t c no united_states tax_court american stores company and subsidiaries petitioner v commissioner of internal revenue respondent docket no filed date p made contractually required monthly contributions to multiemployer pension plans p also provided vacation pay benefits to its employees under various plans for its tye date p obtained an extension of the time within which to file its u s consolidated corporate_income_tax return to date for its tye date p obtained an extension of the time within which to file its u s consolidated corporate_income_tax return to date on its return for tye p deducted in addition to the monthly contributions based on units of service worked during the taxable_year contributions based on units of service worked during months after the last day of tye but before the due_date of the return as extended on its returns for tye and tye p also deducted in addition to its vacation pay liabilities based on units of service worked during those years vacation pay liabilities based on units of service worked during months after the last days of the taxable years but before the due dates of the returns as extended held pension contributions based on units of service worked after the close of tye and before date were not on account of p's tye as required by sec_404 i r c and are therefore not deductible in that year 107_tc_1 supplemented by tcmemo_1997_70 followed held further vacation pay based on units of service worked after the close of tye or tye and before the due_date of the return for such year as extended was not earned in tye or tye as required by sec_463 i r c and is therefore not deductible in such year frederick j gerhart thomas e doran stephen dibonaventura and scott d price for petitioner thomas r lamons c glenn mcloughlin and david l miller for respondent opinion nims judge respondent determined the following deficiencies in petitioner's federal_income_tax taxable_year ending tye date date date date deficiency dollar_figure big_number big_number big_number unless otherwise indicated all section references are to sections of the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the following issues remain for us to resolve in the present proceeding whether petitioner in its taxable_year ending date tye properly deducted certain contributions to multiemployer pension plans attributable to services performed after the conclusion of that tax_year and whether petitioner properly deducted certain vacation pay liabilities pursuant to sec_463 in its taxable_year ended date tye and in tye the amount of the disputed pension contribution deduction is dollar_figure the amounts of the disputed vacation pay deductions are dollar_figure in tye and dollar_figure in tye the facts have been fully stipulated and are found accordingly this reference incorporates the stipulated facts and attached exhibits petitioner is a delaware corporation at the time the petition was filed petitioner's principal_place_of_business was located in salt lake city utah background petitioner is the common parent of an affiliated_group_of_corporations and files a consolidated federal_income_tax return annually petitioner filed the petition on behalf of all eligible members of the group for federal_income_tax purposes petitioner elected to file corporate_income_tax returns on the basis of a week fiscal_year ending on the saturday nearest january of any given year petitioner requested and received an extension to date to file its united_states consolidated corporate_income_tax return for tye petitioner requested and received an extension to date to file its united_states consolidated corporate_income_tax return for tye petitioner through its subsidiaries primarily engages in the retail_sale of food and drug merchandise conjointly the subsidiaries represent one of the nation's leading retailers operating combination drug food stores super drug centers drug stores and food stores during the years in question petitioner conducted its principal business activities through wholly owned subsidiaries and operating divisions including acme markets inc jewel food stores star market jewel osco alpha beta company skaggs alpha beta and buttrey food respondent issued a statutory_notice_of_deficiency on date after stipulations of agreement executed by the parties the remaining issues are whether petitioner can deduct in tye certain contributions made to various multiemployer pension plans in the months after date but before the extended due_date for filing its return and whether petitioner is entitled to certain vacation pay accrual adjustments pursuant to sec_463 for tye and tye i the deductions for contributions to collectively bargained plans under applicable internal_revenue_code provisions employers may enter into qualified deferred_compensation arrangements which provide retirement and other_benefits to employees and their beneficiaries through single employer plans multiple employer plans and multiemployer plans plans not established pursuant to collective bargaining agreements are herein referred to as multiple employer plans plans established and maintained pursuant to such agreements are henceforth referred to as multiemployer plans or alternately as cba plans in both multiple employer plans and multiemployer plans the contributions of participating employers are pooled and used to provide benefits to all covered employees former employees and their beneficiaries sec_413 contains certain rules exclusively applicable to cba plans which are the plans involved in the instant case at all relevant times petitioner was obligated to contribute money to cba plans these plans were defined benefit pension plans by stipulation of the parties arguments were limited to the plans to which petitioner contributed the largest amounts in tye the top plans the parties have agreed to apply the court's decision with respect to the top plans to petitioner's contributions to the other plans the following schedule sets forth the the top plans and their respective annual accounting periods plan years for federal tax purposes cba plan southern california ufcw union food employers joint pension_trust fund ufcw union and participating food indus- try employers tri-state pension fund northern california retail clerk union food employers joint pension_trust fund southern california meat cutters union food employers pension_trust fund ufcw union local retail meat pension fund ufcw international union industry pension fund western conference of teamsters pension_trust southern california retail clerks union drug employers pension fund warehouse employees union local employers joint pension fund ufcw local participating employers pension fund plan_year april - march january - december january - december july - june july - june july - june january - december january - december january - december january - december during the calendar years and more than big_number employers made contributions on behalf of thousands of unionized employees and their beneficiaries to many of the plans other plans were smaller at all times between date and date each of the plans qualified as a multiemployer_plan within the meaning of the employee_retirement_income_security_act_of_1974 erisa publaw_93_406 88_stat_829 and was a plan to which sec_413 and subtitle e of title iv of erisa applied moreover at all times during this period each of the plans qualified under sec_401 as a pension_plan and accordingly the trusts related to each cba plan were exempt from taxation under sec_501 generally at the end of each month petitioner calculated the amount of its required_contribution to each cba plan by multiplying the hours or weeks units of service worked by covered employees in such month by fixed monetary rates the contribution rate set by the collective bargaining agreement increases or decreases in the number of covered employees along with increases or decreases in the units of service worked by covered employees required petitioner to make a separate calculation for its required_contribution to each plan every month contributions to each cba plan attributable to units of service worked in a given month were due on the 30th of the month after the units of service were worked on occasion contributions to plans were made on a quarterly basis based upon covered services performed during the quarter for taxable years prior to tye petitioner's subsidiaries computed their deductions for plan contributions in one of ways skaggs alpha beta and jewel food stores for one of the plans to which it contributed calculated the contributions paid to the plans during the corporations' taxable years regardless of when the covered services related to the contributions were performed and claimed that total as their deduction alpha beta company osco drug company acme markets and jewel food stores for the other plans to which it contributed calculated the contributions related to covered services performed during their taxable years regardless of when those contributions were paid and claimed that total as their deduction for each subsidiary and for each taxable_year ending prior to petitioner's tye the total amount claimed as a deduction for that year did not include any contributions attributable to covered services performed after the end of that taxable_year for tye skaggs alpha beta for the plans to which it contributed and jewel food stores for one of the plans to which it contributed computed their deductions for contributions to the plans claimed on petitioner's federal_income_tax returns by adding together the contributions actually made during tye and those contributions made after the end of tye but before the due_date for filing petitioner's return ie date jewel food stores calculated its deduction for contributions to other plans by adding together contributions calculated with reference to covered services performed in tye and those contributions calculated with reference to covered services performed after tye that were made before the due_date for filing petitioner's return alpha beta company osco drug company and acme stores each calculated its deduction for contributions to the plans by adding together the contributions made with reference to covered services performed in tye and those contributions which were related to covered services performed after tye and were made after the end of tye but before the due_date for filing petitioner's return petitioner claimed a deduction for contributions to the plans of dollar_figure of that amount dollar_figure was reflected on petitioner's books as a tye expense and dollar_figure was reflected on schedule m-1 as an adjustment to petitioner's book income of the dollar_figure deducted by petitioner on the schedule m- dollar_figure pertained to amounts contributed by skaggs alpha beta and star markets in date and thus was attributable to covered services performed during tye the remaining dollar_figure deducted by petitioner on schedule m-1 related to covered services performed after the end of tye for taxable years after tye petitioner reported deductions based upon contributions attributable to covered services performed during the taxable_year but not previously deducted for tax purposes as well as contributions attributable to covered services performed after the close of the taxable_year where the contributions were made before the filing_date for petitioner's federal_income_tax return in contrast to tye for taxable years before and after tye petitioner deducted only contributions calculated with reference to covered services performed over a 12-month_period at no time did petitioner file a form_3115 application_for change in accounting_method concerning the method used to arrive at its deduction for contributions to the plans claimed on its return for tye in her notice_of_deficiency respondent disallowed the dollar_figure schedule m-1 adjustment upon determining that petitioner could not properly deduct contributions attributable to covered services performed after the close of the taxable_year as so-called grace period contributions respondent did not disallow the dollar_figure deduction representing contributions made by petitioner to the plans attributable to covered services performed during tye the parties subsequently agreed that petitioner improperly calculated the amount of the grace period contributions petitioner admits that it overstated its deduction for grace period contributions by dollar_figure and acquiesces in the adjustments made by respondent to that extent thus after that concession the amount remaining in dispute in regard to contributions made by petitioner after date and before date was dollar_figure respondent concedes that contributions in the amount of dollar_figure which were attributable to amounts contributed by skaggs alpha beta and star markets in date for covered services performed in date were properly deductible as a result the portion of the grace period contributions remaining at issue is dollar_figure the administrator of each plan was a party independent of petitioner and was appointed by the board_of trustees of the plan under the terms of the collective bargaining agreements the plans were entitled to collect interest and or late fees on delinquent contributions from employers at all times during the relevant period each cba plan_administrator had procedures to monitor the actual dates of receipt of each employer's required_contribution as required by erisa sec_104 and 88_stat_847 and sec_6057 and sec_6058 after the close of each plan_year the administrator of each cba plan filed annual reports forms and accompanying schedules with the irs on schedule b of form_5500 each cba plan reported for its plan_year only those contributions paid under the applicable agreement for units of service worked during that particular year only a defined_benefit_plan subject_to the minimum_funding standards of sec_412 and erisa sec_302 88_stat_869 is required to file a schedule b one purpose of the completion of the schedule b is to demonstrate compliance or noncompliance with such minimum_funding standards at all times during the relevant periods each cba plan satisfied the minimum_funding requirements of sec_412 and erisa sec_302 petitioner's subsidiaries' monthly contributions to each cba plan were reported on schedule b for that plan_year in which the related units of service of the covered employees had been worked while nothing in the collective bargaining agreements prohibited petitioner from contributing more than the amount required or contributing amounts in advance of the date that such amounts became due no provision explained how the plan_administrator should credit an advance contribution from an employer_generally advance pension contributions were not made to the plans and with the exception of advance contributions made with respect to vacation time and severance_pay petitioner did not make any such contributions during the taxable years at issue no contributions were made by petitioner to any of the cba plans during the relevant period that were not required by collective bargaining agreements petitioner's subsidiaries for public financial reporting purposes accounted for their contributions to the cba plans in one of ways skaggs alpha beta for the plans to which it contributed and jewel food stores for one of the plans to which it contributed calculated contributions paid to the plans during the corporations' taxable years regardless of when the covered services related to the contributions were performed and included that total as their contributions expense for the other plans to which jewel food stores contributed and for the plans to which alpha beta company osco drug company and acme markets contributed the contributions related to covered services performed during the corporations' taxable years were treated as contributions expenses regardless of when those contributions were paid for each of the subsidiaries and for each taxable_year the amount included as a contributions expense did not include contributions attributable to covered services performed after the end of the taxable_year the taxable_year of a contributing employer need not match the plan_year of a plan to which such employer contributes administrators of multiemployer plans are not cognizant of the taxable years adopted by contributing employers moreover under the terms of the collective bargaining agreements petitioner was not required to report to the plan administrators the deductions it claimed for contributions in preparing its funding_standard_account under sec_412 for each plan_year no cba plan considered contributions made by contributing employers for hours worked by covered employees following such plan_year under each cba plan for all relevant periods the earning crediting and vesting of a participant's benefit remained independent of the making of any specific contribution of an employer the parties stipulated that if called to testify by petitioner the employee of petitioner most familiar with its subsidiaries' contribution obligations to each of the plans would state that as of date he had no reason to believe that the amount of any of the subsidiaries' monthly contribution obligation to any such plan would significantly decrease in the 8-month period following date furthermore the amount of total employer contributions actually paid to each of the plans relating to covered services performed during each plan_year is an amount which the plan_administrator could have as of the beginning of such plan_year reasonably anticipated to be made by employers with respect to covered services performed during such plan_year petitioner consulted with an accounting firm ernst whinney about accelerating deductions for contributions to the cba plans made after the end of a tax_year and before the due_date of the tax_return for that year herein for convenience referred to as grace period contributions the parties stipulated that ernst whinney marketed this type of acceleration to certain clients that were making required contributions to multiemployer defined benefit pension plans during this period petitioner was never notified by any plan representative that the statutory deduction limit was exceeded with respect to any plan for any relevant period petitioner did not notify any plan representative that the monthly contributions calculated with reference to covered services performed after date were to be applied to months ending on or before date ii the vacation pay deductions petitioner provides many of its approximately big_number employees with job-related benefits including vacation pay and other types of compensated leave a number of factors determine the type and amount of vacation pay available to an employee such as the employing company the employee's job classification the employee's tenure with the employing company and the employee's status as a union or non-union worker petitioner deducted dollar_figure attributable to its vacation pay liability on its return for tye dollar_figure of which is in dispute in the instant case the vacation pay petitioner deducted dollar_figure attributable to its vacation pay liability on its return for tye dollar_figure of which remains in dispute the vacation pay a the terms of the vacation benefits plans petitioner provided vacation pay benefits to its employees under three basic plans the american stores co general vacation plan and other plans providing similar benefits herein collectively referred to as the general plan the star markets non-union plan the star markets plan and the acme markets union plans the acme markets plans the general plan the general plan is the vacation benefit plan most widely used by petitioner under this plan once a covered_employee reaches the first anniversary of his initial hire date he has the right to take one week of paid vacation following an employee's first year of continuous service the plan operates somewhat differently as of each january an employee's vacation pay benefits are determined based on the next anniversary of his initial hire date this calculated amount is referred to as the employee's leave entitlement only those individuals continuously employed by petitioner for the 12-month_period ending on december of each year obtain a leave entitlement the general plan permits an employee to take his entire leave entitlement as of january thus for example an employee who worked for petitioner since date had the right to take week of vacation upon reaching date on date the same employee was able to take weeks of leave since the employee was expected to have years_of_service by date the following schedule reflects the leave entitlement available to employees under the general plan salaried week after year_of_service weeks after years_of_service weeks after years_of_service weeks after years_of_service weeks after years_of_service hourly week after year_of_service weeks after years_of_service weeks after years_of_service weeks after years_of_service weeks after years_of_service the general plan calculates years_of_service using the anniversary of an employee's date of hire the anniversary date the plan uses an employee's job category salaried or hourly worker as of january of each year to calculate the amount of the employee's leave entitlement for the calendar_year leave entitlements generally must be used by the end of the calendar_year no full week increments of leave may extend beyond that time moreover employees do not receive compensation_for the portion of their leave entitlement which remains unused at the end of the calendar_year leave entitlement for employees covered by the general plan vests ratably over the 1-year period between successive anniversary dates consequently an employee's leave entitlement as of january normally includes both vested and nonvested portions the vested portion is coextensive with services which have already been performed by the employee the nonvested portion of the leave entitlement will vest on a weekly or monthly basis as future services are performed by the employee thus an employee with an anniversary date of july of a given year will be vested in one-half of his vacation pay for that year as of january the other half of the leave entitlement will be nonvested at that time although the general plan enables a covered_employee to take his entire leave entitlement anytime after january if an employee leaves his job prior to reaching his anniversary date he must reimburse petitioner for any used portion of the nonvested leave entitlement moreover if a covered_employee retires or voluntarily terminates employment with unused leave entitlement petitioner will only pay the employee for the vested leave entitlement the employee does not have a right to receive payment for any unused nonvested leave entitlement an employee receives vacation pay under the general plan equal to the salary he would normally receive when the vacation is actually taken vacation pay is not based on the employee's salary at the beginning of the calendar_year the star markets plan star markets provides vacation pay benefits to certain non- union employees under a plan which differs from the general plan star markets permits an employee to take week of vacation after year of continuous service and weeks of vacation after years of continuous service the plan also permits employees with years or more of continuous service to take additional vacation pay benefits the actual amount of vacation for which an employee qualifies hinges on the employee's anniversary date with star markets the following shows the vacation schedule for employees who qualify for week of vacation under the star markets plan if anniversary date falls between vacation may be taken between january april may october may december upon reaching anniversary the star markets plan permits an employee on the payroll as of april to take weeks of vacation after completing years of continuous service with star markets the following shows the vacation schedule for employees who qualify for weeks of vacation under the star markets plan if anniversary date falls between vacation may be taken between january april may october may december first week between may october second week upon reaching anniversary the parties have stipulated that by the end of tye and tye employees satisfied three-quarters of the service necessary under the star markets plan to qualify for or weeks of vacation regardless of their respective anniversary dates that is to say the parties have stipulated that all employees were on the payroll as of april the three-quarters of the service satisfied the 9-month span from may to january or corresponds to an employee's accumulated benefits since contrary to the general plan vacation benefits do not vest ratably under the star markets plan nonaccumulated benefits consist of that one-quarter of the vacation entitlement measured from the end of the relevant tax_year january or to the applicable_date of grant april for employees who qualify for or weeks of vacation pay the star markets plan vacation season extends from may through december of each year unless an individual terminates employment prior to reaching his anniversary date he becomes fully vested in the first and second weeks of vacation as of the date he is eligible to take his vacation under the plan with the exception of an employee starting between may and december who can take his first week between may and october but does not vest until his anniversary date all vacation under the star markets plan must commence within the calendar_year in which an employee reaches his anniversary date with star markets no vacation benefits may be accumulated from year to year the record does not disclose how an employee whose anniversary date falls in the last week of december is supposed to take his vacation we presume that as long as his vacation commences before the end of that calendar_year it may continue into the next calendar_year without forfeiture as with the general plan the star markets plan calculates vacation pay benefits using an employee's rate of pay in effect at the time the vacation is actually taken vacation pay is not premised on an employee's salary at the beginning of the calendar_year the acme markets plans acme markets offers vacation pay benefits to certain union employees the acme markets plans' vacation season extends from may through september of each year for the first and second weeks of vacation and may through april of the next calendar_year for the third fourth and fifth weeks of vacation in contrast with the star markets plan employees covered by the acme markets plans vest ratably in a specified amount of leave for each month or each week they work for acme markets between may of one calendar_year and april of the next year the amount of leave in which an employee vests depends on the employee's length of continuous service with acme markets as of may of each year an employee will be fully vested in the vacation pay he is expected to take during the vacation season beginning on that date all vacations under the acme markets plans must be used during the relevant vacation season no vacation benefits accrue from one vacation season to the next a covered_employee who terminates employment before reaching the may start of a vacation season retains the right to receive payment for vacation pay benefits he has vested in since may of the preceding year however he has no right to receive vacation pay for nonvested vacation benefits he would have vested in by the may start of the next vacation season an employee receives vacation pay under the acme markets plan equal to the salary he would normally receive when the vacation is actually taken b petitioner's sec_463 deductions for the general plan and the acme markets plans petitioner included both the unused yearend vested and nonvested vacation benefits in calculating its vacation pay accruals under sec_463 for the relevant period in some instances petitioner applied inflation factor adjustments to the unused yearend vested and nonvested vacation benefits when calculating claimed accruals under sec_463 the parties agree that petitioner may include the unused yearend vested vacation benefits and related adjustments when calculating its vacation pay accruals under sec_463 respondent disputes however petitioner's inclusion of the unused yearend nonvested vacation benefits and adjustments when calculating the vacation pay accruals under sec_463 for tye and tye petitioner also included the yearend star markets accumulated and nonaccumulated benefits when calculating the claimed vacation pay accruals under sec_463 for the relevant period star markets also applied inflation factor adjustments to the yearend accumulated and nonaccumulated benefits when calculating the claimed vacation pay accruals under sec_463 the parties agree that star markets may include the yearend accumulated benefits and corresponding adjustments when calculating its vacation pay accruals under sec_463 however respondent disputes the inclusion of the nonaccumulated benefits and adjustments when calculating accruals for tye and tye discussion the issues we must decide are whether petitioner properly deducted contributions made to multiemployer plans attributable to services performed after tye on its return for that year and whether petitioner properly deducted certain nonvested or nonaccumulated vacation pay liabilities pursuant to sec_463 on its returns for tye and tye for the following reasons we hold that the timing of petitioner's deductions was improper with respect to both issues issue the deductions for grace period contributions to multiemployer plans during the relevant period petitioner's subsidiaries made monthly contributions to cba plans on behalf of their unionized employees for each cba plan the amount of the monthly contribution was obtained by multiplying the units of service worked by employees covered under the respective cba plan by the contribution rate for each taxable_year prior to tye petitioner deducted monthly contributions based on covered hours worked during such year then as to tye petitioner changed its method of calculating its deduction for that year petitioner obtained an extension to date of the time within which to file its return between the date on which tye ended and the extended due_date of the return petitioner's subsidiaries made or in some cases monthly contributions to the cba plans and claimed these grace period contributions as a deduction for tye in addition to the monthly contributions sec_404 specifies that employer contributions to exempt trusts under various types of qualified_employee benefit plans are not deductible under any other code provision but if they would otherwise be deductible they are deductible under sec_404 subject_to articulated limitations as to the amount deductible in any taxable_year the limitations on the amount deductible are contained in sec_404 which also refers to the deduction of contributions in the taxable_year when paid however sec_404 does not specify the method by which the actual amount of the deduction may be determined the applicable limitations on contributions to cba plans in this case are contained in clauses i and iii of sec_404 which together provide that the overall_limitation is the greater of the amount necessary to satisfy the minimum_funding_standard of sec_412 for plan years ending within the employer's taxable_year and an amount equal to the normal_cost of the plan augmented by any amount necessary to amortize unfunded costs equally over years in addition the flush language at the end of subparagraph a of the foregoing section provides among other things that the maximum amount deductible for the taxable_year is to equal the full funding limitation for such year determined under sec_412 as a further refinement of the sec_404 limitations on the deductibility of contributions sec_413 provides certain rules that apply exclusively to collectively bargained plans etc sec_413 provides that subsection b applies to any plan and any trust thereunder maintained pursuant to a cba ie a cba plan various paragraphs of subsection b provide rules that relate to cba plans but the relevant paragraph for the instant matter is paragraph which furnishes a blueprint for applying sec_404 limitations insofar as they relate to cba plans sec_413 states deduction limitations -- each applicable limitation provided by sec_404 shall be determined as if all participants in the plan were employed by a single employer the amounts contributed to or under the plan by each employer who is a party to the agreement for the portion of his taxable_year which is included within such a plan_year shall be considered not to exceed such a limitation if the anticipated employer contributions for such plan_year determined in a manner consistent with the manner in which actual employer contributions for such plan_year are determined do not exceed such limitation if such anticipated contributions exceed such a limitation the portion of each such employer's contributions which is not deductible under sec_404 shall be determined in accordance with regulations prescribed by the secretary petitioner concedes in its brief that the facts and the issue before us are essentially identical to that of a case before the court at the time the briefs were filed which we have since decided in favor of the commissioner see 107_tc_1 lucky stores i many of the arguments petitioner poses in the instant case were discussed at length in lucky stores i or in the supplemental memorandum opinion lucky stores inc subs v commissioner tcmemo_1997_70 lucky stores ii and we need not retread the same ground here however we shall address certain of petitioner's arguments pertaining to the deduction limitations of sec_404 and sec_413 and their relation to sec_404 for the reasons detailed below we conclude that petitioner by its misguided attempt to use the expanded time of payment provision of sec_404 to augment its current contribution deduction has run afoul of the deduction limits for individual employer contributors imposed by sec_404 and sec_413 see lucky stores inc subs v commissioner t c pincite sec_404 and sec_413 place limits on the overall amount that may be deducted by all contributing employers to a cba plan for portions of their respective tax years included in a plan_year they do not detail the method by which the actual amount of the deduction of an individual employer contributor may be calculated nevertheless in the absence of regulations promulgated by the secretary we think these sections outline the approach that should be taken to determine the permissible amount of each employer's deductions for contributions to a cba plan the dominant themes we extrapolate from sec_413 to aid us in this regard are those of consistency and predictability sec_413 provides a necessary fiction for employer contributors to ascertain whether they will exceed the overall deduction limitation of sec_404 for a given plan_year since they cannot know the exact amount of their required contributions for a plan_year until the units of service are actually completed by their employees their tax years do not necessarily correspond with one another and employer contributors are not required to report to plan administrators the deductions they claim for contributions sec_413 states that all employers' contributions for a plan_year will not exceed the overall limit imposed by sec_404 if the total anticipated contributions for the plan_year do not exceed such limit anticipated contributions for a plan_year must be determined in a manner consistent with that in which actual contributions are determined sec_413 actual contributions are calculated by plan administrators based on units of service worked within the 12-month plan_year petitioner presumes that once the total anticipated contributions are found not to exceed the overall deductible limit it can thereafter elect to augment the amount of its actual contributions for its tax_year pursuant to sec_404 to take advantage of any leftover overall_limitation for the corresponding plan_year the difference between full funding under sec_412 and all anticipated employer contributions for that plan_year any other approach petitioner contends in effect recalculates anticipated contributions which defeats congress' intent in using the word anticipated petitioner is mistaken on counts first except to the limited extent discussed below none of petitioner's contributions qualify for sec_404 treatment second petitioner fails to comply with the individual deduction limits of sec_404 and sec_413 sec_404 states time when contributions deemed made -- for purposes of paragraphs and a taxpayer shall be deemed to have made a payment on the last day of the preceding_taxable_year if the payment is on account of such taxable_year and is made not later than the time prescribed by law for filing the return for such taxable_year including extensions thereof emphasis added if a taxpayer fulfills the above conditions sec_404 automatically applies no election is required or contemplated under the statute the operative language is shall in arguing that it has complied with the foregoing conditions petitioner relies heavily on revrul_76_28 1976_1_cb_106 which offers guidelines to interpret the meaning of the phrase on account of in pertinent part the ruling states a payment made after the close of an employer's taxable_year to which amended sec_404 applies shall be considered to be on account of the preceding_taxable_year if a the payment is treated by the plan in the same manner that the plan would treat a payment actually received on the last day of such preceding_taxable_year of the employer and b either of the following conditions is satisfied the employer designates the payment in writing to the plan_administrator or trustee as a payment on account of the employer's preceding_taxable_year or the employer claims such payment as a deduction on his tax_return for such preceding_taxable_year rev_rul c b pincite emphasis added the underscored language above illustrates that revrul_76_28 offers those employers to which it applies the opportunity for what is in effect an election under sec_404 in lucky stores i we did not need to address the weight to be afforded revrul_76_28 in the context of cba plans lucky stores inc subs v commissioner t c pincite we held that in any event grace period contributions based on services performed after the close of the taxable_year were not on account of the earlier tax_year in that the taxpayer had not proven that the same treatment requirement of revrul_76_28 was satisfied id the only grace period contributions that we find to be on account of tye and which consequently must be deducted in that year are any delinquent payments and the payments for services performed in the last month of tye but not paid until the first month of tye we think that an individual employer's contributions and ensuing deductions for its tax_year in order to comport with anticipated contributions for the plan_year on which the sec_413 deduction limit is based must be limited to those contributions attributable to services performed over a 12-month_period lucky stores inc subs v commissioner t c pincite sec_413 states that each limit under sec_404 shall be determined as if all plan participants were employed by a single employer which mandates uniformity of tax treatment for employer contributors even as their tax years are widely disparate as a result petitioner may not unilaterally and arbitrarily expand its deduction limitation and thereby increase the amount of its deduction for its tax_year by including contributions in its tax_year in a manner at odds with how anticipated contributions previously had been determined for the plan_year in which its tax_year falls id in response to one of petitioner's arguments we recognize that in certain limited situations where the same plan_year includes both the last day of an employer's tax_year and the entire month grace period that follows the tax_year the use of sec_404 in the manner advocated by petitioner if permitted would have no effect on an individual employer's anticipated contributions for the plan_year however many employer contributors would not fall under this category due to their widely varying tax years since these employer contributors could not also use sec_404 without impermissibly distorting their anticipated contributions the requirement of uniform tax treatment would be violated if the individual employer whose anticipated contributions would be unaffected were able so to use sec_404 sec_413 under the 12-month limitation discussed above anticipated contributions are easily forecast at the outset of a plan_year no recalculation is ever required in order to arrive at anticipated employer contributions each employer can examine prior years' forms which indicate actual contributions to a plan for units of work performed during a plan_year alternatively an employer can ask the plan_administrator to indicate the amount of contributions it expects to be due for units of service performed under the plan during the year petitioner acknowledges that sec_413 establishes a means whereby the party with the most information ie the multiemployer_plan can determine in advance whether employer contributions will exceed the deductible limit yet under petitioner's theory a plan_administrator could make no such determination if an employer contributor could arbitrarily expand its actual contributions for its tax_year by electing to do so under sec_404 anticipated contributions for the corresponding plan_year would become indeterminate and therefore unreliable they would no longer approximate the amount of actual contributions for a plan_year this in turn would cause the sec_413 fiction to become unworkable leading to the inability of a plan to prospectively determine whether the overall limit would be exceeded petitioner attempts to finesse this point by positing that whereas sec_404 deems a contribution to be made in an earlier tax_year sec_413 measures employer contributions that are expected to be actually made to a multiemployer_plan during its plan_year under this reasoning the treatment of contributions pursuant to sec_404 does not affect the limits under sec_413 petitioner asserts that sec_404 expressly limits this deemed treatment of grace period contributions in the preceding tax_year to sec_404 petitioner then concludes that the tax_year in which a contribution is deducted is wholly irrelevant under sec_413 we disagree with the preceding disjunctive analysis petitioner ignores that sec_413 is merely an amplifying refinement of sec_404 in the context of cba plans see lucky stores inc subs v commissioner t c pincite sec_413 even refers directly to sec_404 each applicable limitation provided by sec_404 shall be determined as such sec_404 and sec_413 cannot be read separately together they enable individual employer contributors to determine their deduction limits in the tenebrous context of overlapping tax and plan years consequently sec_404 by its reference to sec_404 through has an impact on sec_413 petitioner maintains that if an individual employer's tax treatment of its contributions affects the deductibility of all contributions administrators and other contributing employers could never know whether a contribution was in fact deductible that would no doubt be true under petitioner's approach in which an employer's tax treatment is subject_to its unilateral allocation of grace period contributions however such a problem never arises if an employer contributor premises its deduction on services performed in its 12-month tax_year petitioner argues that the rationale of airborne freight corp v united_states aftr 2d ustc par big_number w d wash should prevail in the instant case however as we noted in lucky stores ii the district_court did not directly confront the question of sec_404 deduction limitations lucky stores inc subs v commissioner tcmemo_1997_70 rather the court summarily opined that because the taxpayer was late in filing its tax_return it could not have interfered with the ability of other employers to calculate and claim their deductions airborne freight corp v united_states aftr 2d pincite9 ustc par big_number at big_number w d wash the district_court held that since the plan-wide deductible limit had not been exceeded the disputed deductions were permissible id such a conclusion can only be reached retrospectively which is precisely what petitioner correctly opposes as contrary to congress' intent in addition this holding does not recognize an employer contributor's individual deduction limit we respectfully disagree with the district court's analysis in our view limiting each employer's deductions to contributions based on services performed in its 12-month tax_year leads to the following salubrious results deductions are predictable since they do not hinge on sec_404 and no employer can usurp a greater share of a plan year's overall deduction limit at another's expense based on the vagaries of when its tax_year ends in relation to that of other employers or when it files its return cf airborne freight corp v united_states aftr 2d pincite9 ustc par big_number at big_number w d wash it seems only fair to require that those employers who choose to file their tax returns later must accept the risk of possible limitations on their ability to claim deductions finally sec_404 and sec_413 offer employers a powerful incentive to participate in qualified_plans employers obtain the significant tax advantage of a deduction for plan contributions in many cases years before the corresponding income is recognized by their employees in general employee participants are not taxed until the time they receive distributions from a qualified_plan whereas an employer's contributions to a qualified_plan are deductible when paid to the trust in contrast for nonqualified plans an employer's contributions are not deductible when paid they are deductible only when the employee participant reports the amount of the contribution as income sec_404 however sec_404 and sec_413 impose restraints which cannot be disregarded petitioner baldly seeks to garner an additional tax_benefit permanent tax_deferral by its one-time bunching of up to months of deductions in tye for each of the multiemployer plans to which it contributed see lucky stores inc subs v commissioner tcmemo_1997_70 we are not convinced that congress intended sec_404 to be read so expansively or in a manner inconsistent with sec_413 in furtherance of such a dubious goal we therefore hold that pension contributions based on units of service worked after the close of tye and before date were not on account of tye as required by sec_404 and are therefore not deductible in that year issue the vacation pay deductions we now turn to the issue of whether certain vacation benefits were earned pursuant to sec_463 by the end of tye and tye such that petitioner could take deductions for vacation pay liabilities in those years sec_463 was repealed by section a of the omnibus budget reconciliation act of publaw_100_203 stat effective for taxable years beginning after date prior to repeal sec_463 provided as follows a allowance of deduction -- at the election of a taxpayer whose taxable_income is computed under an accrual_method of accounting if the conditions of sec_162 are otherwise satisfied the deduction allowable under sec_162 with respect to vacation pay shall be an amount equal to the sum of-- a reasonable addition to an account representing the taxpayer's liability for vacation pay earned by employees before the close of the taxable_year and paid during the taxable_year or within months following the close of the taxable_year such liability for vacation pay earned before the close of the taxable_year shall include amounts which because of contingencies would not but for this section be deductible under sec_162 as an accrued expense emphasis added the tax_reform_act_of_1986 publaw_99_514 sec a 100_stat_2511 amended sec_463 for tax years beginning after date prior to the amendment the section read and expected to be paid during the taxable_year or within_12_months following the close of the taxable_year in lieu of the underscored language above for our present purposes it is helpful to review the history of vacation pay liability deductions antedating the enactment of sec_463 by the act to amend the tariff schedules of the united_states publaw_93_625 88_stat_2108 for taxable years beginning after date prior to in published rulings under the code i t 1949_1_cb_78 and g_c_m 1947_2_cb_44 no date given the irs ruled that liability for vacations with pay may with respect to some employees be terminated if the employment relationship is severed prior to the scheduled vacation period nevertheless it is stated that this contingency should not preclude the accrual of vacation pay at the end of the taxable_year in which the services are performed since with respect to the individual employee at the end of such year the employer would be justified in anticipating that the liability will be paid i t 1949_1_cb_78 emphasis added despite the existence of these taxpayer-friendly rulings courts imposed a stricter standard for the accrual of vacation pay liabilities in instances where earned vacation pay entitlements were forfeitable due to post-yearend contingencies e g e h sheldon co v commission19_tc_481 affd in part and r214_f2d_655 6th cir 15_tc_424 in light of these decisions the irs issued revrul_54_ 1954_2_cb_8 which revoked i t and modified g_c_m 1947_2_cb_44 the ruling stated that employers must clearly establish the fact of liability to individual employees by the end of a tax_year to accrue vacation pay in that year revrul_54_608 c b pincite consequently if an employee had to remain employed beyond the end of the year and until the scheduled vacation period in order to fix the employer's liability respondent did not consider the liability to be accruable to prevent hardship to taxpayers who had relied on i t congress continually delayed the effective date of revrul_54_608 while it studied the vacation pay issue see 38_tc_557 nn congress subsequently enacted sec_463 in direct response to the strict accrual doctrine set forth in the ruling the senate report for publaw_93_625 states that the repeal of i t creates hardships for taxpayers who have been accruing vacation pay under plans which do not meet the requirements of the strict accrual rules set forth in rev_rul s rept 1975_1_cb_517 the senate report further states that sec_463 has been developed as a result of congress' study of this problem and insofar as accrued vacation pay is concerned the committee believes it represents the permanent legislation promised by the committees id pincite c b pincite sec_463 permitted taxpayers to elect to establish a reserve_account for the accrual of vacation benefits it authorized a yearend deduction for earned but unpaid vacation benefits which otherwise failed to satisfy the strict accrual test due to the existence of contingencies which could result in the forfeiture of leave entitlement sec_463 to qualify for deduction the benefits also had to be payable to employees within_12_months after the end of the tax_year a period later reduced to months for tax years beginning after date sec_463 petitioner accrued and deducted all vacation benefits that it expected to pay within_12_months of the close of tye and within months of the close of tye the parties agree that petitioner is entitled to the deductions but they part company on the proper timing respondent contends that the vacation pay should have been deducted in tye and the vacation pay ought to have been deducted in tye although the term earned is not expressly defined in the statute or the legislative_history the parties both maintain that vacation pay is earned if it pertains to services performed before the close of a taxable_year the gravamen of the dispute therefore lies in whether vacation benefits under the general plan the star markets plan and the acme market plans were in fact attributable to services performed before the close of the taxable_year for which the deductions were sought for reasons which follow we hold that the vacation benefits were not earned before the end of each taxable_year within the meaning of sec_463 consequently the deductions must be taken in the subsequent taxable years a vacation benefits are partially based on services performed after the end of the taxable_year sec_1 the general plan petitioner argues that the only service requirement for receiving leave entitlement under the general plan is employment for the consecutive months preceding the grant_date respondent on the other hand asserts that employees earned their respective vacation benefits only as services were rendered over the 12-month_period between consecutive anniversaries of the employees' initial dates of employment it is true for the general plan that the granting of leave entitlement is conditioned on the performance of services during the consecutive months preceding the date of grant january nevertheless as petitioner concedes despite the employee's eligibility to take vested and nonvested leave after january the amount of the leave entitlement is based on the next anniversary of the employee's date of hire as such the leave entitlement is partially attributable to services performed after the end of the tax_year thus while an employee may have had to work the months before january to qualify for any vacation benefits the extent of the benefits received upon satisfying that precondition hinged upon the years_of_service he was expected to complete on his next anniversary date as evidence of this vacation pay benefits are calculated using an employee's rate of pay at the time the vacation is actually taken rather than the rate of pay at the end of the taxable_year furthermore petitioner's own vacation plan brochures used the term earned in the same manner as respondent does here the star markets plan and acme markets plans that vacation pay benefits are partially based on services performed after the end of the relevant taxable_year is even more apparent under the star markets plan and acme markets plans unlike the general plan the star markets plan and acme markets plans provide no advance leave in the form of leave entitlement to employees rather employees are not permitted to take any leave until all of the plans' service requirements are fulfilled this occurs at the earliest on may the grant_date which i sec_3 months after the close of petitioner's taxable_year moreover as with the general plan vacation pay benefits under the star markets plan and acme markets plans are calculated using an employee's rate of pay at the time the vacation is actually taken rather than the rate of pay at the end of the taxable_year b respondent's disallowance of claimed deductions does not render sec_463 meaningle sec_1 the general plan respondent contests petitioner's inclusion of the general plan unused yearend nonvested leave entitlements in its calculation of vacation pay accruals under sec_463 for tye and tye petitioner asserts that vacation pay is earned as of the end of a tax_year even if employees must perform additional services after the end of that year to absolutely fix an employer's obligation to provide the vacation pay petitioner posits that the fact that an individual employee did not have a nonforfeitable right to such vacation pay at the close of the taxable_year determines only whether the pay is accrued or vested not whether it is earned petitioner submits that when stripped of its trappings respondent's position is simply that earned means accrued which thereby renders sec_463 meaningless respondent on the other hand contends that nothing in sec_463 signals that vacation pay is earned simply because the employer permits its employees to take vacations respondent acknowledges that under the terms of the general plan whether vacation pay was earned happened to coincide with whether it had vested nevertheless she states that in making her determination she was not swayed by inappropriate factors such as whether the vacation benefits were vested nonvested or contingent or whether the vacation benefits were subject_to conditions subsequent or precedent the court is persuaded that respondent did not rely on a strict accrual doctrine in contravention of sec_463 in disallowing certain deductions for tye and tye under the general plan strict accrual would prohibit any deduction if a possibility existed that the vacation benefits could be forfeited after the end of the taxable_year see revrul_54_ 1954_2_cb_8 such a possibility exists even for the taxable yearend vested benefits under the general plan because of what is commonly called a use-or-lose provision in the plan this provision requires participants to use their allocated vacation benefits by the end of the calendar_year if a participant fails to use all of the allocated leave he receives no compensation_for the unused leave remaining at the calendar yearend and it cannot be carried over to the next year indeed it appears to us that the principal reason for allowing an employee to take all of his leave as of january is to ensure that all employees were able to take all of their leave entitlement without creating scheduling conflicts and without forfeiture the use-or-lose provision applies to all leave allocated to an employee and does not distinguish between taxable yearend vested and nonvested benefits due to the use-or-lose provision there is no assurance as of the close of the taxable_year that all otherwise vested vacation benefits will be used by participants by the end of the calendar_year nevertheless while the mere possibility of forfeiture would have precluded a deduction under the strict accrual doctrine espoused in revrul_54_608 supra respondent did not limit petitioner's deductions to yearend fixed and nonforfeitable vacation benefits in the instant case rather she allowed deductions to the extent they were based on services performed in that taxable_year the star markets plan star markets included both the yearend accumulated and nonaccumulated benefits in calculating its claimed vacation pay accruals under sec_463 for tye and tye respondent disputes petitioner's inclusion of the yearend nonaccumulated benefits in its calculation of accruals under sec_463 respondent claims she did not consider inappropriate factors such as whether the vacation benefits were vested nonvested contingent or subject_to conditions subsequent or precedent in making her adjustments we are convinced that respondent properly focused solely on whether the vacation pay was earned pursuant to sec_463 respondent allowed petitioner a deduction based on three-fourths of the unpaid yearend vacation benefits may through january or disallowing only the nonaccumulated benefits january or to april even though none of the benefits vested until may and employees could not take any leave before their service requirements were met for the entire year the acme markets plans by the end of tye and tye employees covered by the acme markets plans would have vested in three-quarters of the vacation benefits they anticipated receiving in the subsequent taxable_year the remaining one-quarter of acme markets plans vacation benefits would fully vest by the may following the end of those taxable years respondent disputes acme markets' inclusion of the nonvested benefits when calculating its vacation pay accruals under sec_463 respondent correctly focused solely on the services performed by the end of the taxable_year rather than the substantive rights of plan participants at the close of such year to wit respondent allowed petitioner a deduction based on three-fourths of the unpaid yearend vacation benefits despite the fact the plans did not permit employees to take leave before the service requirements were fully met and no benefits were actually granted until months after the close of petitioner's taxable_year for each of the plans although respondent did not acquiesce in petitioner's excessively broad interpretation of sec_463 neither did she disregard statutory language and legislative_history which sought to liberate accruals of vacation pay from the strictures of revrul_54_608 c petitioner's attempt to equate the deductions at issue with deductions allowed in i t is unavailing we agree with petitioner that the legislative_history discussed supra makes clear that sec_463 was meant to apply to the type of vacation pay plan at issue in i t 1949_1_cb_78 however we are not convinced by petitioner's comparison of the plans at issue in the instant case to the plan in i t supra despite some shared characteristics in i t supra a calendar_year employer negotiated a vacation pay plan for its union employees pursuant to which eligible employees received a vacation entitlement on january if they had worked days in the preceding calendar_year the employer sought to deduct the vacation entitlement in the year in which the days had been worked the agreement further provided that vacations could be scheduled from january to december and that vacation pay was calculated using an employee's rate of pay at the time the vacation was actually taken moreover no vacation with pay was due an employee whose employment relationship terminated prior to his scheduled vacation period i t concerned the accrual and deduction of vacation pay where the service requirements had already been fulfilled during the preceding calendar_year but where other provisions such as termination of employment could lead to the forfeiture of the earned leave see 62_tc_456 47_tc_471 denver rio grande w r r v commissioner t c pincite although employees potentially had to remain employed well after the year of deduction to prevent a forfeiture of their vacation entitlements those entitlements were based solely on the days of service rendered in the preceding calendar_year the ruling did not address the issue of leave advances as provided by the general plan moreover unlike i t for each of the plans at issue the service requirements had only been partially fulfilled by the end of the respective taxable years consistent with i t respondent disallowed petitioner's deductions only to the extent that the qualifying services had not been performed by the last day of tye and tye consequently we hold that vacation pay based on units of service worked after the close of tye and tye and before the due dates of those returns as extended was not earned in tye and tye as required by sec_463 and is therefore not deductible in those years to reflect the foregoing and issues previously resolved decision will be entered under rule


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date aug ed by contact person identification_number telephone number employer_identification_number legend dear sir or madam this ruling letter supersedes our previously issued ruling dated date this is in response to a letter dated date which requested certain rulings with respect to a proposed transfer of all of the assets of b to c and d b is exempt under sec_501 of the internal_revenue_code and is classified as a private_foundation under sec_509 both c and d have filed an application_for recognition of exempt status under sec_501 c of the code and classification as a private_foundation under sec_509 a difference of opinion has developed among the trustees of b as to the governance of b in order to resolve these concerns the trustees of b have proposed that b be split into two smaller new private_foundations c and d d would receive the remaining one-third of b’s assets c and d would continue to carry out the charitable purposes previously conducted by b once b's assets are transferred to c and d b will have no assets and may elect to terminate its private_foundation_status following the transfer c and d would be effectively controlled by the same trustees who control b b would transfer two-thirds of its assets to c b has never notified the service in the past that it intends to terminate its private_foundation_status nor has b ever received notification that its status as a private_foundation has been terminated furthermore b has not committed willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_507 of the code and the regulations to sec_507 sets forth rules applicable to terminating foundations the internal_revenue_service in revrul_2002_28 2002_20_irb_941 copy attached has issued guidance on the filing obligations and tax issues that arise when a private_foundation transfers ali of its assets to one or more other private_foundations under sec_507 of the code the rev_rul presents three situations in which a private_foundation transfers all of its assets to one or more private_foundations in situation one the foundation under a plan of dissolution distributes all of its remaining assets in equal shares to three other private_foundations in situation two the trustees of a private_foundation trust create a not-for-profit corporation to carry on the trust’s charitable activities which the trustees have determined can be more effectively accomplished by operating in corporate form all of the trust’s assets and liabilities are transferred to the not-for-profit corporation in situation three two private_foundations transfer all of their assets and liabilities to a newly formed private_foundation in the rev_rul the service has ruled that a private_foundation that transfers all of its assets to one or more private_foundations in a transfer described in sec_507 is not required to notify the manager exempt_organizations determinations tax exempt government entities that it plans to terminate its private_foundation_status under sec_507 the ruling further states that if the private_foundation does not provide notice and does not terminate it is not subject_to termination_tax under sec_507 if the private_foundation provides notice and terminates then it is subject_to the tax however if the private_foundation has no assets on the day it provides notice the sec_507 tax will be zero the rev_rul gives detailed information as to the applicability of the excise_taxes imposed by sections of the code the ruling further provides that a private_foundation that has disposed of all its assets and terminates its private_foundation_status must file a form pf for the tax_year of the disposition and must comply with any expenditure_responsibility reporting obligations on the return a private_foundation that has disposed of all its assets and does not terminate its private_foundation_status must file a form 990-pe for the tax_year of the disposition and must comply with any expenditure_responsibility reporting obligations on the return but does not need to file returns in the following tax years if it has no assets and does not engage in any activities activities in later years it must resume filing form_990-pf for those years if the private_foundation receives additional assets or resumes our evaluation of the facts and circumstances in your ruling_request indicates that the transfer of b’s assets to c and d would be similar to the facts and circumstances described in situation one of the rev_rul under the facts described the foundations would not be subject to tax under sec_507 and sections of the code accordingly based on the information furnished and the code and regulations as interpreted in revrul_2002_28 we rule as follows the proposed transfer of all of the assets of b to c and d will qualify as a transfer under sec_507 of the code because b will not terminate as a result of the transfer b will not be subject_to any_tax under sec_507 of the code if b elects to terminate its private_foundation_status after it has transferred all of it sec_2 assets to c and d no tax will be due under sec_507 of the code provided that b complies with the notification requirement under sec_507 of the code because c and d will be effectively controlled by the same persons who control b both c and d will be treated under sec_1_507-3 of the regulations as if they were b in the proportion that the fair_market_value of the assets transferred to each bears to the fair_market_value of b’s assets immediately before the transfer the proposed transfer of assets from b toc and d will not give rise to net_investment_income and therefore will not give rise to the imposition of tax under sec_4940 of the code for b b will not be required to pay the tax imposed by sec_4940 in the year of distribution c and d will report their share of b’s net_income for the year of distribution and pay the tax imposed by sec_4940 on such share the proposed transfer of assets will not be treated as an investment that jeopardizes the charitable purposes of b the proposed transfer of assets from b to c and d will not constitute an act of self- dealing which will occasion an excise_tax under sec_4941 of the code because c and d will both be effectively controlled by the same persons who control b b itself will not be required to meet the distribution requirement of sec_4942 for fiscal_year the taxable_year in which b transfers its assets c and d’s minimum distributable_amount will be increased by its share and respectively of b’s distributable_amount for fiscal_year the taxable_year of the transfer and will be credited with a proportionate and respectively amount of the qualifying distributions actually made by b in fiscal_year before the transfer the proposed transfer of all the assets from b to c and d will not constitute a taxable_expenditure within the meaning of sec_4945 of the code and b will not be required to exercise expenditure_responsibility with respect to such transfer of assets likewise c and d each will not be required to exercise expenditure_responsibility over operations by the other after the transfer this ruling is issued on the assumption that c and d are recognized as exempt under sec_501 of the internal_revenue_code and classified as private_foundations under sec_509 we are informing the your organization’s permanent records te_ge office of this action please keep a copy of this ruling in this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely geraid v sack manager exempt_organizations technical group


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number info release date uil 6039e dear i apologize for the delay in responding to your letters dated january and date to the irs governmental liaison on behalf of your constituent asked why the irs requires u s citizens to provide their social_security_number ssn when they apply for a passport and whether we have an alternative to this procedure the irs uses ssn’s to identify u s citizens living abroad and to ensure they are filing their income_tax returns as required by the law united_states citizens must pay u s income_tax on their worldwide income united_states citizens are required to file united_states tax returns and pay united_states tax on their worldwide income even if they are living outside of the united_states sec_1_1-1 reporting social_security numbers on passport applications increases compliance with federal tax laws the congress intended to increase tax compliance of u s citizens living outside the united_states through sec_6039e of the internal_revenue_code_of_1986 the code congress enacted sec_6039e under sec_1234 of the tax_reform_act_of_1986 p l date the conference committee report to public law includes the following u s persons resident abroad are required to file u s tax returns but a substantial percentage of foreign residents fails to do so senate amendment a irs information returns the senate amendment requires that passport applicants complete an irs information_return reporting foreign residence and certain other information penalties for failure_to_file apply conference agreement a irs information returns the conference agreement generally follows the senate amendment the agreement also makes the following technical amendments first to deter noncompliance effectively the penalty for each failure_to_file the required information returns is increased from dollar_figure to dollar_figure second the agreement clarifies that no other provision of law will exempt individuals from the new return-making requirements or bar agencies collecting the returns from providing them to the secretary as required third notwithstanding any other provision of law agencies which collect or are required to collect the new information returns must provide to the secretary the names and any other identifying information of any individuals who refuse to provide them as required conference_report rep no 99th cong 2d sess ii- - ii-639 date generally sec_6039e helps to identify u s taxpayers who may be living abroad if some u s citizens are not aware of their obligation to file a u s income_tax return the irs can inform them of their duty and ensure that once they begin filing they follow the internal_revenue_code provisions for citizens living abroad for u s citizens who willfully fail to file u s income_tax returns sec_6039e provides a way to ensure their compliance with federal tax laws suggested as an alternative to giving her ssn to the u s department of state she could send the irs her passport number however congress did not provide this alternative under sec_6039e referred to sec_6039e which states that the secretary may by regulations exempt any class of individuals from the requirements of this section if he determines that applying this section to such individuals is not necessary to carry out the purposes of this section as established such regulations accurately notes the secretary has not yet i hope this information is helpful if you have any additional questions please contact me at or ms amanda ehrlich id-50-18395 of my staff at sincerely benedetta a kissel deputy associate chief_counsel international


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 tege eoeg teb presp-143672-06 date date dear ------------- this letter is in response to your application_for an allocation of authority to issue dollar_figure------- --------------- in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the project owned by the borrower listed in appendix a because such borrower is a governmental body and dollar_figure has already been allocated to applications requesting a smaller presp-143672-06 share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing a clean renewable energy project sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-143672-06 borrower name appendix a project type project location -------------------------------- --------------------------- landfill_gas facility -------------------------------- -------------------------------- --------------- amount requested dollar_figure--------------