from a tax-sheltered plan such as a cafeteria_plan the fund administrators believe that no reliable data is available to the partie sec_1 while individual distribution amounts are calculated from actual claims plr-132932-05 law and analysis sec_1_468b-1 provides that a qualified_settlement_fund is a fund account classification of fund as a qualified_settlement_fund sec_468b of the code provides in part that nothing in any provision of law shall be construed as providing that an escrow account settlement fund or similar fund is not subject_to current income_tax pursuant to the authority of sec_468b the secretary has published sec_1_468b-1 through 468b-5 of the regulations regarding qualified settlement funds or trust that satisfies all three requirements of sec_1_468b-1 first sec_1_468b-1 requires that the fund account or trust is established pursuant to an order of or it is approved by the united_states any state including the district of columbia territory possession or political_subdivision thereof or any agency_or_instrumentality including a court of law of any of the foregoing and is subject_to the continued jurisdiction of that governmental authority second sec_1_468b-1 requires that the fund account or trust is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event or related series of events that has occurred and that has given rise to at least one claim asserting liability i under the comprehensive environmental response compensation and liability act of ii arising out of a tort breach of contract or violation of law or iii designated by the commissioner in a revenue_ruling or revenue_procedure third sec_1_468b-1 provides that the fund account or trust must be a_trust under applicable state law or its assets must be otherwise segregated from other assets of the transferor and related_persons resolve or satisfy claims described in sec_1_468b-1 as well as other types of claims ie non-allowable claims arising from the same event or related series of events the fund is a qualified_settlement_fund sec_1_468b-1 provides that if a fund account or trust is established to based on the facts represented the three requirements of sec_1_468b-1 are satisfied and as such fund is a qualified_settlement_fund for federal_income_tax purposes first fund is established pursuant to an order of the court dated date over which the court retains jurisdiction during fund’s complete administration see sec_1_468b-1 second fund is established to resolve or satisfy claims brought by the class members against defendant for damages allegedly sustained as a result of violations of erisa and other federal and state laws see sec_1_468b-1 third fund is maintained in a separate and completely unrelated account in the dominion and control of the fund administrators and as such is segregated from the other assets of defendant see sec_1_468b-1 finally the fact that other claims will be paid_by fund eg class counsel attorneys’ fees does not prevent fund from being treated as a qualified_settlement_fund see sec_1_468b-1 plr-132932-05 no reporting requirements for distributions to class members sec_1_468b-2 provides that payments and distributions by a qualified_settlement_fund are subject_to the information reporting requirements in sec_6031 through of the code sec_1_468b-2 provides in part that a qualified_settlement_fund must make information returns for a distribution to a claimant if one or more transferors would have been required to make a return had that transferor made the distribution directly to the claimant sec_1_468b-2 provides in part that for purposes of sec_6041 if a qualified_settlement_fund makes a payment or distribution on behalf of a transferor or a claimant the fund is deemed to make the payment or distribution to the recipient of that payment or distribution in the course of a trade_or_business except as otherwise provided sec_6041 requires information reporting from all persons engaged in a trade_or_business who make payments in the course of the trade_or_business to another person of rent salaries wages premiums annuities compensation remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more sec_1_6041-1 provides that income is fixed when it is to be paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained where the determination of the recipient’s gross_income inclusion of an amount is based on the knowledge of the recipient’s basis and the payer lacks such information the amount to be paid is not a payment of fixed or determinable amount of gains profits or income see eg revrul_80_22 1980_1_cb_286 payment of insurance proceeds not a payment of a fixed or determinable amount of gains profits or income where the determination of the recipients gross_income inclusion of the insurance proceeds is based on the knowledge of the recipient’s basis and the insurance_company lacks such information in addition sec_111 of the code provides that gross_income does not include income attributable to the recovery during the taxable_year of any amount deducted in any prior taxable_year to the extent such amount did not reduce the amount of federal_income_tax imposed based on the facts represented fund does not have an information reporting requirement under sec_6041 for distributions to class members the cash distributions from fund to class members are not payments of rent salaries wages premiums annuities compensation remunerations and emoluments moreover the cash distributions from fund to class members are not payments of fixed or determinable gains profits and income of dollar_figure or more a distribution from fund may be includible in the gross_income of a class member to the extent that the class member derived any federal_income_tax benefit from a previous deduction taken by the class member however fund is unaware of whether a class member took a deduction in a plr-132932-05 previous year and the amount by which the deduction reduced the class member’s federal_income_tax liability thus fund is unable to determine if a cash distribution to class members is includible in the gross_income of a class member and the amount of the gross_income inclusion if any no reporting requirements to class members for costs and fees paid from fund sec_1_468b-2 provides in part that for purposes of section sec_1_468b-2 provides that with respect to a payment or a if a qualified_settlement_fund makes a payment or distribution on behalf of a transferor or a claimant the fund is deemed to make the payment or distribution to the recipient of that payment or distribution in the course of a trade_or_business distribution on behalf of a transferor or a claimant and the information reporting requirements of sec_6031 through the qualified_settlement_fund is also deemed to have made the payment or distribution to the transferor or claimant sec_1_6041-1 provides that fees for professional services paid to attorneys are required to be reported in returns of information if paid_by persons engaged in a trade_or_business and paid in the course of such trade_or_business sec_6045 of the code requires any person engaged in a trade_or_business and making a payment in the course of such trade_or_business to file information returns with respect to any payment to an attorney in connection with legal services unless such payment is reportable under sec_6041 or sec_6051 of the code requirement under sec_6041 to the class members for amounts paid_by fund for the administration costs and attorneys’ fees paid to class counsel the payments are not payments or distributions made on behalf of the class members as described in sec_1_468b-2 and d furthermore payments made to class counsel in an opt-out class action are not income to the class members in opt-out class actions a class member obtains the benefits of an opt-out class action merely by coming within the definition of the class unless the member affirmatively excludes himself from the lawsuit the service has consistently ruled that a class member’s non-inclusion of payments to class counsel in an opt-out class action is consistent with situation of revrul_80_364 1980_2_cb_294 but cf 268_f3d_756 9th cir cert_denied sub nom 536_us_904 settlement of opt-in class action pursuant to age discrimination in employment act where class members had contingency fee agreements with counsel and fredrickson v comm’r t c memo aff’d in unpub opinion 9th cir settlement of mandatory title vii class action where class members personally signed settlement agreements providing for compensation of counsel in situation of revrul_80_364 a union filed claims on behalf of its members against a company due to a breach of a collective bargaining agreement subsequently the union based on the facts represented fund does not have an information reporting plr-132932-05 and the company entered into a settlement agreement later approved by a federal district_court that provided that the company would pay the union 40x dollars in full settlement of all claims the union paid 6x dollars of the settlement for attorneys’ fees and returned 34x dollars to the employees for back pay owed to them the ruling concluded that the portion of the settlement paid_by union for attorney’s fees was a reimbursement for expenses_incurred by the union and not includible in the gross_income of the union members conclusion sec_1 fund is a qualified_settlement_fund described in sec_1_468b-1 of the based solely on the information provided and the representations made we conclude as follows regulations distributions made to class members and fund does not have a reporting obligation to class members under sec_6041 of the code for amounts paid from fund for administration costs and attorneys’ fees paid to class counsel fund does not have a reporting obligation under sec_6041 of the code for the rulings contained in this letter are based upon information and representations submitted by fund 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 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 fund requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-132932-05 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely jeffery g mitchell branch chief branch income_tax accounting


office_of_chief_counsel department of the treasury internal_revenue_service washington d c date number release date conex-107308-19 uil the honorable michael c burgess member u s house of representatives south stemmons freeway suite lake dallas tx attention ---------------- dear representative burgess i am responding to your inquiry dated date on behalf of your constituent ------------ --------------asked about the tax reporting requirements for nail salon workers who receive cash payments specifically --------------explained his concerns about possible underreporting of income by workers in this industry this information_letter highlights certain general principles of law it is intended for information purposes only and does not constitute a ruling see revproc_2019_1 sec_2 2019_1_irb_1 january sec_61 of the internal_revenue_code code provides that gross_income means all income from whatever source derived including but not limited to compensation_for services including fees commissions fringe_benefits and similar items sec_1_61-2 of the income_tax regulations provides that tips are income to the recipients sec_3101 and sec_3111 of the code impose social_security and medicare taxes under the federal_insurance_contributions_act fica on employees and employers respectively equal to a percentage of the wages received by an employee with respect to employment sec_3121 defines wages for purposes of the fica tax as all conex-107308-19 remuneration for services performed by an employee for an employer with certain exceptions sec_3121 provides that cash tips of dollar_figure or more received by an employee in any calendar month in the course of the employee’s employment are wages for fica purposes similar rules are provided in sec_3401 and sec_3402 as they apply to income_tax_withholding the code establishes a set of specific rules that govern tip reporting the fundamental rule is that an employee must report tips received to his or her employer this rule is found at sec_6053 of the code and requires every employee who receives more than dollar_figure in tips a month to report those tips to their employer on a written_statement no later than the 10th day of the month following the month in which the employee received the tips sec_6051 requires employers to provide employees with a written_statement form_w-2 each year showing among other things the_amount_of_wages paid and the amount of income and employment_taxes deducted and withheld under sec_31_6051-1 of the regulations tips reported by the employee to the employer under sec_6053 are reported as wages on form_w-2 self-employed individuals generally are responsible for filing and paying all their own taxes which includes self-employment_tax as well as income_tax self-employment_tax is a social_security and medicare_tax primarily for individuals who work for themselves it’s similar to the social_security and medicare taxes withheld from the pay of most wage earners tips received by self-employed individuals should be reported as income on schedule c profit or loss from business self-employed individuals can get more information about reporting in publication tax guide for small_business on our website at www irs gov click on forms publications if the irs determines that a worker underreported their tips they could be subject_to additional federal_income_tax social_security and medicare taxes penalties and interest may also apply i’m enclosing a copy of publication reporting tip_income which provides guidance for employees who receive tips i’m also enclosing a copy of publication tips on tips which gives guidance to tip_income reporting for employers in businesses that usually generate tip_income conex-107308-19 again this letter is intended for information purposes only and does not constitute a ruling i hope it is helpful if you have additional questions please contact me or ---------- ------------------------at ------------------ sincerely enclosures melissa l duce senior technician reviewer employment_tax branch office of the associate chief_counsel employee_benefits exempt_organizations employment_tax


internal_revenue_service department of the arp significant index number washington dc contact person telephone number in reference to op e ep t date attn legend state a plan x plan z resolution y employer m dear this is in response to your ruling_request dated date as supplemented by a letter dated date submitted on your behalf by your authorized representative concerning the federal_income_tax treatment under sec_414 code of certain contributions to plan x of the internal_revenue_code the following facts and representations have been submitted employer m a political_subdivision of state a established plan x benefit of certain employees employee contributions and is qualified under sec_401 a of the code a defined_contribution_plan the plan requires mandatory for the bb pursuant to sec_4 of plan x employer m agreed to under sec_3_2 the mandatory employee in lieu of employees paying such pick up ie assume and pay contributions to plan x contributions effective date employees do not have the option to receive the picked up contributions in cash in lieu of having such contributions paid to plan x days to elect to participate in plan x fails to make such an election he or she may not participate in plan x and automatically becomes a member of plan z qualified under code sec_401 participation in plan x may later elect not to participate by irrevocably electing to participate in plan z eligible_employee cannot elect to choose not to participate in either plan x or plan a retirement_plan established under state a and if an employee an eligible_employee has an employee who elects eligible an based on the aforementioned facts and representations your authorized representative has requested the following rulings no part of the contributions to plan x picked up by employer m on behalf of eligible employees will constitute taxable_income to such employees until such contributions are actually received by these employees from plan x and employer m will not be required to withhold any amount of federal income taxes with respect to the picked up contributions sec_414 of the code provides that contributions otherwise designated as employee contributions shall be treated as employer contributions if such contributions are made to a plan described in sec_401 established by a state government or a political_subdivision thereof and are picked up by the employing unit the federal_income_tax treatment to be accorded contributions which are picked up by the employer within the meaning of sec_414 revrul_77_462 c b of the code is specified in in that revenue ab7 ruling the employer school district agreed to assume and pay the amounts employees were required by state law to contribute to a state pension_plan concluded that the school district's picked up contributions to the plan are excluded from the employees’ gross_income until such time as they are distributed to the employees the revenue_ruling held further that under the provisions of sec_3401 a contributions to the plan are excluded from wages for purposes of the collection of income_tax at source on wages therefore no withholding is required from the employees’ salaries with respect to such picked up contributions the school district’s revrul_77_462 of the code these revenue the issue of whether contributions have been picked up by an employer within the meaning of code sec_414 h is addressed in revrul_81_35 1981_1_cb_255 and revrul_81_36 1981_1_cb_255 rulings established that the following two criteria must be met the employer must specify that the contributions although designated as employee contributions are being paid_by the employer in lieu of contributions by the employee and of choosing to receive the contributed amounts directly instead of having them paid_by the employer to the pension_plan is immaterial for purposes of the applicability of code sec_414 whether an employer picks up contributions through a reduction in salary an offset against future salary increases or a combination of both the employee must not be given the option furthermore it in revrul_87_10 c b the internal_revenue_service considered whether contributions designated as employee contributions to a governmental_plan are excludable from the gross_income of the employee service concluded that to satisfy the criteria set forth in revenue rulings and with respect to particular contributions the required specification of designated employee contributions must be completed before the period to which such contributions relate the plan x satisfies the criteria set forth in revrul_81_35 and revrul_81_36 by providing that employer m will make contributions in lieu of contributions by eligible employees although employees who participate in plan x may later irrevocably elect to participate in oy plan z they do not have the option of receiving the picked up amounts directly participate in plan x is irrevocable we believe that plan x does not vest in the employee enough control of the picked up contributions to taint the contributions and therefore the picked up contributions are in substance employer contributions in addition an election not to accordingly we conclude that the provisions of plan x as adopted by employer m satisfy the requirements of code sec_414 picked up by employer m for employees shall be treated as employer contributions and will not be includible in the employees’ gross_income for the taxable_year in which such amounts are contributed amounts because we have determined that the picked up amounts are to be treated as employer contributions they are excepted from wages as defined in code sec_3401 a a for federal_income_tax withholding purposes therefore no withholding of federal_income_tax is required from the employees’ salaries with respect to such picked up amounts this ruling is based on the assumption that plan x will be qualified under sec_401 of the code at the time of the proposed contributions no opinion is expressed as to whether the amounts in question are subject_to tax under the federal_insurance_contributions_act the amounts in question are paid pursuant to a salary reduction agreement within the meaning of section b v no opinion is expressed as to whether the effective date for the commencement of any proposed pick up as specified in the final resolution cannot be any earlier than the date the final resolution is signed or put into effect this ruling is directed only to the taxpayer who requested it be used or cited by others as precedent code sec_6110 k provides that it may not a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours ohm ke cock john swieca chief employee_plans technical branch enclosures deleted copy of this ruling notice ec of


department of the treasury third party contact petitions date date washington dc person to contact telephone number refer réply to pa c dom it a plr-c-4 feb bs internal_revenue_service index no taxpayer taxpayer's ein taxpayer's address subsidiary subsidiary subsidiary subsidiary subsidiary subsidiary propertie sec_1 propertie sec_2 propertie sec_3 propertie sec_4 plr-c-103069-99 page date date date dear _ this letter responds to your request for a closing_agreement dated submitted on behalf of taxpayer taxpayer requests a ruling that for federal_income_tax purposes under the facts described below taxpayer may defer recognizing gain under sec_1033 of the internal_revenue_code on the transfer of in addition taxpayer seeks a ruling that sec_1254 does not apply to its transaction issues taxpayer has requested the following rulings subsidiary 4's transfer of conversion within the meaning of sec_1033 subsidiary will recognize no taxable_income as a consequence of this exchange will be treated as a tax-free involuntary in exchange for subsidiary 5's transfer of will be treated as a tax-free involuntary_conversion within the meaning of sec_1033 subsidiary will recognize no taxable_income as a consequence of this transfer to the extent that qualified_replacement_property is purchased during the relevant replacement_period include a qualified_replacement_property for this purpose shall in exchange for and b _in exchange subsidiary 4's transfer of propertie sec_3 and propertie sec_4 to _will be treated as a tax-free involuntary_conversion within the meaning for of sec_1033 subsidiary will recognize no taxable_income as a consequence of these transfers to the extent that qualified_replacement_property is purchased qualified_replacement_property for this during the relevant replacement_period purpose shall include a b plr-c-103069-93 page sec_1254 will not be applicable to the transfers of propertie sec_1 propertie sec_2 propertie sec_3 and propertie sec_4 described in issue sec_1 and above conclusions subsidiary 4's transfer of propertie sec_1 to sec_1033 subsidiary will recognize no taxable_income as a consequence of this exchange in exchange for is an involuntary_conversion within the meaning of in exchange for subsidiary 5's transfer of propertie sec_2 to an involuntary_conversion within the meaning of sec_1033 subsidiary will recognize no taxable_income as a consequence of this transfer to the extent that qualified_replacement_property is purchased during the relevant replacement_period in accordance with the standards and requirements of sec_1033 and applicable treasury regulations thereunder qualified_replacement_property for this purpose includes a is and b _in exchange for subsidiary 4's transfer of propertie sec_3 and propertie sec_4 to propertie sec_1 to conversion within the meaning of sec_1033 subsidiary will recognize no taxable_income as a consequence of these transfers to the extent that qualified_replacement_property is purchased during the relevant replacement_period in accordance with the standards and requirements of sec_1033 and applicable treasury regulations thereunder qualified_replacement_property for this purpose includes a is an involuntary and of and b sec_1254 will not be applicable to the transfers of propertie sec_1 propertie sec_2 propertie sec_3 and propertie sec_4 described in issue sec_1 and above the taxpayer facts a ee plr-c-103069-99 page taxpayer is the common parent of an affiliated_group that includes among other diary and subsidiary corporations subsidiary subsidiary subsidiary subsi il taxpayer's business taxpayer and its subsidiaries are engaged in business this a propertie sec_1 propertie sec_1 are owned by subsidiary and b propertie sec_2 propertie sec_2 are owned by subsidiary and c propertie sec_3 subsidiary owns propertie sec_3 d propertie sec_4 ae es plr-c-103069-99 propertie sec_4 are owned by subsidiary and page the transaction giving rise that prevented taxpayer and its s propertie sec_3 and propertie sec_4 in to this ruling_request resulted from a series of events ubsidiaries from using propertie sec_1 propertie sec_2 business plr-c-103069-99 page vv replacement tis anticipated that subsidiary will purchase transferred to used in subsidiary 4's business or held for investment it is anticipated that subsidiary will purchase in exchange to replace the properties the replacement_property will be the replacement_property will be used in subsidiary 5's business or held for investment to replace propertie sec_2 _ although the proposed transaction contemplates the sale exchange ____ there is no proposed sale conversion or other_disposition exchange conversion or other_disposition of property within the meaning of sec_614 law _ analysis sec_1033 provides in part that if property as a result of requisition or condemnation or threat or imminence thereof is compulsorily or involuntarily converted into property similar_or_related_in_service_or_use to the converted property no gain shall be recognized sec_1033 provides in part that if property as a result of requisition or condemnation or threat or imminence thereof is compulsorily or involuntarily converted into money or into property not similar_or_related_in_service_or_use to the converted page plr-c-103069-99 property the gain if any shall not be recognized to the extent the taxpayer within the period specified in a b for the purpose of replacing property converted into cash purchases other_property similar_or_related_in_service_or_use to the property so converted or purchases stock in the acquisition of control of a corporation owning such other_property sec_1033 provides in part that the period referred to in sec_1033 is the period beginning on the date of the disposition_of_the_converted_property or the earliest date of the threat or imminence of requisition or condemnation of the converted property whichever is the earlier and ending years after the close of the first taxable_year in which any part of the gain upon the conversion is realized or subject_to such terms and conditions as may be specified by the secretary at the close of such later date as the secretary may designate on application of the taxpayer sec_1033 provides that in the case of a compulsory or involuntary_conversion of real_property described in g held for productive use in a trade_or_business or for investment sec_1033 shall be applied by substituting years for years sec_1033 provides in part that for purposes of sec_1033 if real_property not including stock_in_trade or other_property held primarily for sale held for productive use in trade_or_business or for investment is as a result of its seizure requisition or condemnation or threat or imminence thereof compulsorily or involuntarily converted property of a like_kind to be held either for productive use in trade_or_business or for investment shall be treated as property similar_or_related_in_service_or_use to the property so converted sec_1033 provides a general_rule that sec_1033 will not apply if the replacement_property is acquired from a related_person however the general_rule of i does not apply if the related_person acquired the replacement_property from an unrelated_person within the period described in sec_1033 for purposes of sec_1033 a person is related to another person if the person bears a relationship described in sec_267 or sec_707 sec_1_1033_g_-1 provides special rules for application of sec_1033 with respect to certain dispositions of real_property held either for productive use in trade_or_business or for investment not including stock_in_trade or other_property held primarily for sale for purposes of the regulation disposition means the seizure requisition or condemnation but not destruction of the converted property or the sale_or_exchange of such property under threat or imminence of seizure requisition or condemnation in such case for purposes of applying sec_1033 the replacement of such property with property of like_kind to be held either for productive use in the trade_or_business or for investment shall be treated as property similar_or_related_in_service_or_use to the property so converted ce page plr-c-103069-99 sec_1_1033_g_-1 provides that the principles set forth in sec_4 a -1 b shall be used in determining whether replacement_property is property of like_kind sec_1_1031_a_-1 provides that the words like_kind have reference to the nature or character of the property and not to its grade or quality sec_1 a -1 c illustrates this point by providing that the exchange of a leasehold of a fee with years or more to run for real_estate will be treated as a like_kind exchange involuntary_conversion taxpayer asks whether subsidiary 4's and subsidiary 5's transfer of properties in return propertie sec_2 propertie sec_3 and propertie sec_4 to - constitutes an involuntary_conversion of property within for the meaning of sec_1033 for the reasons described below these transfers constitute an involuntary_conversion under sec_1033 sec_1033 concerns the federal_income_tax treatment of involuntary_conversions the general_rule requires nonrecognition of any gain realized if property is compulsorily or involuntarily converted into property similar_or_related_in_service_or_use to the converted property sec_1033 sec_1_1033_a_-2 alternatively if property is converted into money or dissimilar property then the taxpayer may elect to recognize gain only to the extent the amount_realized upon the conversion exceeds the cost of qualified_property that is purchased as a replacement sec_1033 sec_4 a -2 c these rules apply however only if the involuntary_conversion of the property is a result of its complete or partial destruction theft seizure or requisition or condemnation or the threat thereof sec_1033 sec_1_1031_a_-2 involuntary_conversion within the meaning of sec_1033 means that the taxpayer's property has been physically converted into other_property or cash without the taxpayer's consent plr-c-103069-99 page deferral of gain taxpayer also requests rulings that subsidiary and subsidiary will recognize no taxable_income as a consequence of the transfers of propertie sec_1 propertie sec_2 propertie sec_3 and propertie sec_4 to the relevant replacement_period taxpayer also requests a ruling that qualified_replacement_property for this purpose shall include to the extent that qualified_replacement_property is purchased during in appropriate circumstances sec_1033 will apply to defer gain resulting from the involuntary_conversion of property in this case the transfer of propertie sec_1 propertie sec_2 propertie sec_3 and properties taxpayer asserts that the replacement of propertie sec_2 propertie sec_3 and propertie sec_4 po a plr-c-103069-99 page will satisfy the requirement of sec_1033 that the replacement_property be similar_or_related_in_service_or_use to the converted property or consist of stock in the acquisition of sec_1033 control of a corporation owning such replacement_property provides that property of a fike kind to be held either for productive use in trade_or_business or for investment shall be treated as property similar_or_related_in_service_or_use to the property so converted the rules of sec_1031 apply in determining whether the replacement_property satisfies the like_kind standard see sec_1_1033_g_-1 provided the replacement_property satisfies the like_kind standard of sec_1031 subsidiary and subsidiary will defer recognizing any gain in accordance with the rules of sec_1033 taxpayer requests a ruling that qualified_replacement_property sec_1033 provides that gain may be deferred under if a taxpayer purchases stock in the acquisition of control of a corporation owning qualified_replacement_property means the ownership of stock possessing at least percent of the total combined voting power of all classes of stock entitled to vote and at least percent of the total number of shares of all other classes of stock of the corporation provided the corporation's assets consist of a sufficient amount of qualified_replacement_property acquisition of stock in the acquisition of control of such a corporation will permit subsidiary and subsidiary to defer gain in accordance with the rules of sec_1033 ‘ in this context control _ any acquisition of reolacement property from a related oartv will triacer the restrictions of sec_1033 plr-c-103069-99 a b page sec_1254 sec_1254 provides for the recognition of gain which is ordinary_income in the case of certain dispositions of sec_1254 property’ sec_1254 provides in part that the term ‘ sec_1254 property means certain property within the meaning of sec_614 the proposed transaction will not provide for the sale exchange conversion or other_disposition of property within the meaning of sec_614 accordingly there will be no disposition of sec_1254 property and therefore no gain will be recognized under sec_1254 as a result of the proposed transaction except as specifically ruled above no opinion is expressed as to the federal tax treatment of the above transactions under other provisions of the code and regulations that may be applicable no opinion is expressed as to the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above ruling a copy of this letter_ruling should be attached to the appropriate federal_income_tax returns for the taxable years in which the transactions described herein are consummated this letter_ruling 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 c aun ul du judith c dunn associate chief_counsel domestic


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc dom fip 2-plr-115362-00 date date legend parent company trustee state a state b statute a b c d e dear this letter is in reply to company’s letter dated date and other correspondence asking the internal_revenue_service to rule on the transaction described below facts parent is the common parent of an affiliated_group_of_corporations that includes the company parent files a consolidated_return for the group company a calendar_year taxpayer that uses the accrual_method of accounting plr-115362-00 is an electric utility in state a company generates transmits and distributes electricity to residential commercial and industrial customers within a designated territory company has the right to sell electricity at retail within its territory and is regulated by state a’s public service commission psc and the federal energy regulatory commission state a is restructuring its electric industry as a result the company’s customers will be allowed to contract directly with alternative electric suppliers aess and will compete with other parties to sell electricity to facilitate deregulation state a enacted statute which allows each electric utility to recover the net uneconomic portions of its regulatory assets as determined by the psc and any costs that the psc determines the utility would be unlikely to collect in a competitive market qualified_costs qualified_costs include but are not limited to retail open access implementation costs and the costs of a psc approved restructuring buyout or buy-down of a power purchase contract together with the costs of issuing supporting and servicing securitization bonds and any costs of retiring and refunding the electric utility’s existing debt and equity securities in connection with the issuance of securitization bonds qualified_costs also include taxes related to the recovery_of securitization charges under the statute a utility may apply to the psc for a financing order permitting it to recover a specified amount of qualified_costs through the imposition and collection of special charges on the utility’s customers the special charges authorized by the financing order are called securitization charges securitization charges and are imposed on all customers in the utility’s service area using its facilities the securitization charges are nonbypassable and generally cannot be avoided even if a customer buys electricity from another source the securitization charges are assessed against the amount of electricity purchased by or made available to the customer whether from the utility or from an aes actual collections of the securitization charges will vary from expected collections due to a number of factors including power usage and delinquencies the statute requires the financing order to provide for adjustment of the securitization charges at least annually to correct any over-collections or under-collections under the statute the right to collect securitization charges and other rights under the financing order constitute a separate_property right that is called securitization property the statute also permits a utility to request the psc to approve the issuance of securities called securitization bonds that are secured_by the utility’s rights to the securitization charges bonds the principal_amount of bonds approved in the financing order includes the amount of the qualified_costs that may be recovered plr-115362-00 proposed transaction the company received a financing order from the psc authorizing the issuance of the bonds in an aggregate principal_amount not to exceed dollar_figurea the financing order authorizes securitization charges in an amount needed to service the bonds pay transaction costs and provide for credit enhancement the financing order requires that the securitization charges be adjusted annually until months prior to the expected final payment_date of the bonds and quarterly thereafter the financing order creates securitization property including the right to collect the securitization charges and provides that the securitization property may be assigned by the company to a special purpose limited_liability_company the issuer in addition the financing order grants the company authority to impose and collect tax charges in an amount sufficient for the company to recover federal and state taxes payable as a result of the company’s recognizing the securitization charges received the company will collect the tax charges for its own account the company has formed the issuer under state b law as a bankruptcy remote limited_liability_company solely for the purpose of effectuating the proposed transaction the issuer will use the accrual_method of accounting the company is the sole member of the issuer the issuer will not elect to be treated as a business_entity organization taxable as a corporation under sec_301_7701-3 of the procedural and administration regulations the company will contribute as equity to the issuer cash equal to b percent of the total principal_amount of the bonds pursuant to the financing order the company will transfer the securitization property to the issuer the issuer will issue and sell bonds to investors the proceeds from the issuance of the bonds net of issuance costs will be transferred to the company in consideration for the securitization property the issuer will initially issue one or more series of bonds to investors each series may be comprised of one or more classes each having a different final maturity_date the company expects that the bonds will have expected final payment dates of no more than c years and final maturity dates of no more than d years the expected final payment_date is the date when all principal and interest on a class of bonds is expected to be paid in full by the issuer the final maturity_date is the date on which a class of bonds will be in default under the indenture for failure to pay the principal thereof and interest thereon in full interest on the bonds will be payable quarterly or semi-annually at rates that are based on yields that are commensurate with similarly rated debt obligations of comparable weighted average lives the bonds are expected to be sold at or near their stated principal amounts principal payments will be scheduled to be made quarterly or plr-115362-00 semi-annually within a series principal will be applied in sequential order to each class until the outstanding principal balance of the class is reduced to zero in general the bonds will be payable solely out of the securitization property and other assets of the issuer in addition the bonds may be subject_to an optional clean- up ie early payment of all outstanding principal and accrued interest when the outstanding principal of the bonds has been reduced to e or less than e percent of the initial principal_amount initially the company will act as servicer of the securitization property the servicer as servicer the company will bill and collect securitization charges from customers remit amounts collected to the issuer apply to the psc for adjustments to the securitization charges and retain all books_and_records with respect to the securitization charges subject_to the issuer’s right of inspection the company will retain all investment_income earned on the securitization charges between the time they are collected and the time they are remitted to the issuer only in the event that the company fails satisfactorily to perform its servicing functions will the company be subject_to replacement as servicer the company will receive a fee as servicer payable monthly aess may not bill and collect securitization charges or tax charges from customers without the consent of the company the company has agreed that it will not give that consent the securitization charges will be set to provide for the recovery_of the principal of and interest on the bonds and related expenses as well as for an excess_amount ie the overcollateralization amount that will eventually reach at least b percent of the initial principal_amount of the bonds the overcollateralization amount will be collected approximately ratably over the expected term of the bonds a collection account will be established as credit enhancement for the bonds the collection account will consist of four subaccounts entitled general overcollateralization capital and reserve the general subaccount will hold all funds in the collection account not held in any of the other three subaccounts the servicer will remit all securitization charge collections to the general subaccount and the trustee will use the amounts in the general subaccount to make payments in the following order of priority i certain fees and expenses of the servicer and the administrator and the independent managers of the issuer and other operating_expenses of the issuer up to a specified amount ii interest on the bonds iii specified amounts of principal of the bonds iv any amounts needed to replenish withdrawals from the capital subaccount up to the initial balance v amounts required to fund to its required level and to replenish withdrawals from the overcollateralization subaccount and vi any remaining expenses of the issuer including payments if any required under any hedge or swap agreements plr-115362-00 thereafter an amount equal to earnings in the capital_account will be released to the issuer and any remaining unallocated amounts will be allocated to the reserve subaccount for distribution on subsequent payment dates to the extent that the general subaccount in any period is insufficient to make the required_payments the trustee will draw upon the reserve subaccount the overcollateralization subaccount and finally the capital subaccount to make these payments to the extent that amounts in the capital subaccount or the overcollateralization subaccount are used to make payments of fees expenses interest and scheduled principal future securitization charges will be adjusted to replenish those subaccounts in addition any funds in the reserve subaccount from prior payment dates will be used to replenish the capital subaccount and the overcollateralization subaccount certain events constitute a default by the issuer on its payment obligations with respect to the bonds these events include a default in the payment of interest within five days after a payment is due and a default in the payment of outstanding principal as of the legal final maturity_date in the event of a payment default the trustee or holders of bonds owning a majority in principal_amount of the bonds then outstanding may declare the unpaid principal_amount of all the bonds then outstanding to be due and payable the bonds will be nonrecourse to the company and will be secured only by and generally payable solely out of the issuer’s assets which will include the securitization property rights under the transaction documents and the collection account the right to obtain adjustments to the securitization property and any swap agreement executed to permit the issuance of floating rate bonds the company expects that at least two nationally recognized credit rating agencies will give the bonds their respective highest available credit ratings will the issuance of the financing order and the transfer of the securitization property to the issuer result in gross_income to the company issue sec_2 will the issuance of the bonds and the transfer of the proceeds of the bonds to the company result in gross_income to the company will the bonds constitute obligations of the company applicable law plr-115362-00 sec_61 of the internal_revenue_code generally defines gross_income as income from whatever source derived except as otherwise provided by law gross_income includes income realized in any form whether in money property or services sec_1_61-1 of the income_tax regulations this definition encompasses all accessions to wealth clearly realized and over which the taxpayers have complete dominion 348_us_426 1955_1_cb_207 the right to collect the securitization charges and the tax charges is of significant value in producing income for the company moreover state a’s action in making the rights to the securitization charges transferable has enhanced that value generally the granting of a transferable right by the government does not cause the realization of income revrul_92_16 1992_1_cb_15 allocation of air emission rights by the environmental protection agency does not cause a utility to realize gross_income revrul_67_135 1967_1_cb_20 fair_market_value of an oil_and_gas lease obtained from the government through a lottery is not includible in income the economic_substance of a transaction generally governs its federal tax consequences 293_us_465 xiv-1 c b affixing a label to an undertaking does not determine its character revrul_97_3 1997_1_cb_9 an instrument secured_by property may be an obligation of the taxpayer or alternatively may be a disposition of the underlying property by the taxpayer cf id the small_business administration is the primary obligor of certain guaranteed_payment rights that are created under its participating security program conclusions based on the facts as represented we rule as follows neither the issuance of the financing order nor the transfer of the securitization property to the issuer will result in gross_income to the company the issuance of the bonds and the transfer of the proceeds of the bonds to the company will not result in gross_income to company the bonds will be obligations of company except as specifically ruled on above no opinion is expressed or implied regarding the federal tax aspects of the transaction this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that this ruling may not be used or cited as precedent plr-115362-00 a copy of this letter should be attached to the federal_income_tax return of the company for the taxable years that include the transaction described in this letter sincerely yours acting associate chief_counsel financial institutions products by marshall feiring marshall feiring senior technician reviewer branch enclosure


internal_revenue_service number release date index number -------------------------------- ------------------------------ -------------------------------- ty ------- 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 b02 plr-146619-14 date date legend taxpayer -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -- ------------------------------------------------------------- year date company a country b dear ---------------- ------- ------------------ --------------------------------------- ---------------------- this is in response to a letter dated date submitted on your behalf by your authorized representative requesting an extension of time under sec_301_9100-3 to elect the provisions of sec_911 of the internal_revenue_code code for taxpayer’s year additional information was submitted on date 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 rulings it is subject_to verification on examination taxpayer began working for a foreign_affiliate of company a in country b on date taxpayer failed to file form_2555 foreign_earned_income or form 2555-ez plr-146619-14 foreign_earned_income_exclusion to claim the sec_911 foreign_earned_income_exclusion for year and did not make a sec_911 election within the time prescribed by sec_1_911-7 sec_911 of the code allows qualified citizens and residents of the united_states living abroad to elect to exclude from gross_income the foreign_earned_income and housing cost amounts of such individuals sec_1_911-7 sets forth the procedural rules for making a valid sec_911 election the election must be made on form_2555 or on a comparable form and must be filed with the income_tax return or with an amended_return with respect to the timing of the election sec_1 a i provides that a valid sec_911 election must be made a with an income_tax return that is timely filed including any extensions of time to file b with a later return filed within the period prescribed in sec_6511 amending a timely filed income_tax return c with an original return filed within one year after the due_date of the return determined without regard to any extension of time to file or d with an income_tax return filed after the period described in paragraphs a i a b or c of this section provided - the taxpayer owes no federal_income_tax after taking into account the exclusion and files form_1040 with form_2555 or a comparable form attached either before or after the internal_revenue_service discovers that the taxpayer failed to elect the exclusion or the taxpayer owes federal_income_tax after taking into account the exclusion and files form_1040 with form_2555 or a comparable form attached before the internal_revenue_service discovers that the taxpayer failed to elect the exclusion sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or plr-146619-14 announcement sec_301_9100-3 provides that requests for relief 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 sec_301_9100-3 provides that except as provided in paragraph b i through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i ii iii iv v requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service failed to make the election because of intervening events beyond the taxpayer's control failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election reasonably relied on the written advice of the irs or reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election in this case sec_1_911-7 fixes the time to make the election under sec_911 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth under sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to elect the foreign_earned_income_exclusion for year the taxpayer should attach a copy of this letter_ruling to his her federal_income_tax return for the relevant year plr-146619-14 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer’s authorized representatives sincerely kristine crabtree assistant to the branch chief branch international