office_of_chief_counsel department of the treasury i n t e r n al r e v e n u e s e r v i c e washington d c date number info release date cc psi b07 ------------------------- genin-158480-04 uil ------------------------ -------------------------- ------------------------------ dear --------------- this letter is in response to your letter dated date in which you requested guidance from the internal_revenue_service regarding revrul_70_604 revproc_2004_1 2004_1_irb_1 available at www irs gov provides the procedures followed by the internal_revenue_service service for issuing letter rulings determination letters and general information letters a letter_ruling is a written_statement issued to a taxpayer that interprets and applies the tax laws to the taxpayer s specific set of facts section of the revenue_procedure provides general instructions for requesting letter rulings and determination letters sec_15 and appendix a provide the user_fee requirements for requests for letter rulings and determination letters because your request does not comply with the requirements for a private_letter_ruling we cannot issue you a letter_ruling the service is also prohibited from issuing a letter_ruling regarding a taxpayer’s tax_return to another taxpayer however we are providing this information_letter an information_letter calls attention to a well-established interpretation or principle of tax law without applying it to a specific set of facts an information_letter is advisory only and has no binding effect on the service if in addition to this information_letter you desire a letter_ruling you should submit a request for a ruling prepared in accordance with the instructions provided in revproc_2004_1 association as defined in sec_528 shall be subject_to taxation under this subtitle only to the extent provided in this section a homeowners_association shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes sec_528 of the internal_revenue_code provides that a homeowners sec_528 defines a homeowners_association as an organization which is a such organization is organized and operated to provide for the acquisition a condominium_management_association a residential_real_estate_management_association or a timeshare_association ifb construction management maintenance and care of association_property b percent or more of the gross_income of such organization for the taxable_year consists solely of amounts received as membership dues fees or assessments fromb i owners of residential units in the case of a condominium_management_association owners of residences or residential lots in the case of a residential_real_estate_management_association or ii iii owners of timeshare rights to use or timeshare ownership interests in association_property in the case of a timeshare_association d no part of the net_earnings of such organization inures other than by c percent or more of the expenditures of the organization for the taxable e such organization elects at such time and in such manner as the secretary year are expenditures_for the acquisition construction management maintenance and care of association_property and in the case of a timeshare_association for activities provided to or on behalf of members of the association acquiring constructing or providing management maintenance and care of association_property and other than by a rebate of excess membership dues fees or assessments to the benefit of any private_shareholder_or_individual and by regulations prescribes to have this section apply for the taxable_year sec_1_528-8 of the income_tax regulations provides that an organization wishing to be treated as a homeowners_association under sec_528 and this section for a taxable_year must elect to be so treated except as otherwise provided in this section such election shall be made by the filing of a properly completed form 1120-h or such other form as the secretary may prescribe a separate election must be made for each taxable_year described in sec_528 is binding on the organization for the taxable_year and may not be revoked without the consent of the commissioner sec_1_528-8 provides that an election to be treated as an organization sec_1_528-9 provides that regardless of the organization’s method_of_accounting excess assessments during a taxable_year which are either rebated to the members or applied to their future assessments are not considered gross_income and therefore will not be considered exempt_function_income for such taxable_year however if such excess assessments are applied to a future year's assessments they will be considered gross_income and exempt_function_income for such taxable_year revrul_70_604 provides guidance regarding the application of excess assessments to future assessments the revenue_ruling provides that this treatment must be elected at a meeting of the shareholder-owners although this letter is a general information_letter not a private_letter_ruling we hope that the above information proves helpful sincerely s joseph h makurath senior technician reviewer branch passthroughs special industries


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date conex-144266-09 cc ita o f f i c e o f t h e c h i e f c o u n s e l number info release date uil no the honorable earl blumenauer u s house of representatives washington d c dear mr blumenauer this letter responds to your inquiry dated date you wrote on behalf of the numerous taxpayers unable to complete their like-kind_exchange under sec_1031 of the internal_revenue_code the code due to the bankruptcy of the qualified_intermediary qi used to facilitate the exchanges as noted in your letter because many of these taxpayers must file tax returns by date they seek guidance on whether they must report gain_or_loss on the failed sec_1031 exchange i assure you that the irs and the treasury_department are working diligently to provide guidance to affected taxpayers our task is complicated because the statute limits the extent of relief we can provide as discussed in my date letter to you the law prescribes the period for replacing property relinquished in a like-kind_exchange sec_1031 and we cannot extend it consequently we are considering other reporting options for example whether taxpayers may defer reporting gain on the failed sec_1031 exchange until the taxpayer eventually receives the proceeds from the disposition we appreciate the hardship taxpayers are facing because of qi bankruptcies we are making every effort to provide appropriate assistance to these victims if you would like to discuss our efforts in more detail please contact ------------------- at -------------------- or me at -------------------- sincerely george j blaine associate chief_counsel income_tax accounting


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc intl br3 tl-n-4954-01 uilc internal_revenue_service national_office field_service_advice memorandum for associate area_counsel lm hmt - philadelphia from assistant to the branch chief cc intl br3 subject this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend usparent business a years b c and d ussub1 ussub2 month e frenchcfc amount f amount g frenchhybrid amount h issue whether the french withholding taxes imposed on the nontaxable year d distributions from frenchcfc to ussub1 and from frenchhybrid to ussub1 and ussub2 should be allocated to usparent’s sec_904 general limitation separate category conclusion on its consolidated federal_income_tax return for year d usparent claimed a sec_901 credit for the french withholding taxes in the general limitation separate category tl-n-4954-01 apparently relying on the base difference rule in sec_1_904-6 in general the base difference rule is intended to have very narrow application however based on the facts of this case in which the distributing entities had no income for u s tax purposes allocation of the taxes to the general limitation separate category pursuant to the base difference rule is not unreasonable facts usparent conducts business a for the years at issue usparent filed consolidated federal_income_tax returns ussub1 and ussub2 were included in those returns in month e of year b usparent acquired all of the stock of frenchcfc a publicly traded french holding_company owning numerous subsidiaries all of which were engaged in business a prior to month e of year b usparent had owned no shares of frenchcfc and frenchcfc had never been a controlled_foreign_corporation as defined in sec_957 cfc all of frenchcfc’s income both before and after the acquisition was interest and dividends received from its subsidiaries on its consolidated federal_income_tax return for year b usparent made an election pursuant to sec_338 and g for its acquisition of frenchcfc the purchase_price of frenchcfc approximately amount f exceeded the fair_market_value of its tangible assets by approximately amount g amount g was allocated to intangible assets subject_to amortization under sec_197 ussub1 and ussub2 own and respectively of the ownership interests in frenchhybrid which was formed in year b for french tax purposes frenchhybrid is taxable as a corporation and is the parent of a consolidated_group of corporations frenchhybrid is recognized as a partnership for u s tax purposes ninety-five percent of the frenchcfc stock was transferred to frenchhybrid in a series of transactions during year b the remaining of frenchcfc stock was transferred to ussub1 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended sec_338 provides that a purchasing_corporation such as usparent that makes a qualified_stock_purchase of at least of the stock of a foreign target_corporation such as frenchcfc may make a sec_338 and g election that results in a deemed sale of the target corporation’s assets if the purchasing_corporation makes this election the old target is considered to sell all of its assets to a new target_corporation as of the close of the acquisition_date and is required to recognize gain_or_loss on its assets see sec_338 new target is treated as acquiring old target’s assets as of the beginning of the day after the acquisition_date id new target is entitled to an aggregate basis in the assets received from old target equal to the adjusted_grossed-up_basis see sec_1 b -1 a year b this aggregate basis is then allocated among the assets of new target as provided by sec_1 b -2t id new target does not succeed to old target’s e_p accounts see sec_1_338-2 year b here frenchcfc's stock is not carryover ft stock since frenchcfc had not been a cfc prior to acquisition in month e of year b see sec_1_338-5 year b tl-n-4954-01 in year d frenchcfc distributed_amount h to ussub1 and frenchhybrid frenchhybrid distributed the amount that it received of the distribution to ussub1 and ussub2 five percent of the distributions from frenchcfc to ussub1 and from frenchhybrid to ussub1 and ussub2 was withheld pursuant to article a of the income_tax treaty between the united_states and france treaty since those distributions were determined by france to be dividends under article of the treaty and under french tax law on its consolidated federal_income_tax return for year d usparent claimed a sec_901 credit in the general limitation separate category for the withheld taxes frenchcfc's profit and loss statements under french law reflected positive current earnings for years b c and d however due in large part to substantial required amortization deductions under sec_197 usparent reported current and accumulated_earnings_and_profits e_p deficits on the forms filed for frenchcfc for each of those years frenchcfc's profit under french law for each of the three years exceeded the distribution of amount h frenchhybrid incurred expenses principally interest_expense in years b c and d and had no income for u s tax purposes in those years france treated the distributions to ussub1 and ussub2 as dividends based upon the distributable reserves of the frenchhybrid consolidated_group due to frenchcfc’s lack of post-acquisition e_p under u s tax standards and the sec_338 and g election which eliminated frenchcfc’s pre-acquisition e_p usparent determined for purposes of its year d consolidated federal_income_tax return that the distributions made in that year by frenchcfc to frenchhybrid and ussub1 were returns of capital pursuant to sec_301 and therefore not income to the recipients further usparent determined that the year d distributions from frenchhybrid to ussub1 and ussub2 were nontaxable partnership_distributions under sec_731 convention between the government of the united_states of america and the government of the french republic for the avoidance of double_taxation and the prevention of fiscal evasion with respect to taxes on income and capital date u s -fr article a of the treaty defines dividends as income from shares as well as income treated as a distribution by the taxation laws of the state of which the company making the distribution is a resident article a provides such dividends may also be taxed in the contracting state of which the company paying the dividends is a resident and according to the laws of that state but if the beneficial_owner of the dividends is a resident of the other contracting state the tax so charged shall not exceed a percent of the gross amount of the dividends if the beneficial_owner is a company that owns i ii directly or indirectly at least percent of the capital of the company paying the dividend if the company is a resident of france tl-n-4954-01 law and analysis sec_901 allows u s taxpayers a credit for foreign_income_taxes paid_or_accrued under sec_903 a foreign tax paid in lieu of an otherwise generally imposed foreign_income_tax is treated as a foreign_income_tax for purposes of sec_901 the foreign_tax_credit is subject_to the limitations of sec_904 and d sec_904 limits the amount of foreign_income_taxes that may be credited in any one taxable_year to the amount of a taxpayer’s pre-credit u s income_tax on its foreign source taxable_income the sec_904 limitation is calculated separately for different categories of foreign source taxable_income sec_904 here france treated the distributions from frenchcfc to ussub1 and from frenchhybrid to ussub1 and ussub2 as dividends and withheld of the distributions pursuant to article a of the treaty for u s tax purposes these distributions were treated as returns of capital under sec_301 and as nontaxable partnership_distributions under sec_731 on its consolidated federal_income_tax return for year d usparent claimed a sec_901 credit for those taxes even though none of the recipients of the distributions recognized income with respect to the distributions we have assumed for purposes of this memorandum that the french taxes withheld on the distributions are creditable taxes under sec_901 or sec_903 furthermore the code does not restrict the allowable credit to foreign taxes that are associated with specific items of foreign_source_income that are recognized both for u s and foreign purposes see 69_tc_579 acq in result aod credit allowed for swiss withholding_tax on payment treated as a dividend under swiss law and as a nontaxable repayment of a receivable for u s purposes accordingly the creditability of the french withholding taxes is not affected by the fact that the distributions are not income to the recipient for u s tax purposes the issue here is in which separate category of income for purposes of sec_904 should those withholding taxes be placed sec_1_904-6 provides rules to allocate foreign taxes paid_or_accrued to the sec_904 separate categories of income under sec_1_904-6 foreign law applies to determine the income to which foreign taxes paid_or_accrued relate specifically foreign taxes are related to income if the income is included in the base upon which the tax is imposed id a foreign withholding_tax for example is related to the income from which it is withheld id foreign taxes are allocated to a separate category by reference to the separate category to which the income taxed under foreign law would be assigned under u s tax principles see sec_1_904-6 example in addition the regulations provide that if a tax is related to more than one separate category the tax is considered to be imposed on income in all such categories sec_1_904-6 accordingly the tax is apportioned amongst the separate categories based on the amount of net_income in each separate category subject_to tax tl-n-4954-01 sec_1_904-6 for purposes of apportioning the tax foreign law generally applies to determine the amounts of gross_income in each separate category and the amount_of_deductions properly allocable thereto id sec_1_904-6 provides special rules for allocating taxes in case of base and timing differences that provision provides that i f under the law of a foreign_country a tax is imposed on an item_of_income that does not constitute income under united_states tax principles that tax shall be treated as imposed with respect to general_limitation_income if under the law of a foreign_country a tax is imposed on an item that would be income under united_states tax principles in another year that tax will be allocated to the appropriate separate category or categories as if the income were recognized under united_states tax principles in the year in which the tax was imposed it is not entirely clear how the rules in sec_1_904-6 apply when a withholding_tax is imposed on an item that is treated as a dividend for foreign tax purposes but is a return_of_capital under u s tax principles we have solicited comments on how the regulations could be amended to clarify the operation of sec_1_904-6 and iv see t d 2001_4_irb_360 as stated above on its consolidated federal_income_tax return for year d usparent claimed a sec_901 credit for the french withholding taxes in the general limitation separate category apparently relying on the base difference rule in sec_1 a iv in general the base difference rule is intended to have very narrow application however based on the facts of this case in which the distributing entities had no income for u s tax purposes allocation of the taxes to the general limitation separate category pursuant to the base difference rule is not unreasonable please call if you have any further questions bethany ingwalson assistance to the branch chief cc intl b3 5frenchhybrid has never recognized income for u s tax purposes


department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division legend org organization name release date org addre sec_2 date date uil dollar_figure address address xx date person to contact badge number contact telephone number contact address last date for filing petition august 20xx certified mail and return reciept dear this is a final revocation letter as to your exempt status under sec_501 of the internal_revenue_code recognition of your exemption under internal_revenue_code sec_501 is revoked beginning july 20xx for the following reason s you have not been operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you have not demonstrated that you primarily engage in activities which accomplish one or more of such exempt purposes specified in sec_501 as required by sec_1_501_c_3_-1 contributions to your organization are no longer deductible effective july 20xx if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment by referring to the enclosed publication you may write to the united_states tax_court at the following address united_states tax_court second street nw washington dc you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code as a result of this revocation of tax-exempt status your organization is required to file form_1120 annually with the appropriate campus identified in the instructions this letter is a final revocation letter and should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely marsha ramirez director eo examinations enclosures publication department of the ‘treasury - internal_revenue_service explanation of items form 886a name of taxpayer org legend org organization name xx date 20u89 schedule no or exhibit year period ended 20xx conclusion the org failed to respond to four letters mailed by the examiner in regards to their audit for fiscal_year ending june 20xx they also failed to respond to any phone messages left by the examiner as a result their tax exempt status under sec_501 should be revoked form 886-a rev department of the treasury - internal_revenue_service page -1- government entities division org address department of the treasury internal_revenue_service causeway street room boston ma taxpayer_identification_number form tax_year s ended person to contact iid number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f z2uubu s04 if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely marsha a ramirez director eo examinations letter catalog number 34809f


index no 468a cc dom p si plr-113229-99 nov re revised schedule of ruling amounts taxpayer plant location commission a commission b fund district dear this letter responds to the request of taxpayer dated date and supplemental information submitted by taxpayer for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on date information was submitted pursuant to sec_1_468a-3 we understand the facts as presented by taxpayer to be as follows taxpayer directly owns piant began commercial operation in by the nuclear regulatory commission on of the plant which is situated in location the the plant’s operating license was revoked taxpayer proposes to plr-113229-99 decommission the plant using the prompt removal dismantling method taxpayer is under the audit jurisdiction of the district_director of the district at the present time there are no proceedings pending before either commission that may result in an increase or decrease in the amount of decommissioning costs to be included in taxpayer's cost of service for ratemaking purposes the after-tax rate of return to be earned on the assets of the fund is taxpayer are allowed to recover in its rates are set by commission a commission b does not set taxpayer's decommissioning costs therefore no ruling is requested with regard to commission b the decommissioning cots which commission a's costs for the plant in the amount of be included in taxpayer's cost of service for ratemaking purposes of this amount previously provided for decommissioning per year which is continued herein to is allocable to the fund the total estimated cost of decommissioning the plant is and this amount escalated annually at a rate of decommissioning cost of results in a future the record of the ratemaking proceeding for the order demonstrates that commission a reviewed the amendments made by section of the national policy energy act of the energy act to sec_468a of the code when it determined the amount of decommissioning costs included in taxpayer's cost of service the amendments repealed the investment restrictions contained in former sec_468a for taxable years beginning after date and lowered the tax_rate applicable to a nuclear decommissioning fund in sec_468a for taxable years beginning after date the funding_period and level_funding period extends from the estimated period for which the fund will be in effect is and the estimated_useful_life of the plant is therefore the qualifying percentage is sec_468a of the code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to that year sec_468a of the code provides that no deduction shail be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any taxable_year is defined under sec_468a as the amount which the secretary ol plr-113229-99 determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the taxable_year if the payment is made on account of the taxable_year within months after the close of the taxable_year sec_1_468a-1 of the regulations provides in part that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides in part that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any taxable_year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such taxable_year il or the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 of the regulations generally provides in part that a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the taxable years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of sec_1_468a-3 each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder thus for example each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a taxable_year bb plr-113229-99 under sec_1_468a-3 of the regulations the internal_revenue_service shall provide a schedule of ruling amounts that is identical to the schedule proposed by the taxpayer but no such schedule shall be provided unless the taxpayer's proposed schedule is consistent with the principles and provisions of sec_1_468a-3 under sec_1_468a-3 of the regulations the internal_revenue_service may in its discretion provide a schedule of ruling amounts that is determined on a basis other than the rules of sec_1_468a-3 through g if i in connection with its request for a schedule of ruling amounts the taxpayer explains the need for special treatment and sets forth an alternative basis for determining the schedule of ruling amounts and if the internal_revenue_service determines that special treatment is consistent with the purposes of sec_468a of the code sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 and ii the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 and ii of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides in part that the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes bug plr-113229-99 sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning the plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant under sec_1_468a-3 of the regulations the estimated period for which a nuclear decommissioning fund is to be in effect a begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations and b ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes likewise under sec_1_468a-3 the estimated_useful_life of a nuclear power plant a begins on the first day of the taxable_year that includes the date that the plant begins commercial operations and b ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that for purposes of sec_1_468a-3 and iii the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant to which the nuclear decommissioning fund relates has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount of plr-113229-99 sec_1_468a-3 of the regulations enumerates the information required to be submitted by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases ‘the proposed period over which decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any taxable_year and b the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of the action by the public_utility commission sec_1_468a-7 of the regulations provides in general that an eligible_taxpayer is allowed a deduction for the taxable_year in which the taxpayer makes a cash payment or is deemed to make a cash payment to a nuclear decommissioning fund only if the taxpayer elects the application of sec_468a of the code a separate election is required for each nuclear decommissioning fund and for each taxable_year with respect to which payments are to be deducted under sec_468a in the case of an affiliated_group_of_corporations that join in filing a consolidated_return for a taxable_year the common parent must make a separate election on behalf of each member whose payments to a nuclear decommissioning fund during such taxable_year are to be deducted under sec_468a the election under sec_468a for any taxable_year is irrevocable and must be made by attaching a statement election statement and a copy of the schedule of ruling amounts provided pursuant to the rules of sec_1_468a-3 to the taxpayer's federal_income_tax return or in the case of an affiliated_group_of_corporations that join in filing a consolidated_return the consolidated_return for such taxable_year the return to which the election statement and a copy of the schedule of ruling amounts is attached must be filed on or before the time prescribed by law including extensions for filing the return for the taxable_year with respect-to which payments are to be deducted under sec_468a we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations thereunder based solely on these representations we reach the following conclusions the taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 and of the regulations plr-113229-99 commission a has authorized decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the qualifying percentage under sec_1_468a-3 for the taxpayer is the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning cost applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved revised schedule of ruling amounts taxable years for commission a year each year through the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code -as stated above payments made to the fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to the fund or the ruling amounts applicable to the fund in the taxable_year of fe plr-113229-99 pursuant to a copy of the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each year in which the taxpayer's claims a deduction for payments made to the fund sincerely yours melioc faadlaey peter c friedman assistant to the chief branch office of assistant chief_counsel passthroughs and special industries a7


r tax_exempt_and_government_entities_division date department of the treasury internal_revenue_service washington d c sin contact person identification_number telephone number twelolh sb employer_identification_number legend x q k i k n u n i dear sir or madam this is in response to your ruling_request concerning the effect of a proposed transaction on your exempt status under sec_501 of the internal_revenue_code the code and the application of private_foundation sec_507 and sec_4941 of the code the trust was created by x the donor under the x trust agreement the trust agreement the trust is exempt under sec_501 of the code and is a private_foundation under sec_509 the trust received inter_vivos gifts from the donor and a bequest from the donor's estate from inception through date the trust has made very substantial charitable disbursements with the majority of such disbursements going to local charities the trust's form_990-pf for tax_year reported the value of its total assets at approximately y dollar the trust is managed by six trustees each trustee receives annual compensation of zz dollars paragraph of the trust agreement provides that the trust agreement may be modified from time to time by the unanimous vote of the trustees whenever necessary or advisable for the more convenient or efficient administration of the trust or to enable the trustees to carry out the purpose of the trust more effectively provided that no such amendment or modification page shall alter the intention of the donor that the trust be operated exclusively for exempt purposes described in sec_501 of the code paragraph of the trust agreement provides that the trustees may terminate the trust at any time by action of the trustees provided that upon such termination the trustees shall promptly distribute the entire remaining trust fund to recipients that are exempt under sec_501 of the code paragraph further provides that in all events the trust agreement and the trust shall terminate no later than o the termination_date the trustees are desirous of reforming the trust by amending paragraph to remove the termination_date so that the trust will continue into perpetuity and would terminate only upon the majority action of the trustees the trustees believe this amendment would allow the trust to carry on its charitable purpose more effectively the trustees also believe that had the donor foreseen the substantial growth of the assets of the trust and the beneficial impact it has on the local community the donor would have caused the trust to have been drafted without a finite termination_date so that the trust could have a more substantial and lasting impact on the charities it supports and the focal community the trustees will petition the court for approval of the proposed amendment to the trust agreement article of the trust agreement will be amended as follows the trust shall be irrevocable on the part of the donor and shall continue in perpetuity until a majority of the trustees agree to terminate the trust provided that upon such termination the trustees shall promptly distribute the entire then remaining trust fund to recipients classified as exempt_organizations under the provisions of sec_501 of the internal_revenue_code_of_1986 or the corresponding provisions of an sic future internal revenue law or to the federal state_or_local_government for exclusive public purposes and no part of the income and or corpus of the trust shall ever revert to or become the property of the donor or her heirs at law law and analysis sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for educational charitable or other exempt purposes sec_507 of the code provides that the status of any organization as a private_foundation shall be terminated if such organization notified the service that of its intent to accomplish such termination sec_4941 of the code imposes excise_tax on any act of self- dealing between a private_foundation and any disqualified persons described in sec_4946 of the code sec_4941 e of the code provides that compensation paid_by a private_foundation to a disqualified_person for personal services reasonable and necessary to carry out the exempt purposes of the private_foundation is not an act of self-dealing if the compensation is not excessive page sec_4946 of the code provides the term disqualified_person with respect to a _private foundation includes a foundation_manager sec_4946 of the code provides that the term foundation_manager includes a trustee of a foundation paragraph of the trust agreement prohibits any amendment that alters the intent of the donor that the trust be operated exclusively for charitable purposes the trust has represented that it has been organized and operated exclusively for exempt purposes - under sec_501 of the code the proposed amendment will extend the life of the trust indefinitely but not change its charitable purposes and activities therefore the purposes and activities of the trust will be the same both before and after the adoption of the proposed amendment and the trust’s status as an organization described in sec_501 will not be adversely affected amending the trust agreement to remove the finite termination_date of the trust concomitantly extends the period of time for the trustees to serve the trust and receive compensation however the proposed amendment would not give rise to an act of self-dealing under sec_4941 of the code as long as the amount of the annual compensation paid to the trustees remains reasonable and is paid for reasonable and necessary services rendered to the trust the trust is not notifying the service of an intent or desire to terminate its private_foundation_status the proposed amendment if approved by the court merely extends the term of the trust in continuing its charitable activities therefore the trust will not be terminating under sec_507 of the code the trustees represented that they will obtain court approval in amending the trust agreement as described the proposed amendment would enable the trust to continue carrying out its exempt purposes we stress that issues relating to reforming the trust agreement to allow the trust to continue in perpetuity are matters under the jurisdiction of the appropriate state court based on the foregoing and assuming you obtain court approval-of the proposed amendment to the trust agreement we rule as follows the proposed amendment to the trust agreement will not jeopardize the trust's tax-exempt status as an organization described in sec_501 c of the code the proposed amendment to the trust agreement will not constitute a termination of the trust’s private_foundation_status under sec_507 of the code the proposed amendment to the trust agreement will not constitute an act of self-dealing under sec_4941 of the code page these rulings are based on the understanding that there will be no material changes in the facts upon which they were based these rulings are directed only to the organization that requested them and should not be treated as implied endorsement of the proposed amendment sec_6110 of the code provides that this ruling 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 signed robert c harper jr robert c harper jr manager exempt_organizations technical group


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b05 -plr-104660-01 date date in re sub c date a this letter responds to your date request for a letter_ruling supplementing our letter_ruling dated date the prior letter_ruling in the prior letter_ruling we ruled that distributing may separate business b from business a under sec_355 of the internal_revenue_code the legend abbreviations except as noted above the defined terms the summary of the facts the description of the proposed transactions the representations and the caveats appearing in the prior letter_ruling are incorporated herein by reference controlled’s active trade_or_business factual issues in the prior letter_ruling distributing represented that percent of the gross value of controlled’s assets would be active trade_or_business assets however after the prior letter_ruling was issued controlled completed the offering at a price substantially in excess of the financial advisors’ projected price in addition since that time the fair_market_value of controlled’s assets has fluctuated significantly the volatility of the value of controlled’s assets makes it impossible to be certain that the gross value of controlled’s active business_assets at the time of the controlled and newco distributions the distributions will be at least percent of the gross value of all of its assets in particular an increase in the value of controlled’s assets may cause the relative value of controlled’s active business_assets to fall below percent nevertheless controlled has provided sufficient information which proves that even if the relative value of controlled’s active business_assets falls below percent these assets are not de_minimis compared with the other assets and activities of controlled distributing’s issuance of additional common_stock plr-104660-01 favorable market conditions made it possible for distributing to raise additional capital through a public offering of its stock on date a distributing issued c shares to the public the distributing offering the proceeds from the distributing offering will be used by distributing to fund operations of business a and to repay existing indebtedness none of the proceeds from the distributing offering will be used to fund business b distributing’s capital_contribution to controlled to pay certain expenses pursuant to arms-length agreements between distributing and controlled distributing directly and indirectly contributed cash to controlled to defray certain controlled expenses_incurred in connection with the offering and the distributions the capital_contribution distributing controlled stock held in employee benefit plans distributing has established two employee benefit plans the distributing employee savings_plan the esp and the distributing employee_stock_ownership_plan the esop collectively referred to as the distributing plans the distributing plans are both qualified_plans under sec_401 and they provide restrictions on the specific types of investments that may be held in a participant’s account under the provisions of the distributing plans the participants may invest in distributing stock and they have voting rights over any distributing stock held in their account at the time of the controlled distribution it is anticipated that the esp will hold percent or more of the stock of distributing on behalf of its participants while the esop will hold less than percent no individual participant in the esp hold sec_5 percent or more of distributing’s stock including stock held directly and stock held indirectly by such individual including stock held through the esp and esop controlled will form plans substantially_similar to the distributing plans the controlled plans for the benefit of controlled employees these plans will hold among other investments distributing stock in connection with the controlled distribution participants in the distributing plans and the controlled plans will receive controlled stock in the same manner as other shareholders of distributing accordingly after the controlled distribution distributing employees who participate in the distributing plans will have investments in controlled stock and controlled employees who participate in the controlled plans will have investments in distributing stock to the extent such employees have distributing stock in their individual accounts neither the distributing plans nor the controlled plans will require the immediate disposition of the controlled shares or the distributing shares respectively plan participants may direct their respective trustees to sell these shares at the participants’ discretion but may not acquire any additional shares of the other company’s stock at the end of years from the controlled distribution it is anticipated that any controlled plr-104660-01 shares in the distributing plans and any distributing shares in the controlled plans will be sold and the proceeds reinvested in permitted_investments under the terms of the respective plans new operating company distributing has formed a new corporation sub at the time of the controlled distribution sub will not have material assets it is anticipated that distributing sub will acquire the facility from sub after the controlled distribution continuing relationships in order to minimize any potential tort or contract liability controlled will continue to manage and operate certain facilities nominally owned by distributing that are currently in bankruptcy proceedings controlled and distributing anticipate that both of their involvement in these facilities will end upon the conclusion of the bankruptcy proceedings because of these changes to the proposed transaction subsequent to the issuance of the prior letter_ruling the following are modifications to the prior letter_ruling representations in connection with the controlled distribution and the capital_contribution distributing makes the following representation q except as described above distributing controlled and their respective shareholders will each pay their own expenses if any incurred in connection with the controlled distribution rulings in connection with the capital_contribution we rule as follows the capital_contribution transferred by distributing to controlled in constructive exchange for additional shares of controlled common_stock followed by distributing’s distribution of all of its controlled common_stock will constitute a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on its transfer of the capital_contribution to controlled in constructive exchange for controlled stock sec_361 plr-104660-01 no gain_or_loss will be recognized by controlled on its receipt of the capital_contribution in constructive exchange for controlled stock sec_1032 ruling of the prior letter_ruling is changed to read as follows no gain_or_loss will be recognized by distributing upon the distribution of the controlled stock to distributing’s shareholders sec_361 ruling of the prior letter_ruling is changed to read as follows as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made in accordance with sec_1_312-10 based solely on the information and representations submitted in the original and supplemental requests we rule that the additional information and representation will have no adverse effect on the prior letter_ruling and except as provided above the prior letter_ruling remains in full force and effect 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 each taxpayer affected by the prior letter_ruling should attach a copy of the letter and of this supplemental letter to its federal_income_tax return for the taxable_year in which the transactions covered by these letters are completed under a power_of_attorney on file in this office copies of this supplemental letter are being sent to the taxpayer and its authorized representative sincerely yours associate chief_counsel corporate by chief branch


internal_revenue_service national_office technical_advice_memorandum number release date uil index nos date third-party_contacts january and category congressional control number tam-113576-99 cc ita b6 district_director taxpayer’s name and address taxpayer’s ein years involved t y e date of n o conference legend m issues whether certain educational benefits provided by the taxpayer are qualified scholarships excluded from gross_income under sec_117 of the internal_revenue_code and whether the benefits are excluded from wages for purposes of the federal_insurance_contributions_act fica the federal_unemployment_tax_act futa and income_tax_withholding if the benefits are subject_to employment_taxes whether the taxpayer is entitled to relief under sec_7805 of the code facts the taxpayer is a voluntary employees’ beneficiary association veba under sec_501 and was created in under a collective bargaining agreement with the employers in a particular industry employers contribute a specified percentage of gross payroll on a monthly basis to fund the veba veba funds are used to pay life sickness accident and other_benefits to members members of the veba are the bargaining-unit employees and their dependents of the participating employers in the taxpayer created the m scholarship program to provide scholarships to the children of its employee-members for undergraduate studies the program is an activity of the veba and not a separate fund or organization all applicants receive scholarships however applicants are ranked in order of need and the amount of the individual awards varies greatly depending on need some applicants receive an additional award based on grades except in certain layoff situations if an employee’s employment and therefore participation in the veba terminates the scholarship grant ceases tuition paid for the current term does not have to be refunded but any remaining grant is canceled and the student is not eligible to apply for further grants the taxpayer has requested that the holding of this memorandum if adverse be applied without retroactive effect the taxpayer provided information showing that in a technical_advice_memorandum tam was requested by its local district_director on the issue of whether scholarships are a proper benefit to be provided by a veba regulations issued in under sec_501 resolved that issue in the taxpayer’s favor and the taxpayer later received a favorable determination from the irs that it continued to qualify as a veba and the benefits under the m scholarship program would not jeopardize its status the issue of whether the taxpayer had any fica or withholding obligation with respect to the scholarship benefits was never raised the taxpayer considered the favorable determination to be an indication that its procedures which treated the benefits as nontaxable were approved by the irs only when the taxpayer’s current general counsel started in was the taxation of the scholarship benefits questioned applicable law and analysis under sec_61 of the code gross_income means all income a small number of applicants did not receive scholarships in the years at issue primarily because they failed to complete the application process from whatever source derived unless excluded by applicable law sec_61 specifies that gross_income includes compensation_for services including fringe_benefits sec_1_61-21 of the regulations deals with the taxation of fringe_benefits under sec_1_61-21 and a fringe benefit provided in_connection_with_the_performance_of_services shall be considered to have been provided as compensation_for services and a taxable fringe benefit is included in the income of the person performing the services however sec_1_61-21 provides that to the extent that a particular fringe benefit is specifically excluded from gross_income under another section of the code that section will govern the treatment of the fringe benefit sec_117 of the code provides an exclusion for certain scholarships and fellowship grants sec_117 provides that gross_income does not include any amount received as a scholarship or fellowship_grant by an individual who is a candidate_for_a_degree at an educational_organization described in sec_170 describing generally a school to the extent such amount is used for qualified_tuition_and_related_expenses generally amounts paid to or for the benefit of employees are compensatory in nature and includible in gross_income as wages where educational grants are made available to or for the benefit of employees on a preferential basis such preferential grants suggest an intent to provide additional compensation or an employment incentive 394_us_741 1969_2_cb_17 see also 77_tc_189 aff’d 692_f2d_432 6th cir newspaper guild of new york v commissioner t c memo 57_tcm_812 and revrul_85_175 1985_2_cb_276 these suggestions are not dispelled simply because the grantor is an independent third party such as a private_foundation or a veba to be accorded scholarship treatment under sec_117 educational grants awarded in an employment context must generally be shown to fall outside the pattern of employment we have also considered the application of other code provisions under which employer-provided educational benefits can be excluded from income such as sec_127 educational_assistance programs or a working_condition_fringe but none applies revproc_76_47 1976_2_cb_670 provides guidelines for determining whether grants made by private_foundations under employer-related scholarship programs to employees and or children of employees will be treated as scholarships or fellowship grants subject_to the provisions of sec_117 of the code revproc_76_47 by its terms applies only to scholarships awarded by private_foundations however the guidelines set forth in the revenue_procedure serve to illustrate the type of analysis involved in determining whether grants awarded under employer-related programs fall outside the pattern of employment for example sec_3 of revproc_76_47 provides that the availability of grants to employees or their children under the program must be controlled and limited by substantial nonemployment related factors to such an extent that the preferential treatment derived from employment does not continue to be of any significance beyond an initial qualifier under revproc_76_47 educational grants will be considered to fall outside the pattern of employment and subject_to the provisions of sec_117 only if certain conditions and at least one of two percentage tests in the revenue_procedure are satisfied for example under section dollar_figure of revproc_76_47 a scholarship grant may not be terminated because the recipient or the recipient’s parent terminates employment with the employer subsequent to the awarding of the grant regardless of the reason for the termination of employment in addition if a grant is awarded for one academic year and the recipient must reapply for a grant for a subsequent year the recipient may not be considered ineligible for a further grant simply because that individual or the individual’s parent is no longer employed by the employer under the percentage tests the number of grants awarded under the program to children of employees must not exceed percent of the children who i were eligible for such grants ii were applicants for the grants and iii were considered by the selection committee making such grants or percent of the number of employees' children who can be shown to be eligible for grants whether or not they submitted an application in that year if a taxpayer meets all of the conditions set forth in the revenue_procedure but is unable to show that it meets one of the percentage tests the program's grants can still be subject_to the provisions of sec_117 if all the relevant facts and circumstances show that the purpose of the grant is to educate grant recipients rather than provide extra compensation however the facts and circumstances are considered in the context of the probability that a grant will be available to any eligible applicant in the present case the taxpayer's awards program falls significantly short of the facts and circumstances needed to evidence that the program falls outside the pattern of employment in particular awards are made to all applicants an outcome that does not begin to satisfy either of the percentage tests in revproc_76_47 additionally the program does not pass the substitute facts and circumstances analysis because there is great probability that a grant will be available to any particular applicant furthermore the program does not satisfy the requirement that a grant not be terminated simply because the employee terminates employment the scholarships are therefore not excluded from gross_income under sec_117 sec_3101 sec_3102 and sec_3111 of the code provide that every employer making payment of wages is required to withhold and pay fica_taxes sec_3301 imposes the futa_tax on an employer that pays wages similarly sec_3402 provides that every employer making payment of wages is required to deduct and withhold federal_income_tax from such amounts paid to its employees sec_3401 of the code provides that for purposes of income_tax_withholding the term employer means the person for whom an individual performs or performed any service of whatever nature as the employee of that person except that if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services the term employer means the person having control of the payment of wages for example sec_31_3401_d_-1 of the employment_tax regulations provides that where wages are paid_by a_trust and the person for whom the services were performed has no legal control_over the payment of such wages the trust is the employer neither the fica nor futa provisions contain a definition of employer similar to the definition contained in sec_3401 of the code however 419_us_43 1975_1_cb_329 holds that a person who is an employer under we have considered the facts and circumstances analysis even though the taxpayer’s program does not satisfy all of the other conditions under revproc_76_47 because these requirements are not met it has not been necessary for us to analyze whether the program satisfies the other conditions for excludability sec_3401 for income_tax_withholding purposes is also an employer for purposes of fica withholding under sec_3102 the otte decision has been extended to provide that the person having control of the payment of wages is also an employer for purposes of the employer share of fica under sec_3111 and for purposes of futa provided the person meets the requirements of sec_3306 or a in re armadillo corp 410_fsupp_407 d col aff’d 561_f2d_1382 10th cir holds that the otte rule applies to the employer’s fica tax and to futa as well in re laub baking co 642_f2d_196 6th cir and sta of baltimore -ila container royalty fund v united 621_fsupp_1567 d c md aff’d 804_f2d_296 4th cir reached similar conclusions in this case the taxpayer has the legal control of payment of the scholarships and is therefore the employer within the meaning of sec_3401 the taxpayer is therefore responsible for complying with any employment_tax requirements that apply to the scholarships sec_3121 of the code provides that for purposes of fica the term wages means all remuneration for employment unless specifically excepted sec_3306 and sec_3401 contain similar definitions for purposes of futa and income_tax_withholding sec_3121 of the code provides that for fica purposes the term wages does not include any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from income under sec_117 of the code sec_3306 and sec_3401 provide similar exceptions from the definition of wages for purposes of futa and income_tax_withholding see also sec_31_3121_a_-1t sec_31_3306_b_-1t and sec_31_3401_a_-1t of the temporary employment_tax regulations the exclusion from wages found in sec_3121 sec_3306 and sec_3401 of the code is not triggered merely by an employer's assertion that it applies if an employer seek sec_5 we note that wages paid_by the common_law employer are taken into account in applying the wage_base under sec_3121 which applies for purposes of the oasdi portion of fica see sec_3101 and sec_3111 and the wage_base under sec_3306 which applies for purposes of futa to rely on the exclusion it is obligated at a minimum to have ascertained the applicable law and to have applied it to the particular facts in this way the existence of a reasonable belief for excluding the benefits is based on a reasoned judgment see 40_fedclaims_712 applying an objective standard in determining whether it was reasonable for an employer to believe that a fringe benefit would be excludable from an employee's gross_income although that decision was reversed in part and remanded on a factual issue the application of the objective standard was affirmed by the court_of_appeals in american airlines inc v united_states f 3rd fed cir the taxpayer in the instant case has not met this burden accordingly the scholarships were not excluded from wages under sec_3121 sec_3306 or sec_3401 consideration of sec_7805 relief sec_7805 of the code provides that the secretary may prescribe the extent if any to which any ruling or regulation relating to the internal revenue laws may be applied without retroactive effect section dollar_figure of revproc_2000_2 2000_1_irb_73 pincite provides in relevant part that a holding in a tam that is adverse to the taxpayer is applied retroactively unless the associate chief_counsel domestic or employee_benefits and exempt_organizations as appropriate exercises the discretionary authority under sec_7805 to limit the retroactive effect of the holding section dollar_figure of revproc_2000_2 pincite indicates that the appropriate associate chief_counsel may prescribe the extent if any to which a tam will be applied without retroactive effect section dollar_figure of the revenue_procedure discusses the general procedures for taxpayers requesting such relief section dollar_figure of revproc_2000_2 pincite lists the following factors to be considered in determining whether a holding in a tam should be applied without retroactive effect there has been no misstatement or omission of material facts the facts at the time of the transaction are not materially different from the facts on which the letter_ruling plr or tam was based there has been no change in the applicable law relates to previously issued plrs not applicable here the taxpayer directly involved in the plr or tam acted in good_faith in relying on the plr or tam and the retroactive modification or revocation would be to the taxpayer’s detriment the factors listed in revproc_2000_2 in connection with sec_7805 generally relate to the situation in which the internal_revenue_service irs previously issued a favorable plr or tam to the taxpayer and the earlier plr or tam is being revoked by the current tam in this case however no plr or tam was issued to the taxpayer on the issues presented here the taxpayer suggests that it relied on an irs determination_letter dealing with the effect of the scholarship program on its status under sec_501 as a basis for believing that the scholarship benefits were excludable under sec_117 the circumstances in this case do not justify limiting the effect of the current tam under sec_7805 the information provided shows that the income and employment_tax treatment of the scholarship benefits was never raised in the process leading up to the issuance of the determination_letter to the taxpayer in addition under sec_1_501_c_9_-6 of the regulations whether an income_tax exclusion applies to benefits provided by a veba is determined by the statutory provision granting the exclusion and the regulations and rulings thereunder not by the permissibility of the benefit paid the example in sec_1_501_c_9_-6 states that the fact that educational benefits constitute other_benefits does not of itself mean that such benefits are eligible for the exclusion of either sec_117 or sec_127 of the code for these reasons extension of sec_7805 relief is not warranted in the present circumstances and the holdings in this memorandum may be applied with retroactive effect conclusions the educational benefits paid_by taxpayer to children of employees members under the m scholarship program are not qualified scholarships excludable from gross_income under sec_117 of the code but rather are wages for fica futa and income_tax_withholding purposes sec_7805 does not apply to limit the retroactive effect of the previous conclusion a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 of the code provides that it may not be used or cited as precedent -end- enclosures copy of this memorandum copy for sec_6110 purposes


internal_revenue_service p o box cincinnati oh release number release date date date legend s school v county state x dollar amount y dollar amount dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship 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 you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request you will enhance access to higher education by providing scholarships for worthy graduates of s located in v the scholarships are awarded to students attending vocational technical school or pursuing a four-year degree at a college or university the number of scholarships distributed will vary depending on the amount of funds available and upon the amount you are required to annually distribute to satisfy code sec_4942 however the amount of each award generally ranges from x to y dollars it is estimated that up to individuals are eligible to apply for the scholarship annually and you will aim to award about one-third of the scholarships to those attending letter catalog number 58263t vocational school and the remaining two-thirds of the scholarships for those attending full universities scholarships are publicized on the s website to be eligible students from s must have maintained at least a grade point average through seven semesters of high school and have been accepted to an accredited college university or trade school the college university or trade school must be approved by the scholarship selection committee each year you advise the scholarship selection committee of the amount of funds available to be awarded as scholarships the members of the selection committee review the scholarship applications and rank the applicants based on gpa financial need and a required activity log the scholarship selection committee reviews the applicants and makes a recommendation to you regarding the amount that should be awarded to each applicant the monetary value of each scholarship is determined upon mutual agreement between you and the scholarship committee all scholarships are awarded on an objective and non-discriminatory basis no scholarship is awarded to any disqualified_person as defined in code sec_4946 each scholarship recipient shall remain eligible for renewals as long as the recipient continues to pursue the course of study he or she originally selected and the trade school_college_or_university originally selected any proposed change in the course of study originally chosen or the location of the trade school_college_or_university selected must be properly reported in advance to and approved by the scholarship selection committee in order for the scholarship recipient to remain eligible for benefits in accordance with the rules and regulations adopted by the scholarship selection committee you require the student to provide an official transcript along with a copy of their schedule for the upcoming semester if the student fails to continue their studies any remaining unused funds attributable to their scholarship must be returned scholarships granted for degree scholarships shall be awarded for a maximum of four school years scholarships granted for vocational schools shall be awarded for the number of years necessary to complete the vocational courses specified by the scholarship recipient in their application you pay the scholarship proceeds directly to the school that the recipient attends for the benefit of the recipient you provide a letter to each school specifying that the school’s acceptance of the funds constitutes the schools agreement to notify you and refund any unused portion of the scholarship if a scholarship recipient fails to meet any term or condition of the scholarship if the school will not agree to such terms they are to return the check and you will obtain proof of enrollment and a grade transcript from the student you will do this by sending a grant letter to the student and having them sign to acknowledge individual expenditure_responsibility before any check is mailed if the student does not sign the agreement and provide proof of enrollment and grade transcripts they will not receive the scholarship letter catalog number 58263t please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58263t


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-112518-99 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 had four shareholders shareholders at the time of its incorporation 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 plr-112518-99 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 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 both an effective date of a and signed consents by all of the shareholders current and former 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


anonymous petitioner v commissioner of internal revenue respondent docket no 28246-07d filed date p requested a plr from r r informed p that he would be issuing a plr adverse to p’s interests p declined to withdraw the request for a plr before r publicly released the plr p petitioned this court alleging that the plr was arbitrary and capricious and that r failed to delete certain terms in the plr that tended to identify p p asks that we order r not to disclose the plr or in the alternative order r to delete cer- tain terms from the plr r moved for summary_judgment and argues that this court lacks jurisdiction to prevent r from disclosing the plr at issue and that none of the terms in the plr would tend to identify p held this court’s juris- diction is limited to making a determination with respect to whether certain terms in the plr are required to be deleted before publication therefore we will grant r’s motion for summary_judgment in part held further because a question of fact remains whether certain terms in the plr tend to identify p we will deny r’s motion for summary_judgment in part verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila united_states tax_court reports sealed for petitioner sealed for respondent opinion goeke judge this matter is before the court on respond- ent’s motion for summary_judgment filed pursuant to rule for the reasons stated herein we shall grant in part and deny in part respondent’s motion background letter_ruling on date petitioner submitted a request for a private plr on date respondent contacted petitioner to inform petitioner that respondent intended to issue the plr with a determination adverse to petitioner’s request respondent informed peti- tioner’s counsel that petitioner could withdraw the request but petitioner declined on date respondent issued a written adverse determination_letter ruling against petitioner on date petitioner petitioned this court pursuant to sec_6110 to restrain disclosure of respond- ent’s letter_ruling petitioner’s petition asks the court to order under provisions of the administrative_procedure_act apa u s c secs that respondent not publicly disclose the plr order that the plr not be disclosed to internal_revenue_service irs employees and order should the irs be allowed to publicly disclose the plr that the irs delete certain information in the plr that would identify petitioner since the filing of the petition in this case respondent has agreed to delete addi- tional information on date respondent filed his motion for summary_judgment i summary_judgment discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 the court may grant all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila anonymous v commissioner summary_judgment where there is no genuine issue of mate- rial fact and a decision may be rendered as a matter of law rule a and b 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine issue of material fact and the court will draw any factual inferences in the light most favorable to the non- moving party 85_tc_812 rule d provides that where the moving party properly makes and supports a motion for summary judg- ment an adverse_party may not rest upon the mere allega- tions or denials of such party’s pleading but must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial ii the plr system the irs has developed the plr system to provide guidance to taxpayers on the tax impact of specific transactions cer- tain information is required in order to file requests for letter rulings and written determinations revproc_2007_4 sec 2007_1_cb_118 each request must contain a complete statement of all facts relating to the transaction including a statement of the business reasons for the trans- action and a detailed description of the transaction in ques- tion id sec c b pincite additionally copies of all pertinent documents and an analysis of material facts must be included id sec - c b pincite- the request must also include relevant authorities even those contrary to the taxpayer’s position a statement regarding previous consideration of the issue and a state- ment identifying any pending legislation id sec - c b pincite to assist the irs in complying with sec_6110 the request for a letter_ruling should also include a deletions statement id sec c b pincite sec_6110 provides that the text of any written deter- mination shall be open to public inspection at such places as the secretary may by regulation prescribe before making such document available to the public for inspection how- ever the secretary is required to delete certain information that is exempt from disclosure sec_6110 the exempted verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila united_states tax_court reports information includes the names addresses and other identi- fying details of the person to whom the written determina- tion pertains information the disclosure of which would create a clearly unwarranted invasion of privacy and information specifically authorized under executive_order to be kept secret in the interest of national defense or of foreign policy sec_6110 iii confidential return_information under sec_6103 sec_6103 protects the privacy of taxpayers and restricts government officers and employees from disclosing confiden- tial return_information lizcano v commissioner tcmemo_2008_39 sec_6103 provides that returns and return_information shall be confidential and that no officer_or_employee of the government who obtains such information in an official capacity shall disclose it except as authorized by this title sec_6103 was designed both to protect tax- payers’ privacy and therefore to encourage the taxpayers’ free and open disclosure to the service 92_tc_180 citing 854_f2d_335 9th cir a tax- payer’s return or return_information generally may not be revealed to a third party unless such disclosure is specifically authorized under sec_6103 id citing 857_f2d_722 10th cir sec_6103 defines the term ‘return’ to mean any_tax or information_return dec- laration of estimated_tax or claim_for_refund required by or provided for or permitted under the provisions of this title which is filed with the secretary sec_6103 provides an expansive definition of return_information however sec_6103 provides an explicit exception to these con- fidentiality requirements to allow inspection and disclosure of return and return_information by officers and employees of the department of the treasury whose official duties require such inspection or disclosure for tax_administration_purposes 440_f3d_729 6th cir verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila anonymous v commissioner iv publication of plrs sec_6110 provides that before any written deter- mination or background file is made open or available to public inspection the secretary shall delete the names addresses and other identifying details of the person to whom the written_determination pertains and of any other person other than a person with respect to whom a notation is made under subsection d identified in the written_determination or any background file docu- ment information specifically authorized under criteria established by an executive_order to be kept secret in the interest of national defense or for- eign policy and which is in fact properly classified pursuant to such executive_order information specifically exempted from disclosure by any statute other than this title which is applicable to the internal_revenue_service trade secrets and commercial or financial information obtained from a person and privileged or confidential information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy information contained in or related to examination operating or condition reports prepared by or on behalf of or for use of an agency responsible for the regulation or supervision of financial institutions and geological and geophysical information and data including maps con- cerning wells a person may act to restrain certain information from being disclosed in a written_determination or background file however under the procedures set forth in sec_6110 sec_6110 and the accompanying regulations provide that any taxpayer to whom a written_determination pertains or successor_in_interest executor or other person authorized by law to act for or on behalf of such person or who has a direct interest in maintaining the confidentiality of a written_determination or background_file_document may file an administrative request that material be deleted from the written_determination or background_file_document see sec_301_6110-5 proced admin regs sec_6110 establishes jurisdiction in this court to determine whether and to what extent a disputed portion of a written_determination or background_file_document may be open to public inspection sec_6110 provides in part a creation of remedy -any person- i to whom a written_determination pertains or a successor_in_interest executor or other person authorized by law to act for or on verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila united_states tax_court reports behalf of such person or who has a direct interest in maintaining the confidentiality of any such written_determination or background_file_document or portion thereof ii who disagrees with any failure to make a deletion with respect to that portion of any written_determination or any background file docu- ment which is to be open or available to public inspection and iii who has exhausted his administrative remedies as prescribed pursuant to paragraph may within days after the mailing by the secretary of a notice of intention to disclose any written_determination or background file docu- ment under paragraph together with the proposed deletions file a peti- tion in the united_states tax_court anonymously if appropriate for a determination with respect to that portion of such written_determination or background_file_document which is to be open to public inspection see also rule sec_220 through 229a sec_6110 requires the irs to give notice of its intention to disclose a written_determination respondent moves for summary_judgment on the grounds that the apa does not apply to this disclosure action sec_6103 has a specific exemption for irs employees and the information in the plr is generic and does not tend to identify petitioner petitioner objects to respondent’s motion and argues that the apa provides this court with the authority to order respondent not to disclose the plr at issue because the plr was arbitrary capricious and an abuse_of_discretion peti- tioner alleges sec_6110 grants the court the express authority to review written determinations open to public inspection like plrs petitioner contends that the contents of the plr are contrary to law and thus respondent acted arbi- trarily capriciously and in bad faith in issuing it petitioner further argues that for the same reason the plr should not be disclosed to department of the treasury officials lastly petitioner argues that certain terms in the plr tend to identify petitioner and that the court may determine whether additional information should be redacted from the plr petitioner contends that respondent has failed to delete all identifying information as required by sec_6110 v conclusion on the basis of our examination of the record before us we shall grant in part and deny in part respondent’s motion for summary_judgment sec_6110 explicitly grants verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila anonymous v commissioner to this court jurisdiction to make a determination with respect to the commissioner’s decision to delete or not delete information from a plr before public disclosure further sec_6103 authorizes the disclosure of confidential return_information to department of the treasury officers and employees petitioner’s argument that the apa allows this court to prevent the commissioner from disclosing a plr is incorrect the apa does not create a right of action in this circumstance see eg u s c sec_703 430_us_99 sec_6110 limits this court’s determination the commissioner’s deletion decisions that section does not give this court the authority to order the commissioner to restrain disclosure of a plr in its entirety the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent pro- vided by congress see sec_7442 see also 114_tc_519 this court’s juris- diction under sec_6110 is explicitly limited to making a determination with respect to the commissioner’s decision not to delete information from a written determina- tion or background_file_document which is to be open to public inspection sec_6110 is a precise grant of jurisdiction and does not allow for additional general rem- edies see 550_us_501 lastly we address respondent’s contention that summary_judgment is appropriate because specific terms in the plr do not in fact tend to identify petitioner respondent contends that there is no material issue of fact in regard to these terms and argues that they do not tend to identify petitioner on a party’s motion for summary_judgment we must view the facts in the light most favorable to the nonmoving party dahlstrom v commissioner t c pincite petitioner alleges that terms included in the plr are specific to peti- tioner will be easily recognized by anyone in petitioner’s industry and clearly show petitioner as being the party requesting the plr because there is an issue of material fact with respect to whether these terms do or do not tend to identify petitioner we shall deny that part of respondent’s motion we shall grant respondent’s motion to the extent petitioner asks this court to order withholding of the entire plr at issue we shall deny respondent’s motion to the extent peti- verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila united_states tax_court reports tioner contends that there is a material fact in dispute as to whether certain terms in the plr tend to identify petitioner to reflect the foregoing an appropriate order granting respondent’s motion in part and denying it in part will be issued f verdate 0ct date jkt po frm fmt sfmt v files anon tes sheila