office_of_chief_counsel internal_revenue_service memorandum number release date cc psi b5 postn-136312-11 third party communication none date of communication not applicable uilc date date to lead appeals officer ---------------- appeals_office of appeals from ------------------------ -------- branch office of the associate chief_counsel passthroughs and special industries cc psi b5 subject manufacturing production growth extraction of qualifying_production_property and sec_199 this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend taxpayer --------------------------------------------- ------------------------- ---------------------------------------- ----------------------------- tax years ---------------------------------- issue whether taxpayer’s activities constitute the manufacture production growth or extraction mpge of qualifying_production_property qpp for purposes of the domestic_production_activities_deduction under sec_199 conclusion taxpayer’s activities do not constitute the mpge of qpp postn-136312-11 facts taxpayer is a publisher of books ------------- and other printed materials collectively books taxpayer’s activities with respect to its books include market research resource planning content and layout development and editing these activities allow taxpayer to create an electronic version of a book that contains exact electronic displays of each page taxpayer also develops print specifications that include type of paper page sizes type of printing process type of ink and whether to use thread staples or glue for binding taxpayer uses contract manufacturers to produce books in mass taxpayer provides a contract manufacturer with the electronic version of a book and its list of print specifications the contract manufacturer uses the electronic version of the book to create printing plates which the contract manufacturer then uses to print mass copies of the book the contract manufacturer uses their employees machinery and plant to print and assemble books according to taxpayer’s print specifications after the books have been printed and assembled the contract manufacture may ship the books directly to taxpayer’s customers or may ship them to taxpayer so that taxpayer can package and distribute the books for tax years taxpayer claims that its design development creation materials analysis and selection and packaging of its books constitute mpge activities for purposes of sec_199 law and analysis under sec_199 the domestic_production_activities_deduction is determined by applying a percentage to the lesser_of the taxpayer's qualified_production_activities_income qpai or taxable_income determined without regard to the sec_199 deduction the applicable_percentage i sec_3 for taxable years beginning in and for taxable years beginning in through and for taxable years beginning after under sec_199 qpai is determined by taking dpgr for the taxable_year less cost_of_goods_sold cgs allocable to such dpgr less other expenses losses or deductions which are properly allocable to such dpgr sec_199 defines domestic_production_gross_receipts dpgr as gross_receipts of the taxpayer which are derived from any lease rental license sale exchange or other_disposition of qualifying_production_property qpp which was mpge by the taxpayer in whole or in significant part within the united_states sec_199 defines qpp as tangible_personal_property any computer_software and any property described in sec_168 postn-136312-11 sec_1_199-3 of the income_tax regulations provides except as provided in sec_1_199-3 and the term mpge includes manufacturing producing growing extracting installing developing improving and creating qpp making qpp out of scrap salvage or junk material as well as from new or raw material by processing manipulating refining or changing the form of an article or by combining or assembling two or more articles cultivating soil raising livestock fishing and mining minerals the term mpge also includes storage handling or other processing activities other than transportation activities within the united_states related to the sale exchange or other_disposition of agricultural products provided the products are consumed in connection with or incorporated into the mpge of qpp whether or not by the taxpayer pursuant to sec_1_199-3 the taxpayer must have the benefits_and_burdens_of_ownership of the qpp under federal_income_tax principles during the period the mpge activity occurs in order for gross_receipts derived from the mpge of qpp to qualify as dpgr sec_1_199-3 provides that if a taxpayer packages repackages labels or performs minor assembly of qpp and the taxpayer engages in no other mpge activity with respect to that qpp the taxpayer’s packaging repackaging labeling or minor assembly does not qualify as mpge with respect to that qpp sec_1_199-3 provides a taxpayer that has mpge qpp for the taxable_year should treat itself as a producer under sec_263a with respect to the qpp unless the taxpayer is not subject_to sec_263a sec_1_199-3 defines tangible_personal_property as any tangible_property other than land real_property described in sec_1_199-3 and any property described in sec_1_199-3 sec_1_199-3 sec_1_199-3 or sec_1_199-3 tangible_personal_property also includes any gas other than natural_gas described in sec_1_199-3 chemical and similar_property for example steam oxygen hydrogen and nitrogen property such as machinery printing presses transportation and office equipment refrigerators grocery counters testing equipment display racks and shelves and neon and other signs that are contained in or attached to a building constitutes tangible_personal_property for purposes of sec_1_199-3 except as provided in sec_1_199-3 and sec_1_199-3 computer_software sound_recordings and qualified films are not treated as tangible_personal_property regardless of whether they are affixed to a tangible medium however the tangible medium to which such property may be affixed for example a videocassette a computer diskette or other similar tangible item is tangible_personal_property sec_1_199-3 provides the term tangible_personal_property does not include property in a form other than in a tangible medium for example mass-produced books are tangible_personal_property but neither the rights to the underlying manuscript nor an online version of the book is tangible_personal_property postn-136312-11 sec_1_199-8 provides that sec_1_199-3 is applicable for taxable years beginning on or after date sec_1_263a-2 provides sec_263a applies to the costs of producing tangible_personal_property and not to the costs of producing intangible_property sec_1_263a-2 provides that for purposes of determining whether a taxpayer producing intellectual or creative property is producing tangible_personal_property or intangible_property the term tangible_personal_property includes films sound_recordings video tapes books and other similar_property embodying words ideas concepts images or sounds by the creator thereof other similar_property for this purpose generally means intellectual or creative property for which as costs are incurred in producing the property it is intended or reasonably likely that any tangible medium in which the property is embodied will be mass distributed by the creator or any one or more third parties in a form that is not substantially altered however any intellectual or creative property that is embodied in a tangible medium that is mass distributed merely incident to the distribution of a principal product or good or the creator is not similar_property for these purposes sec_1 a ii a provides sec_263a applies to tangible_personal_property defined in sec_1_263a-2 without regard to whether such property is treated as tangible or intangible under other sections of the code thus for example sec_263a applies to the costs of producing a motion picture or researching and writing a book even though these assets may be considered intangible for other purposes of the code sec_1 a ii a provides the cost_of_producing and developing books including teaching aids and other literary works required to be capitalized under sec_263a include costs incurred by an author in researching preparing and writing the book however see sec_263a which provides an exemption from the capitalization requirements of sec_263a in the case of certain free-lance authors in addition the costs of producing and developing books include prepublication expenditures incurred by publishers including payment made to authors other than commissions for sales of books that have already taken place as well as costs incurred by publishers in writing editing compiling illustrating designing and developing the books the costs of producing a book also include the costs of producing the underlying manuscript copyright or license these costs are distinguished from the separately capitalizable costs of printing and binding the tangible medium embodying the book eg paper and ink see sec_1_174-2 which provides that the term research or experimental expenditures does not include expenditures incurred for research in connection with literary historical or similar projects appeals asked our office whether taxpayer’s activities as described above are mpge activities under sec_199 this advice does not attribute any of the contract manufacturer’s activities eg printing and binding the books to taxpayer the taxpayer and the field agree that the contract manufacturer’s activities are the mpge postn-136312-11 of qpp our office notes that taxpayer claims under sec_1_199-3 to have the benefits_and_burdens_of_ownership of the mass produced books during period that the contract manufacturer’s activities take place appeals requested that we not address the benefits and burdens issue electronic version of a book taxpayer’s activities related to producing an electronic version of a book do not result in qpp sec_199 defines qpp as tangible_personal_property computer_software and property described in sec_168 ie sound_recordings sec_1 j iii provides that tangible_personal_property does not include property in a form other than in a tangible medium the example in the section is that mass-produced books are tangible_personal_property but neither the rights to the underlying manuscript nor an online version of the book is tangible_personal_property sec_1_199-3 provides an electronic book available online or for download is not computer_software taxpayer’s market research content and layout development and editing are activities that result in taxpayer creating an electronic version of a book taxpayer’s electronic version of a book has the same layout and design as the book would have if printed and bound but it is not tangible_personal_property or computer_software while our office recognizes that taxpayer’s activities create valuable assets those assets are intangibles and do not qualify as qpp for purposes of sec_199 the definition of an mpge activity is an activity that results in qpp sec_1 e provides in relevant part the term mpge includes manufacturing producing growing extracting installing developing improving and creating qpp making qpp out of scrap salvage or junk material as well as from new or raw material by processing manipulating refining or changing the form of an article or by combining or assembling two or more articles emphasis added taxpayer’s activities create intangible_property that is not qpp thus taxpayer’s activities should not be considered mpge activities under sec_199 a taxpayer’s non-mpge activities may be treated as part of the mpge of qpp if the taxpayer also mpge the qpp example of sec_1_199-3 illustrates this situation in that example the taxpayer performs materials analysis and selections subcontractor inspections and qualifications testing of component parts assisting customers in their review and approval of the qpp routine production inspections product documentation diagnosis and correction of system failure and packaging for shipment to customers the example concludes that these activities are part of the mpge of qpp because the taxpayer mpge the qpp emphasis added if the taxpayer did not mpge the qpp then those activities are not part of the mpge of qpp based on example of sec_1_199-3 taxpayer’s activities would be part of the mpge of qpp if taxpayer mpge the qpp taxpayer however contracted with a manufacturer for the contract manufacturer to mass produce the books the contract taxpayer’s electronic version of a book is also not property described in sec_168 postn-136312-11 manufacturer’s activities are the activities that constitute the mpge of qpp ie mass- produced books therefore when applying example to taxpayer’s facts taxpayer’s activities are not treated as part of the mpge of qpp because taxpayer did not mpge the qpp while our office believes that the above analysis sufficiently answers the question there are several more reasons supporting the conclusion that taxpayer’s activities are non- mpge activities under sec_199 unless the taxpayer mpge the mass-produced books for example the definition of mpge in sec_1_199-3 requires pursuant to sec_1 f for a taxpayer to have the benefits_and_burdens_of_ownership of the qpp under federal_income_tax principles during the period the mpge activity occurs in order for gross_receipts derived from the mpge of qpp to qualify as dpgr our office questions how taxpayer’s activities could be considered mpge because there is no qpp throughout the entire time of taxpayer’s activities before the contract manufacturer mpge the books congress provided that certain activities that create intangible_property are treated as the mpge of qpp under sec_199 creating and developing computer_software qualifies as the mpge of qpp because computer_software is in the definition of qpp the same treatment applies for property described in sec_168 ie sound_recordings these are the two forms of intangible_property that congress included within the definition of qpp in sec_199 the electronic version of a book that taxpayer’s activities create does not fall within these types of included and qualifying intangible_property therefore taxpayer’s activities are not the mpge of qpp taxpayer’s reliance on the consistency_requirement in sec_1_199-3 is misplaced sec_1_199-3 provides that a taxpayer that has mpge qpp for the taxable_year should treat itself as a producer under sec_263a unless that taxpayer is not subject_to sec_263a sec_1_199-3 does not provide that a producer under sec_263a is treated as a producer under sec_199 our office believes there are cases where a taxpayer is treated as a producer for purposes of sec_263a and should not be considered a manufacturer for purposes of sec_199 see eg 114_tc_1 aff’d 273_f3d_875 9th cir therefore reading the requirement in sec_1_199-3 to require consistency between sec_199 and sec_263a in all cases is inappropriate in taxpayer’s case sec_199 and sec_263a are not consistent in the treatment of the production of books sec_263a includes the costs of taxpayer’s activities that create the intangible aspects of a book as costs related to the production of tangible_personal_property see sec_1 a ii sec_263a treats the costs attributable to printing and binding of books as separately capitalizable costs also attributable to our office notes that this conclusion would change if taxpayer has the benefits_and_burdens_of_ownership during the period in which the qualifying activity occurs under sec_1_199-3 in the contractual arrangement with the contract manufacturer that mass-produces the books postn-136312-11 tangible_personal_property see sec_1 a ii a in contrast sec_199 treats the underlying manuscript and an online version of a book as intangible_property under sec_1_199-3 the activities that create manuscript and online version are properly treated as the production of non-qualifying intangible_property for sec_199 purposes sec_199 treats the printing and binding of books as the mpge of qpp and therefore those activities are property treated as the mpge of qpp thus taxpayer may be treated as a producer of tangible_personal_property for purposes of sec_263a but a producer of non-qualifying intangible_property for purposes of sec_199 sec_199 does not treat the production of intangible_property as the production of tangible_personal_property for example consider films the costs of producing films under sec_1_263a-2 are treated as costs to produce tangible_personal_property sec_1_199-3 provides that qualified films are not treated as tangible_personal_property regardless of whether they are affixed to a tangible medium further under sec_1_199-3 if a taxpayer produces a qualified_film and affixes it to a dvd that it did not mpge then the taxpayer can treat the combined property as the intangible qualified_film or as separate intangible or tangible_property congress did not provide that production of a manuscript or electronic book are qualifying activities however if the activities did qualify then the rule would probably be consistent with that of other qualifying intangible_property under sec_199 the rule would not treat taxpayer’s activities as the production of tangible_personal_property as allowed under sec_263a thus the rules under sec_263a in the context of books are not applicable for purposes of sec_199 because our office believes in some cases a sec_263a production activity is not a sec_199 mpge activity our office also believes cases analyzing the producer requirement of sec_263a including suzy zoo v commissioner are not useful in making the determination for purposes of sec_199 sec_263a cases determine whether a taxpayer is a producer by relying on activities that under sec_199 result in the creation of intangible_property the field believes for a taxpayer to mpge tangible_personal_property the taxpayer must show that it applied some type of physical force to the property further it must show that this physical force should be considered more than minor assembly as contemplated in sec_1_199-3 while we recognize that physical force may be an activity that occurs in the mpge of tangible_personal_property and often is a clear mpge activity the term ‘physical force’ has not been defined and has not been mentioned as a standard for determining whether an activity is an mpge activity we also note for example gases such as oxygen hydrogen and nitrogen are considered tangible_personal_property under sec_1_199-3 but the production of those gases may not involve physical force therefore we decline to say that the mpge of tangible_personal_property categorically involves the use of physical force postn-136312-11 print specifications our office believes that print specification activities are non-mpge activities while providing the print specifications to the contract manufacturer gives the contract manufacturer a detailed description of how the taxpayer desires the mass-produced books to look eg size color print type etc the print specifications do not produce qpp packaging activities taxpayer’s activities in some circumstances also include packaging books sec_1_199-3 provides that if a taxpayer packages repackages labels or performs minor assembly of qpp and the taxpayer engages in no other mpge activity with respect to that qpp the taxpayer’s packaging repackaging labeling or minor assembly does not qualify as mpge with respect to that qpp because taxpayer’s other activities are not the mpge of qpp taxpayer’s packaging activities do not qualify as the mpge of qpp case development hazards and other considerations this request included memorandums from both the field and the taxpayer our office took all of the submissions into consideration before reaching our conclusions --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------------------ this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call ----------------------at if you have any further questions


id office uilc cca-4111452-13 -------------- number release date from ----------------- sent wednesday date pm to ------------------- cc ------------------------------------------------------------------------------------- subject nol period of limitations question ---------- hi ----------- this email responds to your earlier request for assistance please let me know if you have any further questions the refund claim for tax_year ------- was timely filed sec_6511 is not the exclusive limitations_period applicable to nol carrybacks the period provided in sec_6511 of the code was intended to constitute an additional period within which a claim for credit or refund of an overpayment_of_tax for the year to which the loss is carried might be made rather than a substitution for the periods provided in sec_6511 of the code revrul_65_281 1965_2_cb_444 emphasis in original and so as applicable to the facts of this case a claim filed after expiration of the period prescribed in sec_6511 of the code but within years from the date the tax was paid is to be considered timely and valid id


internal_revenue_service p o box cincinnati oh release number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number vil legend b foundation c llc d grant program e religion f dollar amount g dollar amount h dollar amount j dollar amount k dollar amount m dollar amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request b a foundation and the sole member of c operates an educational grant program called d the purpose of d is to deepen and enrich the e educational learning opportunities of students and where relevant or desired their families by offering grants to organizations for use in such programs while b will primarily fund d b may request that other donors enter into their original grant agreement with the recipient in providing additional funding you plan on operating in connection with b to become an additional donor party to the grant agreement in doing so you will provide grants to the original recipient and funds would be administered and monitored under the procedures established by b described below the duration and amounts of the grants awarded to educational organizations will vary but most are expected to be in the form of three year grants in amounts ranging between f and g dollars per annum you will fund each grantee’s program in the first year thereafter grantee organizations are expected to obtain increasing amounts of donor commitments to cover the costs of their programs you expect to mail informational materials to individual educators who are working at organizations that provide e educational programming to students in grades kindergarten through twelfth grade and college the educators who have received or will receive the solicitation materials and application package have been or will be pre-selected by nominators engaged by you to identify and recruit potential applicant organizations with outstanding educators at their organizations since you do not have educational staff with e educational experience you developed relationships with individual consultants who have experience with formal and informal programming to help identify an appropriate applicant pool and to ensure high quality among the applicant pool you have engaged individuals to serve as nominators in connection with d you requested that the nominators identify a group of outstanding innovative educators working with educational organizations who you could invite to apply for funding nominators were asked to identify individuals with a reputation for implementing high quality programming and a proven track record for achieving educational results additionally you requested that nominators identify educators who the nominators believe can propose new programs that could be implemented by the educational organizations where such educators are employed that would deepen and enrich the knowledge and identity of the students of such organizations and educators and if relevant the families of these students while the objective is to have innovative educators design d programs you will also consider the nature of the organization where the educator is employed as the organization will be responsible for supporting sustaining and implementing the educational programming if the organization is awarded a d grant the class of eligible grantees is limited to educational organizations at which educators identified by the nominators are employed although the invitations are intended to be non-transferable and personal to the identified educators you are committed to building educational programming at the grantee organization under the supervision of either the nominated educator or another qualified educator at the organization that is selected by the grantee organization in making their initial nominations the nominators will take into account the experience of the organization in implementing high quality educational programming letter catalog number 58222y you will review the submitted applications based upon a number of criteria including experience and track record of the applicant organization in executing effective e educational programming the clarity of the plan and budget readiness of the organization to implement the proposed project and goals of the proposal and the probability of the organization achieving the stated goals of the proposal in its first year sufficient to enable between ten to twenty you expect to commit funds to d grantee organizations to begin developing programs with the nominated educators thereafter the extent to which you will commit to funding programs and new grantees will be determined after an assessment regarding the success of the first grantees’ programs and available_resources each grantee may request a different amount for each of the three years as it builds its program in the first year grantees may request between f and g dollars in the second year grantees may request between f and h dollars in the third year grantees may request between f and j dollars in years two and three the grantee organization is expected to also raise program funds from other sources during the third year of the grant you will evaluate the impact of the program and effectiveness of grantee organizations for achieving proposal objectives based upon implementation feedback such as increases in the program participants or quantity of time participants spend engaged in programming supported by d or increased depth or measure of learning as determined by valid educational measures you will invite a number of grantees to apply for an additional two years of grant funding if awarded an extension grant each grantee organization would be eligible to receive a maximum of k dollars in year four and m dollars in year five as with the standard three year grants such extension grant will be made with the expectation that the grantees secure increasing amounts of donor commitments to offset program_costs you will fund each grant in installments with an initial payment up front to fund the first eight months of programming in year one thereafter each grantee organization would submit a report to you every six months upon receipt of a report which evidences the satisfactory continued implementation of the program supervised by an adequately qualified educator whether the initial nominated educator or a replacement selected by the educational_organization you will fund the subsequent payments in years one two and three and if extended years four and five if the nominated educator leaves the educational_organization after you enter into the grant agreement the educational_organization would be responsible for selecting an adequately qualified educator to continue implementing the program grantees will submit written reports to you every six months reports will include a narrative description of the implementation of the educational programming and will be accompanied by a financial report on the use of granted funds compared against the budget a program coordinator or other c representative will regularly communicate with each recipient organization to receive feedback on the funded program and how the grant monies are being spent in connection to such programming letter catalog number 58222y each grant recipient must keep and maintain such financial records and in such a manner so as to adequately reflect and account for_the_use_of the organization grant funds and to furnish originals or authentic copies to the program coordinator upon request c in its sole discretion may take any and all such reasonable and appropriate steps including possibly legal action to compel compliance of use of funds for their intended purpose including requiring the return of all or any portion of funds remitted and the withholding of funds not previously remitted the awarding of d is a multi-faceted process which begins with the initial identification of educational organizations at which nominated educators are then employed nominated educators are then sent informational materials and grant applications which they are encouraged to complete with the appropriate stakeholders at their respective educational organizations applications must be submitted by educational organizations completed applications submitted by those educational organizations are then received by you and evaluated by your selection committee each completed application will be reviewed by one or more members of your staff and a nominator other than the nominator who originally nominated the educator who was the architect for the related proposal each member will rate the application in connection with following parameters e e e e e the internal logic educational strength and process of implementing the educational proposal described in the application the evidence and probability that the proposed educational programming will significantly deepen and enrich the educational growth of the program participants the track record of the organization in implementing educational programming and in successfully implementing new educational programming the readiness of the organization and commitment of the organization to expand and offer the new programming the level of involvement and supervision which the selected educator will assume in guiding the project the selection committee will also be responsible for identifying any relationships between potential grant applicants and disqualified persons and ensure that organizations with any such relationship s are not awarded grants your selection committee consists of one or more members of your staff and a nominator other than the nominator who originally nominated the educator who was the architect for the related proposal if any member of the senior staff or management of a potential grant recipient is either related to whether by blood or through marriage or has any direct or indirect affiliation with the d program coordinator or any director officer_or_employee of you or c they will be ineligible to participate in the program letter catalog number 58222y no director officer_or_employee of you or c or any other person who is involved in the process of selecting applicants for the program will be in a position to derive a private benefit directly or indirectly if certain potential grantees are selected over others 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 e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or a prize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show e e e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination e e e this determination covers only 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 precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at letter catalog number 58222y internal_revenue_service exempt_organizations determinations p o box cincinnati oh e e e you cannot make 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 must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58222y


id office uilc cca-945550-12 -------------- number release date from ----------------- sent tuesday date pm to ---------------------- cc subject re streamlined injunctions to stop pyramiding employment_taxes - need materials if any ----- -------- hi --------- sorry for the delayed response i’m working at home today and am having problems accessing things on the intranet so i haven't finished looking for materials that might be helpful i can say though that generally streamlined injunctions per se are a thing of the past the former streamlined injunction project involved allowing ro's to skip certain otherwise required steps such as informing taxpayers about monthly filing and special deposit procedures in the case of certain taxpayers this memo discussed the project but as this interim memo indicates those steps are obsolete this is also indicated in the current http serp enterprise irs gov databases irm dr current dr dr dr htm -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- the cases it relies upon were not decided under sec_7402 and the courts do not analyze sec_7402 cases the way the subsection indicates though the analysis is similar that that irm letter do has recently been updated in light of the obsolescence of montly filing and spcial deposit procedures http serp enterprise irs gov databases irm dr current dr dr dr htm i'll reply again tomorrow ------ attachment redacted attachment date guidance regarding interim guidance


en oo department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date release date uil dear contact person identification_number contact number employer_identification_number form required to be filed tax years you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file file the returns in accordance with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_64 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your action or the irs customer service num ber for businesses the irs customer service number for people with hea ring impairments is sincerely yours robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax exempt and government entities oivision date date uil contact person identification_number contact number fax number employer_identification_number a m o q g q a g t n i m ' ' c i k z l o t n w o t o h x i k k n i we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code based on the information provided we have concluded that you do not qualify for exemption under sec_501 the basis for our conclusion is set forth below the information submitted indicates that you were incorporated on february under the laws of the state of a your articles of incorporation state that your specific purpose is for the restoration preservation and creation of affordable housing for low to moderate ' a provide affordable housing to very low to moderate income or special need persons s b create affordable housing by developing new housing units cc preserve affordable housing by rehabilitation of existing housing units d promote home ownership or proper maintenance of affordable housing provide goods at low cost for better livability health or safety in affordable housing 2uu81 your bylaws also provide that you shall have not less than three or more than five directors with the exact number to be fixed within these limits by approval of the board_of directors or the members the information you submitted indicates that your activities began with the purchase of a vacant lot for dollar_figurer at a tax sale on may you state that you intended to develop the lot for a manufactured_home with all connections and then sell or rent if necessary the property to a low_or_moderate_income person in order to obtain title insurance you had to hold the property untouched for at least one year starting on august ' you operated a carpet thrift store by receiving slightly used carpet from a convention contractor you paid dollar_figures for big_number square yards in expenses associated with the carpet such as labor and transportation were dollar_figureu you state that you sold the carpet to landlords of low_income_housing low income tenants and low income home owners at dollar_figure to dollar_figure per and dollar_figuret for big_number square yards in products for sale subsequent to october you state that you completed building the home on the vacant lot you state that the home was sold on march to an income qualified buyer’ ie a buyer with moderate income as defined by the u s department of housing and urban development the house was appraised at dollar_figurev offered at dollar_figurew and sold at dollar_figurex you paid the closing costs of dollar_figurey you also state that as soon as the house was listed realtors in the area narrowed and streamlined your focus you state that from this time forward of your resources will be devoted to the acquisition improvement and management of mobile home parks you will search out under-performing parks that need improvement or are in jeopardy of redevelopment to new uses and the new uses would evict and reduce the numbers of affordable housing units the remaining of your resources will be used as fundraising to obtain mobile home parks you state that you will provide a safe_harbor for each mobile home project establishing the low-income mix set out in revproc_96_32 c b you further state that you will not provide housing to the elderly or the disabled excepting those that would comply with the low-income mix nor will you rehabilitate distressed abandoned or blighted properties you state that your current and past board members are b president c secretary- treasurer and d son of c you state that if you receive a conditional commitment from the service four additional members from a list of seven two of whom are married will be added to 2uu81 you state that services provided to you by b will be for your management only and that none of your paid employees volunteers or board members can receive any profit by salary or investment from any project you are involved with sec_501 c of the code provides an exemption from taxation for organizations organized and operated exclusively for charitable and educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_513 of the code provides that the term unrelated_trade_or_business does not include any trade_or_business which is the selling of merchandise substantially_all of which has been received by the organization as gifts or contributions sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded activities which accomplish one or more of such exempt_activities specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose ively for one or more exempt purposes only if it engages primarily in sec_1_501_c_3_-1 d of the regulations defines the term charitable as including the promotion of social welfare by organizations designed to relieve the poor and distressed of the underprivileged to lessen neighborhood tensions to eliminate prejudice and discrimination or to combat community deterioration revrul_71_581 1972_2_cb_236 describes an organization that operated a thrift shop where substantially_all of the goods had been donated and more than half of the work was performed without compensation the organization is recognized as exempt under sec_501 of the code because its primary purpose was to serve a group of sec_501 activities a refusal to issue ruling or determination_letter will be considered an initial adverse determination from which administrative appeal or protest rights will be afforded revproc_96_32 1996_1_cb_717 sets forth a safe_harbor under which organizations that provide low-income_housing will be considered charitable as described in sec_501 of the code because they relieve the poor and distressed as described in sec_1 c - d of the regulations sec_3 of the revenue_procedure provides that an organization will be considered charitable as described in sec_501 if it satisfies the following requirements income limit the organization establishes for each project that a at least percent of the units are occupied by residents that qualify as low-income and b either at least percent of the units are occupied by residents that also meet the very low-income limit exceed percent of the area's very low-income limit up to percent of the units may be provided at market rates to persons who have incomes in excess of the low- the project is actually occupied by poor and distressed residents for projects requiring construction or rehabilitation a reasonable transition_period is allowed for an organization to place the project in service whether an organization's transition_period is reasonable is determined by reference to all relevant facts and circumstances for projects that do not require substantial construction or substantial rehabilitation a one-year transition_period to satisfy the actual occupancy requirement will generally be considered to be reasonable the housing is affordable to the charitable beneficiaries in the case of rental housing this requirement will ordinarily be satisfied by the adoption of a rental policy that complies with government-imposed rental restrictions or otherwise provides for the limitation of the tenant's portion of the rent charged to ensure that the housing is if the project consists of multiple buildings and each building does not separately meet the requirements of and above then the buildings must share the same revproc_96_32 also provides a facts_and_circumstances_test for relieving the poor and distressed if the safe_harbor above is not satisfied facts and circumstances that demonstrate relief of the poor may include but are not limited to the following a substantially greater percentage of residents than required by the safe_harbor with incomes up to percent of the area's very low-income limit limited degree of deviation from the safe_harbor percentages limitation of a resident's portion of rent or mortgage payment to ensure that the housing is affordable to low-income and very low-income residents grounds housing operations participation in a government housing program designed to provide affordable operation through a community-based board_of directors particularly if the selection process demonstrates that community groups have input into the organization's the provision of additional social services affordable to the poor residents relationship with an existing sec_501 organization active in low-income acceptance of residents who when considered individually have unusual burdens participation in a homeownership program designed to provide homeownership existence of affordability covenants or restrictions running with the property the information you have submitted establishes that you are not currently performing any such as extremely high medical costs which cause them to be in a condition similar to persons within the qualifying_income limits in spite of their higher incomes opportunities for families that at cannot otherwise afford to purchase safe and decent housing you have not demonstrated that your operation of a carpet thrift store meets the requirements set forth in revrul_74_581 supra the used carpet you sold was not donated but rather sold to you your sale of carpet to landlords of low_income_housing low income tenants and low income homeowners is not necessarily a charitable purpose as there is no indication that the carpet was sold substantially below cost or that more than half of the work in the operation was performed without compensation merely selling used carpet that was revproc_96_32 supra sets forth the requirements of a safe_harbor for an organization providing low-income_housing in order to show that the organization actually has a purpose to relieve the poor and distressed an organization developing a new project may qualify for meet any of these requirements there is no indication in the information you have presented to show that if you purchase an existing mobile home park there will be benefits to low-income persons within a reasonable amount of time or that the rights of existing residents will be addressed further you have not presented the standards criteria procedures or other means by which you intend to effectuate your current purposes as required in revproc_90_27 supra the only basis in the file to in icate your purpose of low-income_housing is your building of a single house which you sold to a moderate-income family this does not indicate whether you will meet the housing requirements in revproc_96_32 supra or the standards that have long been applied to determine whether a low-income_housing organization qualifies for exemption under sec_501 c of the code therefore due to the above reasons you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federa claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service te_ge ‘11117 constitution ave n w washington dc if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours lois g lerner director exempt_organizations rulings agreements


internal_revenue_service department of the treasury index number u i l no washington dc person to contact telephone number refer reply to cc dom p si plr-111569-99 date date number release date legend company state shareholders a this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a in state company has four shareholders shareholders it is represented that company has intended to be an s_corporation since its incorporation believing itself to be an s_corporation company has operated accordingly since a after the end of its taxable_year beginning on a however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year plr-111569-99 then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


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 b01 plr-152060-05 date date --------------------- -------------------------- -------------------------------------- legend legend x -------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152060-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152060-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc