department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division u i l uec song legend taxpayer a ira x property d company c bank b bank f account f account g individual m dear this is in response to your letter dated date as supplemented by correspondence dated august date and date submitted by your authorized representative in which you request a waiver of the day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalties of perjury in support of your request taxpayer a maintained an individual_retirement_arrangement ira with company c taxpayer a states that on date he transferred property consisting of property d from an ira maintained by company c to ira x maintained by bank b taxpayer a states that he wanted sole control_over his account but because of a misunderstanding caused in part by a language barrier bank b set up ira x with control of the investment decisions by its trust division rather than by taxpayer a upon discovering that he did not have sole control of the investment decisions of ira x on date taxpayer a requested that the ira x assets property d be transferred to a self-directed_ira brokerage account so that taxpayer a would have sole control_over the investment decisions pursuant to taxpayer a’s request on date bank b made an in-kind transfer of all of the property held in ira x to account f established with bank f a separate subsidiary of bank b which he believed to be a self-directed_ira brokerage account but which in fact was a non-ira account taxpayer a states that the purpose of the transfer was to permit the investment of ira x individual marketable_securities through a licensed broker-dealer as directed by taxpayer a rather than bank b’s trust division taxpayer a states that per his written instruction on date he made his intentions known to the bank f representative that he had intended to transfer ira x to a self-directed_ira account but he was not provided with an ira application in addition an inexperienced employee at bank f did not provide the correct paperwork and set up the new account as a brokerage account into while preparing taxpayer a’s tax_return upon extension in the taxpayer's accountant discovered that he had a large balance in a new account the accountant researched the account and discovered that this new account with bank f was not established as an ira account the accountant had not previously noticed this error because form 1099-r was never issued by the trust division of bank b and taxpayer a did not bring this to his accountant’s attention because taxpayer a believed that he had properly executed a tax free rollover account with bank f when the accountant notified taxpayer a of the error taxpayer a immediately contacted bank b and requested that the date transaction be reversed and property d be transferred back into his ira bank f refused to transfer the 2uu709068 money because more than days had elapsed since the initial transfer occurred in date in a letter dated date individual m assistant vice president and counsel of bank f verified the fact that the representative of bank f opened the new account account g a non-iira account contrary to taxpayer a’s instructions and intentions and that taxpayer a intended to open a self-directed_ira account in addition individual m acknowledged the errors and omissions committed by both bank b and bank f taxpayer a asserts that his failure to complete a rollover within the 60-day rollover period was due to bank f’s error in completing the necessary paperwork that resulted in property d being deposited into a non-retirement account instead of an ira as he intended taxpayer a further asserts that he has not used or withdrawn any of the property d nor made any contribution in cash or in_kind property since date documentation and account statements submitted with the request support the above assertions made by taxpayer a based upon the foregoing facts and representations you request that the service waive the day rollover requirement with respect to the distribution_of_property d from ira x sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual received the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount 2uuu709068 which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without __fegard to sec_408 section sn d b of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any the time during the 1-year period ending in the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with his assertions that he failed to complete a rollover of property d to an ira within the 60-day rollover period because of the errors committed by both banks b and f therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution_of_property d from ira x taxpayer a is granted a period of days from the date of this ruling to contribute property d to an ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution property d will be considered a valid rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed to taxpayer a by sec_401 of the code no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions regarding this letter please contact _se t ep ra t at incerely yours ks z rances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling notice


internal_revenue_service number release date index number --------------------- ---------------------- -------------------------- in re -------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- telephone number --------------------- refer reply to cc tege eb ec plr-143419-06 date date legend taxpayer amended plan ---------------------------------------------------------------------------------------------------------------- plan_year date awards -------- --------------------------------------------------------------------------------- -------------------------------------------- ------- ------------------- --------------------------------------------------------------------------------- ----------------------------------------- -- ---- -------------------------- ------------------------------------ x y goal goal dear ------------ this letter responds to a request for a private_letter_ruling submitted on behalf of taxpayer regarding whether certain compensation paid under taxpayer’s amended plan is performance-based compensation within the meaning of sec_162 of the internal_revenue_code code taxpayer established the plan in year and the plan was approved by taxpayer’s shareholders on date the plan is designed to compensate officers and other key employees by providing them with an opportunity to purchase shares of taxpayer’s common_stock and to benefit from the appreciation in value of that stock the plan provides compensation in the form of shares of taxpayer common_stock options to buy shares of taxpayer common_stock and units representing shares of taxpayer common_stock under the plan’s design only compensation attributable to stock_options may qualify as performance-based compensation within the meaning of sec_162 of the code plr-143419-06 taxpayer amended the plan so that certain compensation in addition to stock_options can qualify as performance-based compensation under sec_162 of the code under the amended plan taxpayer’s compensation committee committee which is composed of two or more outside directors within the meaning of sec_162 may grant awards to designated eligible participants participants during the first days of the initial year of a x year period with limited exceptions in order to have their awards converted into shares of taxpayer common_stock participants must remain employed by taxpayer for the full x year period plus up to three months following such period while the committee confirms the amount payable if any under the awards under the amended plan the committee has established two performance goals with respect to the awards goal and goal both performance goals are determined in accordance with generally_accepted_accounting_principles gaap the period_of_service relating to both performance goals consists of only the final year of the x year period during the first days of the final year of the x year period the committee will establish in writing a range of performance targets for the goal performance_goal and a single target for the goal performance_goal the actual amount of an award payable upon attainment of the goal performance_goal will be a percentage of the award depending on which target within the specified range is obtained if no target under the goal performance_goal is obtained y percent of the award may be payable if the goal performance_goal is met taxpayer represents that the outcome of both performance goals as well as the attainment of all applicable targets will be substantially uncertain at the time they are established by the committee during the first days immediately following the end of the x year period and before any compensation is paid pursuant to an award the committee will certify in writing whether the performance goals as well as the other material terms under the amended plan have been met if a goal is met awards will be converted into shares of taxpayer common_stock based on the relevant goal however the committee retains discretion to reduce the number of shares of common_stock paid pursuant to an award though in no case can the committee increase the amount of shares paid the amended plan provides an exception under which participants who terminate employment due to death disability or retirement during the x year period remain eligible to have their awards converted into taxpayer stock provided that a performance_goal relating to those awards is met in the final year of the x year period the amended plan requires compensation paid under this exception to be paid in accordance with the amended plan without regard to this exception and only after the committee certifies whether the performance goals have been met taxpayer represents that it will submit the amended plan including all material terms within the meaning of sec_162 of the code to taxpayer’s shareholders for plr-143419-06 approval by a majority of the vote in a separate shareholder vote before the payment of any compensation with respect to an award sec_162 of the code allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 of the code provides that in the case of any publicly-held corporation no deduction is allowed for applicable_employee_remuneration with respect to any covered_employee to the extent that the amount of the remuneration for the taxable_year exceeds dollar_figure sec_162 of the code provides that applicable_employee_remuneration does not include any remuneration payable solely on account of the attainment of one or more performance goals but only if i the performance goals are determined by a compensation committee of the board_of directors of the taxpayer which is comprised solely of or more outside directors ii the material terms under which the remuneration is to be paid including the performance goals are disclosed to the shareholders and approved by a majority of the vote in a separate shareholder vote before the payment of such remuneration and iii before any payment of such remuneration the compensation committee referred to in clause i certifies that the performance goals and any other material terms were in fact satisfied sec_1_162-27 of the income_tax regulations regulations provides that qualified_performance-based_compensation must be paid solely on account of the attainment of one or more preestablished objective performance goals a performance_goal is considered preestablished if it is established in writing by the compensation committee not later than days after the commencement of the period_of_service to which the performance_goal relates provided that the outcome is substantially uncertain at the time the compensation committee establishes the goal however in no event will a performance_goal be considered to be preestablished if it is established after percent of the period_of_service as scheduled in good_faith at the time the goal is established has elapsed under sec_1_162-27 of the regulations the terms of an objective formula or standard must preclude discretion to increase the amount of compensation payable that would otherwise be due on attainment of a goal under sec_1_162-27 of the regulations compensation does not satisfy the requirements of paragraph e if the facts and circumstances indicate that the employee would receive all or part of the compensation regardless of whether the performance_goal is attained thus if the payment of compensation under a grant or award is only nominally or partially contingent on attaining a performance_goal none of plr-143419-06 the compensation payment under the grant or award will be considered performance- based for example if an employee is entitled to a bonus under either of two arrangements where payment under a nonperformance-based arrangement is contingent upon the failure to attain the performance goals under an otherwise performance-based arrangement then neither arrangement provides for compensation that satisfies the requirements of paragraph e sec_1_162-27 provides in part that the material terms of the performance_goal under which the compensation is to be paid must be disclosed to and subsequently approved by the shareholders of the publicly_held_corporation before the compensation is paid sec_1_162-27 of the regulations provides that once the material terms of a performance_goal are disclosed to and approved by shareholders no additional disclosure or approval is required unless the compensation committee changes the material terms of the performance_goal if however the compensation committee has the authority to change the targets under a performance_goal after shareholder approval of the goal the material terms of the performance_goal must be disclosed and reapproved by shareholders no later than the first shareholder meeting that occurs in the fifth year following the year in which shareholders previously approved the performance_goal based on the facts in taxpayer’s submission and the supplements thereto and provided that all of the requirements of sec_1_162-27 of the regulations are met including sec_1_162-27 we rule that the compensation paid as awards under the amended plan as described in the taxpayer’s submissions and using the performance goals specified above is performance-based compensation within the meaning of sec_162 of the code and sec_1_162-27 the ruling contained in this letter is based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination except as specifically ruled on above no opinion is expressed as to the consequences of the transaction described above under any other provisions of the code plr-143419-06 this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent taxpayer should attach a copy of this ruling to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representatives sincerely yours kenneth m griffin senior technician reviewer executive compensation branch office of division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service number release date index number ------------------------------------- --------------------------------- ------------------------------------------------------------ -------------------- ----------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b01 plr-124176-17 date february x y --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- country ---------- date --------------------------- dear -------------- this responds to a letter dated date and subsequent information submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes facts the information submitted discloses that x was formed on date under the laws of country x’s owner y represents that x is an eligible_entity intended to be classified as a disregarded_entity for federal tax purposes effective date however x failed to timely file a form_8832 entity classification election to be classified as a disregarded_entity law and analysis sec_301_7701-2 provides that a business_entity is any entity recognized for federal tax purposes including an entity with a single owner that may be disregarded as an entity separate from its owner under sec_301_7701-3 that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code a business_entity with two or more members is classified for federal tax purposes as either plr-124176-17 a corporation or a partnership sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the appropriate campus under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on the form_8832 cannot be more than days prior to the date on which the election is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-124176-17 conclusion based solely on facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 consequently x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity for u s income_tax purposes effective date a copy of this letter should be attached to the form_8832 this ruling is contingent upon x and its owner filing within days of this letter all required federal_income_tax and information returns including amended returns for all open years consistent with the requested relief these returns must include but are not limited to form_8858 information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter_ruling to your authorized representatives sincerely associate chief_counsel passthroughs special industries faith p colson by ____________________________ faith p colson senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service appeals_office market street suite philadelphia pa date aug number release date person to contact employee id number tel fax refer reply to in re tax period s ended form number uil - employer_identification_number certified mail dear last day to file a petition with the united_states tax_court not applicable this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code it is determined that you are no longer recognized as exempt from federal_income_tax under sec_501 of the internal_revenue_code effective date your application_for exemption form and associated materials misstated material fact and you operated in a manner materially different than originally represented our adverse determination was made for the following reason s this organization had conducted no charitable activities and the manner in which it was structured to operate would further its insiders' interests due to their control therefore it would be operated for a substantial nonexempt purpose accordingly you would not be operated exclusively for exempt purposes described in sec_501 contributions to your organization are not deductible under code sec_170 you are required to file federal_income_tax returns on the form indicated above you have waived your right to contest this determination under the declaratory_judgment - provisions of sec_7428 of the code by your execution of form_906 closing_agreement concerning specific matters an executed copy of which is being sent to you under separate cover if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter oe you also 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 is not able to reverse legally correct_tax determinations nor extend the time fixed by law that you have to file a petition in the u s tax_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 if you want taxpayer_advocate assistance please contact the taxpayer_advocate for the irs office that issued this notice_of_deficiency see the enclosed notice helpful contacts for your notice_of_deficiency for taxpayer_advocate telephone numbers and addresses thank you for your cooperation sincerely ’ charles fisher team manager enclosures notice helpful contacts for your ‘deficiency notice’ department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date dear contact person identification_number contact number fax number employer_identification_number we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 c the basis for our conclusion is set forth below issues do you m who received and hold a interest in a limited_liability_company qualify for exemption under sec_501 of the code ifyou m are exempt are you a supporting_organization as described in sec_509 of the code letter cg catalog number 47630w issue sec_501 facts form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code was submitted on z3 z2 by the execution of a_trust agreement by and between a c and both referred to as the donors a c m was formed as a_trust years and days earlier on is b c's son and is referred to as the trustee and b c both residents of y sec_1 of the trust agreement states in pertinent part this trust is supervised or controlled in connection with and at all times hereafter will be operated exclusively to support or benefit as defined by sec_509 of the code and sec_1 a - n a publicly_supported_organization described in sec_501 of the code sec_2 of the trust agreement states in pertinent part the trustee shall distribute at least eighty-five of the net_income of this trust to n the primary charity in order to ensure that this happens a majority of this organization's board as defined in sec_4 below shall also be members of the primary charity's board so the needs of the primary charity shall be reflected in the actions of this organization sec_2 of the trust agreement states in pertinent part the trustee may make such discretionary distributions of the income in excess of the amount provided in sec_2 above and of the principal of this trust to the primary charity as is directed by the board in a writing signed by at least two members of the board provided that each such distribution shall be a distribution which can be made by an organization described in sec_509 of the code the board shall sec_4 of the trust agreement describes the composition of the board consist of at least three board members that will be comprised of one member of the c family and two independent members of the board the initial family_member of the board is bc's the remaining two members or more of the board shall be appointed by a son ac majority vote of the remaining members of the board other than the c family the initial independent board members shall be e f sec_4 of the trust states in pertinent part ‘the membership of the board shall at all times be such that the original donor or other disqualified persons as defined in sec_4946 of the code do not control the board ac signed the trust as trustee and both father and son b c and ac signed the trust as donors ac and b contributors c are disqualified persons with respect to m because they are substantial the asset of the trust is membership interest in a limited_liability_company o ac andbc of the interest in o o is located in the are the only two members of o and each owned state of y where a c and bc reside m submitted three instruments showing assignment letter cg on the same date ac interests the instruments show that both a c and b c intended to transfer a total of respective interests the father b c transferred ending the calendar_year ending ac transferred his second of the file shows that the total interest transferred so fartom byac andbcis the llc’s interest therefore ac owns donated dollar_figure of his llc interest in the calendar_year m shows that for assignment interest for a total of of the llc the file shows b c of his interest to m cash to m during also assigned bc owns of their the llc o was formed on z1 and is managed solely by a c and bc o's operating_agreement states its purpose is to acquire and develop real_estate and to engage in any lawful activity for which a limited_liability_company may be organized under the y revised limited as of the calendar year-end the book_value of o's assets are liability company act dollar_figure which consist of the following cash in the bank n r - in another llc land dollar_figure acres land dollar_figure acres land and building dollar_figure acres furniture fixtures total assets book_value dollar_figure dollar_figure as of the calendar year-end the book_value of o's assets was dollar_figure consists of the following which cash in bank various notes receivables land land dollar_figure acres condo investment investment investment - camaro total assets book_value dollar_figure dollar_figure we requested an appraisal of the property and received a two page entity valuation which did not show it was from a certified appraiser and which did not list the appraiser's credentials and experience in independent business valuations it included a list of the above assets the market_value of the assets based on multiple offers to purchase which was dollar_figure and market_value net equity in the company which was dollar_figure company is dollar_figure we requested a more complete appraisal of o and m the debt of the replied that letter cg o never had a property appraisal performed and an appraisal of the assets is not relevant to make a determination of their tax exempt status we also requested a detailed description of the business or residence and if anyone is residing on the property m replied by stating o owns some undeveloped land in an area of generally rising property values and this property is not occupied or rented o also holds some rental property and other assets was given on the description of the assets acres of land including if the property is a no other information m replied that o expects to sell its various assets at a profit and reinvest those profits m indicated that we inquired why the financial data only included a dollar_figure the members decided to hold the assets since this will generate the greatest amount of income from the property we then asked how the assets will generate income that can be distributed to m over the course of its existence the board members determined that this is the best_method to generate income at least of the income will be distributed to n the greatest asset value by holding its interest in the o until the limited_liability_company sells the property rather than having m sell its interest in o m feels that it will obtain distribution in m is requesting exemption as a type supporting_organization their primary purpose is to provide funds in the form of grants to n the supported_organization n was also formed by trust agreement n was formed by father and son b c and a c one day later than m’s formation on z2 pending at this time and has not been finalized but the service is tentatively proposing to grant n tax exemption as a private_foundation a private_foundation would not qualify as a supported_organization under sec_509 the exemption applications for m and n were received at same time n’s tax status is m's financial data shows contributions received of dollar_figure respectively the expenses are professional fees for dollar_figure contributions paid out in m’s submitted memoranda of action in lieu of meetings for and income and m decided not to make any charitable distributions the dollar_figure was formed for both years m determined that the assets held by the trust did not produce any therefore m never distributed and has not made any charitable distributions since it that they projected in and dollar_figure in20 and20 anddollar_figure for in law sec_501of the code provides in part that organizations described in sec_501 are exempt from federal_income_tax sec_501 of the code describes in part an organization which is organized and operated exclusively for religious charitable scientific testing for public safety literary or educational purpose no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_501 of the code provides in part for the exemption from federal_income_tax organizations organized and operated exclusively for charitable religious or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual letter cg section big_number c -1 a of the regulations states that in order to qualify under sec_501 of the code an organization must be both organized and operated exclusively for one or more exempt purposes if an organization fails to meet either the organizational or operational_test it is not exempt sec_1_501_c_3_-1 of the regulations states that the term exempt_purpose or purposes means any purpose or purposes specified in sec_501 of the code sec_1_501_c_3_-1 of the regulations states that an organization will be regarded as it engages primarily in activities operated exclusively for one or more exempt purposes only if which accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations states that an organization is not operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest created it it must not be operated for the benefit of designated individuals or the persons who in 326_us_279 the supreme court stated that the presence of a single nonexempt purpose if substantial in nature will preclude exemption under sec_501 of the code regardless of the number or importance of statutorily exempt purposes thus the operational standard prohibiting a substantial nonexempt purpose is broad enough to include inurement private benefit and operations that further nonprofit goals outside the scope of sec_501 in p p l scholarship v commissioner t c an organization operated bingo at a bar for the avowed purpose of raising money for scholarships the board included the bar owners the bar accountant also the director of the bar as well as two players the board was self-perpetuating the court reasoned that since the bar owners controlled the organization and appointed the organization’s directors the activities of the organization could be used to the advantage of the bar owners 35_tc_490 provided that where an exempt_organization engages in a transaction with a related interest and there is a purpose to benefit the private interest rather than the organization exemption may be lost even though the transaction ultimately proves profitable for the exempt_organization in salvation navy v commissioner t c m the court found that one of the reasons why the organization did not qualify for exemption from federal_income_tax was that it could not prove that its net_earnings would not inure to the benefit of a private individual its founder in 670_f2d_104 cir the court affirmed the tax court’s decision that held that the organization supplied no letter cg evidence showing that the payments to its controlling members were reasonable and the court also found that the potential for abuse created by the family’s control of the organization required open candid disclosure of facts in 319_us_436 in which the supreme court stated that so long as a corporation is organized for a legitimate business_purpose other than tax_avoidance or actually carries on such a business it will be respected for tax purposes disregarded where it is a sham or unreal fiction over the years the courts have applied the same principles to partnerships see bertoli v commissioner 103t c the supreme court continued by stating that the corporate form may be in such situation the form is a bold and mischievous revproc_2008_9 internal_revenue_bulletin page read in part as follows exempt status will be recognized in advance of operations if proposed operations can be described in efficient detail to permit a conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed a mere restatement of purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement the organization must fully describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures where the organization cannot demonstrate to the satisfaction of the service that it qualifies for exemption pursuant to the section of the internal_revenue_code under which exemption is claimed the service will generally issue a proposed adverse determination_letter or ruling revrul_67_5 1967_1_cb_123 holds that a foundation controlled by the creator's family was operated to enable the creator and his family to engage in financial activities that were beneficial to them but detrimental to the foundation this resulted in the foundation’s ownership of common_stock that paid no dividends of a corporation controlled by the foundation's creator and his family which prevented it from carrying on a charitable program commensurate in scope with its financial resources this ruling concluded that the foundation was operated for a substantial non-exempt purpose and served the private interest of the creator and therefore was not entitled to exemption under sec_501 of the code revrul_68_489 1968_2_cb_210 holds that an organization will not jeopardize its exemption under sec_501 of the code even though it distributes funds to nonexempt organizations provided it retains control and discretion over use of the funds for c purposes the revenue_ruling states that the exempt_organization ensures uses of the funds for sec_501 purposes by limiting distribution to specific projects that are in furtherance of letter cg its own exempt_purpose it retains control and discretion as to the use of the funds and maintains records establishing that the funds were used for sec_501 purposes application of law because m's articles of incorporation state that its purposes are described in sec_501 of the code and also state that upon dissolution all assets will go to organizations that are exempt under sec_501 of the code m passes the organizational_test as described in sec_1 c -1 a of the regulations the facts submitted show that the activities of m are to hold and manage real_estate and other investments it will sell the assets and invest the funds income from the investments will be distributed to n so far nothing has been distributed to charity and there is no indication when m will begin to make distributions m has also not shown that its activities will not inure to the benefit of ac and other members of c family therefore they are not operated exclusively for purposes described in sec_501 of the code m is not described in sec_1_501_c_3_-1 of the regulations because more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the purpose of m is to make annual distributions to n m received contributions in and of of o from ac and bc the purpose of o is to hold property interests and to acquire and develop real_estate the assets of o consist of cash notes receivables land rental property and investments m's objective was to sell the assets of the company invest the proceeds and donate the earning to n of the and board meetings m determined that the assets held by the trust did not produce any income for this reason m decided not to make any charitable grants m also stated that it would be more beneficial to continue to hold the assets until the market conditions improve owning of a limited_liability_company that holds and manages assets is not a c activity thus far nothing has been donated to n in the memoranda in lieu reg c -1 c clarifies that an organization is not operated exclusively for exempt purposes if its net earning inure to the benefit of private individuals a c and b c both took sizeable tax deductions for contributions that they made to m taxable_income even though no income was used for charitable purposes b c together own of o which means that they control m and the assets that they have an interest from to the assets of o increased and at the same time m decided not to make any distributions because the trust did not produce any income this allowed them to lower their in addition a c and similar to bubbling well church of universal love inc v commissioner supra m did not supply any evidence to show that the members of the c family are not benefiting or using the assets of the organization we requested a detailed description of the property if the property was occupied and who was living on the property is it being rented and is it a residence or a business m stated that o owns undeveloped land in an area of generally rising property values some rental property and holds other assets given no other descriptions of the assets were letter cg we requested an appraisal of the property and m submitted a two page valuation report that was taken from the financial statements when we requested a more detailed appraisal m indicated that an appraisal was never done on o and that the appraisals are not relevant because ownership_interest in o and not interest in any assets were contributed to the commissioner supra in that it has not provided taxpayer sufficient information for us to determine that the assets of the organization will not inure to a c or b c or members of their family mis similar to salvation navy v control is an important factor in determining whether an organization operates for the benefit of private interests similar to the organizations in p l l scholarship v commissioner supra leon a beeghly v commissioner supra and revrul_67_5 m did not submit information that demonstrates it is not formed for the private interest of the board members and their families the board_of directors is comprised of three member directors ac is the family_member and e and f are the two independent members the independent members are selected by a majority of board members that are not members of c family there are only three directors the only member left after you remove the independent directors is ac sec_4 of the trust ac is not permitted to select the independent directors some uncertainty as to how the independent directors were selected this creates per there in no indication that the two independent directors take an active part in the organization or have a voice in the management of the assets their signatures appear only on one article of the operating_agreement for o memorandum in lieu of one board meeting a year therefore they manage all of the assets of m states that it will be managed by ac and bc sec_1_501_c_3_-1 of the requlations clearly states that an organization must not be operated for the benefit of designated individuals or the persons who created it furthermore unlike the organization in rev rule m did not submit any information that indicates the activities they are conducting serve sec_501 purposes interest in o that holds and manages assets does not serve a c purpose does not satisfy the not more that an insubstantial part of its activities standard of sec_1_501_c_3_-1 of the regulations m has a non-charitable purpose that is substantial in nature see better business bureau v united_states supra in addition m holdinga interest in o from ac bc valued at dollar_figure it appears that m was formed for the purpose of even though m was formed as a_trust it is similar to the organization described in moline properties inc v commissioner supra tax_avoidance while retaining control of the assets by the c family accepted contributions of has been given to charity ac bc took tax deductions for this amount lowering their taxable m states that they are going to income the organization has not conducted any other activity wait for the property values to increase before they sell the property m appears to be nothing more than a pass-through entity from o and distribute it to n the purpose of n is to give funds to organizations described in c of the code could have distributed their revenue directly to n instead of creating a their purpose is to receive income letter cg and nothing and in20 m middle entity m stated that it will hold the property and distribute the income to in a letter dated april n when we asked how the property will generate income m indicated that o will sell the assets and invest the income value of the total assets owned by o is dollar_figure based on this information m had chances to sell the and other market valuation reports this statement also property in to produce income but decided to hold the property contradicts what is in the minutes of the board meetings the minutes state that the reason nothing was given to charity is because the assets did not produce any income _ stated that the market based on multiple offers to purchase the value report dated march _and the following year o is buying assets and not selling per the valuation reports for them a condo a camaro and note receivable were assets added in the year following no information was submitted about who is using the condo and the vintage car per revproc_2008_9 m did not demonstrate to the satisfaction of the service that it qualifies for exemption pursuant to the section of the internal_revenue_code under which exemption is claimed the assets begin to produce income was formed to hold and manage assets m has not made any distributions to n and does not plan to do so until the only function of mistohold interest in o which applicant's position m asserts that they qualify for exemption under sec_501 of the code because it was formed for charitable purposes and its net earning do not inure to the benefit of private individuals the purpose of m is to hold assets and distribute the income from those assets to qualified charities which is consistent with reg a -4 income has been produced and this is why nothing has been distributed to qualified charities their position is that this lack of income does not disqualify it as a charitable_organization they refer to sec_2 and of the trust agreement that states that distributions will be made when it receives income furthermore the organization can't sell the limited_liability company’s assets liability company require the concurrence of both managers the organization has a far less than a controlling_interest in the limited the limited_liability_company is not controlled by m and such the sell would thus far m has been holding assets but no m has taken the position that an appraisal of the property and a detailed description of the property are not relevant to the determination property rather its assets are a member interest in a limited_liability_company which holds various assets including real_property m states that it does not hold any interest in real m also holds the position that its activities do not benefit members of the c family because no distributions have been made to any members of c family commissioner ustc ct_cl 846_f2d_78 fed cir in which exemption they cited easter house v letter cg was denied because a substantial part of the earning for easter house inured to the president of the organization in the form of loans to related_organizations the common theme in m's position is that there is no proof that the members of c family benefit they continuously refer to the trust document that states no part of from the activities of m the net earning of this trust shall inure to the benefit of any individuals trust when asserting that they are not controlled by c family referring to sec_4 all authority and power is held by the board sec_4 the board cannot be controlled by disqualified persons sec_4 the board must always include a majority of the members of the primary charity's board m also refers to the service’s position the two issues are whether m is operated exclusively for charitable purposes and has m on the first issue demonstrated that no part of its net_earnings inure to the private individuals the major reason that m is not operated for charitable purposes is that nothing has been donated to other c organizations because they have not earned any income current plan is to hold the assets until the market improves in hopes that this will increase their earning their no one can say for certain when m will receive income or if it ever will holding assets and distributing the income at some future date qualify them for exempt status simply because it is in the trust having this language in the trust agreement is required to pass the organizational_test describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated a mere restatement of the sources or receipts and the nature of contemplated expenditures purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement see revproc_2008_9 for an organization to pass the operational_test is must fully m's position is that one area of disagreement is whether m should submit an appraisal and a detailed description of since the assets are not producing income it is very important that the the property in question without this information the service is aware of exactly of the type of assets it has an interest service is in the dark if m will ever produce any income we are concerned that the property may be worthless or overstated that c family members may be living on the property or otherwise using the property for personal_use or that there are other scenarios that would have an effect on our determination issues could be resolved if m would have provided us with this information a number holding assets until the market conditions improve is not an exempt_purpose m states that they are being denied exemption because they have not produced any income however this is not the case qualified charities and they have no intention to do so until they receive some income they are being denied exemption because they are not making distributions to regarding the second issue m has not demonstrated that their activities do not inure to letter cg m is under the assumption the since no distributions have been made to members of c family any member of the c family then there is no inurement this is completely erroneous inurement can come in many different forms private individual in which the individuals appears to receive a disproportionate share of the benefits of the exchange relative to the charity serve presents an inurement issue transactions may include assignment_of_income compensation arraignments sales or exchange of property and gifts with retained_interest any transaction between an organization and a such m must show to the service's satisfaction that the activities do not inure to the benefit of private individuals see salvation navy v commissioner supra and bubbling well church of universal love v commissioner supra that no distributions have been made to the c family m's only argument is the language in the trust and m also discounts the fact that ac and bc took a tax deduction in and nothing has ever been distributed for c purposes deduction they continue to control the very assets that they contributed and20_ fordollar_figure not only did they take a tax the income will come from the sale of the assets since m only owns interest in the limited_liability_company it has no control_over when the assets will be sold with the other two members m states that only one of the members is affiliated with m what they do not say is that the one that is not affiliated with m is bc the father of ac and is also a donor to the trust made by ac and bc and not by e f by holding the assets until more favorable conditions will benefit ac and bc more than m because they hold a combine interest of in o therefore the income that m will receive will come from the decisions this contro resides determination based on the information provided in form_1023 and supporting documentation we conclude that you are not operated exclusively for purposes described in sec_501 of the code you have not conducted any activities that are described in sec_501 and you have not shown that your assets do not inure to any private individuals therefore your organization does not qualify for exemption under sec_501 of the code issue - sec_509 introduction we have also considered m’s application_for supporting_organization status non-private foundation status under sec_509 of the code in the event that it would qualify for exemption under sec_501 our conclusion regarding private_foundation classification under sec_509 of the code is based on a number of factors discussed in the following material sec_509 of the code provides that the term private_foundation does not include an organization which letter cg a is organized and at all times thereafter is operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one or more specified organizations described in sec_509 or b is operated supervised or controlled by or in connection with one or more organizations described in sec_509 or and c is not controlled directly or indirectly by one or more disqualified persons as defined in sec_4946 other than foundation managers and other than one or more organizations described in sec_509 or sec_509 in effect describes as a public charity an organization which is organized and at all times thereafter is operated exclusively for the benefit of to perform the functions of or carries out the purposes of one or more specified organizations described in sec_509 or sec_509 in our discussion of these issues we are cognizant of the fact that at all times m asserts its qualification under sec_509 under the supervised and controlled in connection with’ relationship provided in sec_1_509_a_-4 of the income_tax regulations for an organization to qualify as a supporting_organization it must pass the organizational and operational_test a a relationship_test a b and a control test a c your organization does not pass the operational_test the relationship_test and control test ' operational_test sec_509 of the code provides that in order to qualify under sec_509 an organization at all times thereafter is operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one or more specified organizations described in sec_509 or reg a -4 b provides that in order to qualify as a supporting_organization an organization must be both organized and operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one of more specified publicly supported organizations if as a supporting_organization it fails to meet either the organizational_test or operational_test it cannot qualify reg a -4 e provides that a supporting_organization will be regarded as operated exclusively to support one or more specified public supported_organization only if solely in activities which support or benefit the specified publicly supported organizations it engages application of operational_test you are not operated exclusively for the benefit of specified publicly supported organizations as required by sec_509 ac and bc took charitable deductions of dollar_figure for tax letter cg and __ but nothing was ever given to the supported_organization in years ending addition our records show to date that n the specified supported_organization is not a public charity described in sec_509 or sec_509 of the code was formed to benefit n the supported_organization m has not demonstrated that it relationship_test sec_509 of the code provides that in order to qualify under sec_509 an organization must be operated supervised or controlled by supervised or controlled in connection with or operated in connection with one or more publicly supported organizations reg a -4 f i provides that the supporting_organization will be responsive to the needs or demands of one or more publicly supported organizations and ii the supporting_organization will constitute an integra part of or maintain a significant involvement in the operations of one or more publicly supported organizations reg a -4 h provides that supervised or controlled in connection with’ as used in sec_509 presupposes a substantial degree of direction over the policies programs and activities of the supporting_organization by one or more publicly supported organizations the relationship requires that there must be common supervision or control by the persons supervising or controlling both the supporting_organization and the supported organizations to insure that the supporting_organization will be responsive to the needs and requirements of the publicly_supported_organization therefore in order to meet such requirement the control and management of the supporting_organization must be vested in the same persons that control and manage the publicly_supported_organization application of the relationship_test on schedule d m indicated that it is a type supporting_organization which is supervised or the relationship is comparable to a controlled in connection with the supported_organization brother sister relationship sec_1_509_a_-4 of the regulations provides that the supporting_organization will be responsive of the needs and demands of the publicly_supported_organization and will constitute an integral part of or maintain a significant involvement in the operations of the publicly_supported_organization with’ as used in sec_509 presupposes a substantial degree of direction over the policies programs and activities of the supporting_organization by the publicly_supported_organization also organizations that are supervised or controlled in connection as described in sec_1 a -4 h of the regulations the control and management of the supporting_organization must be vested in the same persons who control and manage the m has not demonstrated n's direction over the policies publicly_supported_organization programs and activities of m so that the activities are directed for exclusively charitable and public purposes or that m is responsive to the needs of a publicly supported charity letter cg in it sec_32 months of existence m has not made any distributions to n there have been no distributions n has not shown that they that have resulted in exclusively charitable activities for the public have taken any direction over the activities of m for the exclusive benefit of the public the only activity that they have taken is to document annual memoranda in lieu of an annual board meeting in which they decided not to make any charitable distributions since the trust did not produce any income the managers of o are father and son ac bc as managers they provide direction and control directly and indirectly over the applicant m operated exclusively as a public charity that had a significant voice in m’s operations that it would have exerted control and required charitable activity and distributions to be made to its organization if n had a publicly represented board and conclusion based on the facts m has failed to meet the relationship_test of sec_509 of the m has not demonstrated that n is a publicly supported charity that controls m's policies code programs or activities for the exclusive benefit of the public as described in sec_1 a - h of the regulations the control and management of the supporting_organization must be vested in the same persons that control and manage the publicly_supported_organization failed to demonstrate n has exercised a substantial degree of direction over m's policies programs and activities for exclusively charitable purposes m control test sec_509 in effect provides that public charity status under sec_509 is precluded for an organization that is controlled directly or indirectly by one or more disqualified persons as defined in sec_4946 other than foundation managers and other than one or more organizations described in paragraph and sec_4946 of the code defines a disqualified_person as a substantial_contributor to the foundation sec_507 includes in its definition of a substantial_contributor the creator of the trust therefore a is a disqualified_person sec_1_509_a_-4 of the regulations provides that if a person who is a disqualified_person with respect to a supporting_organization such as a substantial_contributor to the supporting_organization is appointed or designated as a foundation_manager of the supporting_organization by a publicly supported beneficiary organization to serve as the representative of such publicly_supported_organization then for purposes of this paragraph such person will be regarded as a disqualified_person rather than as a representative of the publicly_supported_organization an organization will be considered controlled for purposes of sec_509 if the disqualified persons by aggregating their votes or positions of authority may require such organization to perform any act which significantly affects its operations or may prevent such letter cg organization from performing such act this includes but is not limited to the right of a substantial_contributor or his spouse to designate annually the recipients from among the publicly supported organizations of the income attributable to his contribution to the supporting_organization revrul_80_207 1980_2_cb_193 held that for purposes of classification as a supporting_organization under sec_509 of the code an employee of a corporation owned over percent by a substantial_contributor a disqualified_person will be considered under the indirect control of a disqualified_person for purposes of the control test application of the control test m is controlled directly and indirectly by disqualified_person s sec_509 in effect provides that public charity status under sec_509 is precluded for an organization that is controlled directly or indirectly by one or more disqualified persons as defined in sec_4946 other than foundation managers and other than one or more organizations described in paragraph and_ all pertinent facts and circumstances will be taken into consideration in determining whether a disqualified_person does in fact control the supporting_organization acisa substantial_contributor and disqualified_person as defined by sec_4946 of the code sec_4 of the trust document states that the board will consist of one family_member who is a c and two independent members sec_4 of the trust states that the at all times the original donor or other disqualified persons as defined by sec_4946 of the code shall not control the board however based on the facts submitted it appears in addition to the level of direct control can exert and m also remains indirectly controlled by a c and the interests of the c family a cg the two independent board members shall be appointed by a majority vote of the remaining however if you remove the two members of the board other than the c family members independent board members the only other member that is left is ac and unknown is who selected d and the only activity that d e have demonstrated participation is through the ac manages m's assets as outlined in the memoranda in lieu of the annual board meetings is owned by a sec_3_1 of the trust document mowns interest in o the other c and bc the assets that they owned consist of land buildings and furnishings article of based on the the operating_agreement for o structure of o m and n lack the power and independence to determine how these assets are managed family are in a position of authority by controlling the direction and control of the llc's assets and therefore m’s interests even though a c is only one of m's three board members he and his father of the c states that it will be managed by ac andb c sec_4 of the trust states that the membership of the board shall at all times include a majority of the board members of the primary charity shall in all other ways satisfy the supervised or controlled in connection with requirements of sec_1_509_a_-4 time as m n is the primary charity and submitted their application_for exemption at the same n requested exemption as a public charity described in sec_509 of the letter cg code the service has tentatively proposed that n would not qualify for exemption as a public charity but would qualify as a private_foundation revrul_80_207 provides the following analysis because one of the organization's directors is a qualified_person and neither the disqualified_person nor any other director has a veto power over the organization's actions the organization is not directly controlled by a disqualified_person under sec_1_509_a_-4 of the regulations however in determining whether an organization is indirectly controlled by one or more disqualified persons one circumstance to be considered is whether a disqualified_person is in a position to influence the decisions of members of the organization's governing body who are not themselves disqualified persons is in a position of influence it is apparent that a c the corporation and manage all of the assets there is no evidence that the supported_organization has control of the policies programs activities or funds of the organization n the supported_organization is also controlled by ac and bc creator of the organization a c and his father b c directly and indirectly control the supporting_organization based on the facts of the case the ac and bc provide all of the funding for conclusion based on the facts of the case the creators of the organization a c and b c directly and indirectly contro the supporting_organization although two of the three directors are independent directors you have not shown that they have taken an active and controlling role in m's programs policies and activities therefore m does not meet the control test applicant’s position m holds the position that they pass the organizational_test relationship_test and the control test and should qualify as a type supporting_organization described in sec_509 of the code independent board members they will make distributions when they sell the assets and they are controlled by the two m states that they pass the operational_test because they will distribute funds to qualified charities when it will earn income and the absence of income will not disqualify it from qualifying for exemption m asserts that it passes the relationship_test because the board members are the same board members as the supported_organization as specified in sec_4 of the trust they also deny that o controls the m because only one of the managers of o is on m's board m maintains that they pass the contro test because two of the three board members are independent of c family and revrul_80_207 does not apply because the independent letter cg board members control m service’s position m m did not include any new facts or law and plan to continue to operate in the same manner on page in the made several statements to substantiate our position that o does controls m paragraph highlighted application of law paragraph in their letter they state the limited_liability_company is not controlled by the organization and such a sale would require the concurrence of both managers only one is affiliated with the organization the letter's conclusion that the organization could make the limited_liability_company sell its assets is inconsistent with the organization's interest in the limited_liability_company the limited_liability company's operating_agreement and the law applicable to the governance of the limited_liability_company at the top of page m interest in the limited_liability_company and does not control its management or their business decisions states the organization holds a minority of the member m has no voice in when the assets of o will be sold therefore they have no control when they will receive income and be able to conduct tax exempt_activities all of these decisions will be made by ac and bc who are the controlling managers of o monlyholdsa and does not have the authority to sell any assets assets but declined furthermore o has had offers to sell the interest in m’s statement how the independent board members are selected or what happens if the are both remove has nothing to do with the contro test is completely erroneous the board has everything to do with the control test they might be independent of c family but they have no voice when assets are sold which is vital to their exempt_purpose this control is which ac and bc indirectly by disqualified persons this leads to a very simply conclusion that m is controlled directly and the selection of determination - issue based on our analysis of your actual and proposed activities and in light of the applicable law we have determined you do not qualify for exclusion from private_foundation_status under sec_509 of the code you did not pass the operational_test relationship_test and the control test summary even if we determine that you were described in sec_501 you would be a based on our analysis of your activities and in light of the applicable law we have determined you do not qualify for tax exemption as an organization described in sec_501 of the code private_foundation and not a supporting_organization under sec_509 of the code you must file federal tax returns letter cg you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete the declaration must be signed by an officer or trustee of the organization who has personal knowledge of the facts your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if if you do not intend to protest this determination you do not need to take any further action we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address letter cg mail to deliver to if you fax you may fax your statement using the fax number shown in the heading of this letter your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert s choi director exempt_organizations rulings agreements enclosures publication letter cg


significant index no department of the treasury internal fevenue service washington d c tax_exempt_and_government_entities_division apr j tep ralal re substitute mortality_table ruling taxpayer plans for which substitute mortality tables are requested plani plan2 dear plan5 plan3 plan4 this letter is to inform you that your request to use substitute mortality tables for making computations under sec_430 of the internal_revenue_code the code’ for the above plans has been granted with respect to the populations specified in this letter this ruling is effective for a period of plan years beginning with the plan_year commencing janaury sec_430 of the code and sec_303 of the employee_retirement_income_security_act_of_1974 ' your request has been granted in accordance with this approval applies to the following specific populations e e plan sec_1 through combined - male participants including disabled participants plan sec_1 through combined - female participants including disabled participants in granting this approval we have only considered whether the substitute mortality rates were developed in accordance with sec_1_430_h_3_-2 of the treasury regulations regulations and revproc_2017_55 accordingly we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request permission is hereby granted to use the substitute mortality rates shown in the table below for the above plans approved for use beginning with the plan_year commencing january substitute mortality tables base_year male female participants participants age male female participants participants age male female age participant sec_82 participant sec_83 through december i with a base_year of the above rates were develoned based on an experience study period from january ’ the rates were calculated by adjusting the applicable standard mortality tables in sec_1_430_h_3_-1 of the regulations using the mortality ratio and credibility weighting factor individually determined for each population as shown in the table below male participants mortality ratio credibility weighting factor female participants the internal_revenue_service has reviewed the substitute mortality rates and supporting information and has determined that based on the information submitted the rates were developed in accordance with sec_1_430_h_3_-2 of the regulations and revproc_2017_55 the above rates must be applied on a generational basis as provided in sec_1_430_h_3_-2 of the regulations in order to continue using the substitute mortality tables for making computations under sec_430 of the code the following information must be provided by the october immediately following the end of each plan_year beginning with the due october population have changed materially from the population that existed during the experience study period most notably nonannuitants and further changes can be expected this condition is required because certain segments of the plan_year the number of actual deaths during the experience study period used to develop the substitute mortality tables and the beginning and ending dates of the experience study period a table showing the number of expected deaths and actual deaths reported through the year separately for each year beginning with deaths during preceding the most recent actuarial valuation and in total a table similar to the stability demonstration required under section of revproc_2017_55 showing the average number of participants in the population included in the experience study and the number of participants in the population as of the end of each plan_year beginning with december actuarial valuation expressed both as a headcount and as a percentage of the average number of participants in the experience study through the date immediately preceding the most recent a table showing a comparison of i the average ages and ii percentage of the population by the following monthly single_life_annuity brackets under dollar_figure between dollar_figure and dollar_figure between dollar_figure to dollar_figure between dollar_figure to dollar_figure between dollar_figure and dollar_figure and dollar_figure and over for the population in the experience study and at the end of each plan_year beginning with december through the date immediately preceding the most recent actuarial valuation the table should also show the average age and average benefit amount for the population in total for both the experience study data and at the end of each plan_year beginning with december immediately preceding the most recent actuarial valuation through the date an explanation of any material changes in the population and a certification by the enrolled_actuary for the plan as to whether the substitute mortality_table is accurately predictive along with any additional demographic or other information to substantiate this claim a certification signed by the enrolled_actuary stating that a the enrolled_actuary is current with educational requirements set forth by the joint board for the enrollment of actuaries as well as any other actuarial designations asserted b the enrolled_actuary was personally involved in the determination that the c substitute mortality_table is still accurately predictive and provides the actuary’s best estimate for the plan in determining that the substitute mortality_table is still his or her best estimate the enrolled_actuary took into consideration the effect of business combinations plan mergers or spinoffs and settlements other risk transfers and other events that would have similar effects on the relevant populations and d the enrolled_actuary has the specific knowledge and experience to make the judgements set forth above and attests to these representations this information must be provided to david m ziegler or to another individual designated by the service by fax at or to the following address internal_revenue_service attn mr david m ziegler te_ge se t ep ra t a2 nca-630 constitution ave nw washington dc failure to provide this information by the due_date may result in the requirement that the standard mortality tables must be used for purposes of sec_430 of the code beginning with the plan_year during which the deadline for providing this information is missed your attention is called to sec_430 of the code and sec_1 h - d of the regulations which describe the circumstances in which the use of the substitute mortality_table will terminate before the end of the 10-year period described above in general the substitute mortality tables can no longer be used as of the earliest of fora plan using a substitute mortality_table for only one gender the first plan_year for which there is full or partial credible mortality information with respect to the other gender that had lacked credible mortality information unless an approved substitute mortality_table is used for that gender the first plan_year in which the plan fails to satisfy the requirements of sec_1_430_h_3_-2 of the regulations regarding the requirement that other plans and populations in the controlled_group must also use substitute mortality tables unless it can be demonstrated that they do not have credible mortality information taking into account the transition_period for newly affiliated companies in sec_1_430_h_3_-2 of the regulations the second plan_year following the plan_year for which there is a significant change in individuals covered by the plan as described in sec_1_430_h_3_-2 of the regulations the plan_year following the plan_year in which a substitute mortality_table used for a plan population is no longer accurately predictive of future mortality of that population as determined by the commissioner or as certified by the plan’s actuary to the satisfaction of the commissioner or the date specified in guidance published in the internal_revenue_bulletin pursuant to a replacement of mortality tables specified under sec_430 of the code and sec_1_430_h_3_-1 of the regulations other than annual updates to the static mortality tables issued pursuant to sec_1_430_h_3_-1 of the regulations or changes to the mortality improvement rates pursuant to sec_1_430_h_3_-1 of the regulations this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan years for which the substitute mortality tables are used please note the information that is required to be attached to schedule sb actuarial information in accordance with the instructions to that form we have sent a copy of this letter to your authorized representatives pursuant to a power_of_attorney on file in this office and to the manager ep classification in columbus ohio and to the manager ep compliance unit in chicago illinois if you have any questions regarding this matter please contact id at sincerely cc david m ziegler manager employee_plans actuarial group