internal_revenue_service number release date index number --------------------------------------------------------- ------------------------------------ -------------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ----------------- telephone number --------------------- refer reply to cc tege eb hw plr-122568-09 date date legend city ------------------------------------------------------------------------------------------------------ ------------------------- state ----------- trust ---------------------------------------------------------------- plans ---------------------------------------------------------------------------- dear ------------------ facts city is a municipality and political_subdivision of state with the authority to lay and assess property and other taxes as well as to conduct governmental functions such as those dealing with zoning and public health and safety it is governed by a mayor and eight aldermen who are elected by city residents a fulltime city administrator under the direction of the mayor and board_of aldermen is responsible for the day-to-day operations and management of city’s professional staff city sponsors health benefits plans providing comprehensive coverage for city employees retirees and their eligible dependents employees who retire directly from city service may continue coverage on a contributory basis under one of two post- retirement medical_plans the plans retirees under the age of are covered through a self-insured plan similar to the one for current employees for retirees who have reached age or are eligible for medicare city offers a medicare supplemental plan underwritten by a health insurance_company retirees contribute to plans on an plr-122568-09 after-tax basis under plans a retiree’s contribution to the cost of the plan is based on length of service with retirees having more years_of_service paying a smaller percentage of plan costs city does not provide benefits under plans to individuals who do not qualify as a retiree’s spouse or dependent under sec_152 of the internal_revenue_code the code retired employees may not make pre-tax contributions to pay for medical benefits neither active employees nor retirees have the option to cash_out amounts in plans ie eligible retirees may not receive cash or other taxable benefits in lieu of post- retirement medical benefits plans do not permit conversion of sick or vacation benefits to retiree medical benefits all retiree medical benefits terminate upon the death of the retired employee and any dependents city established trust to pay for medical_expenses of its former employees and dependents the trustee is a private trust company unrelated to city trust assets are to be used exclusively to provide post-retirement health benefits under plans trust assets which come from city and participant contributions may be used to pay for plans and trust operations trust assets may not be used to pay for life_insurance or other non-health benefits city maintains the authority to determine all benefit payments appoint investment managers and take all actions necessary to administer trust and plans trust assets are to be managed by city or by an independent investment manager designated by city the trust agreement may be amended at any time except that no amendment may authorize any part of trust corpus or income to be used for or diverted to purposes other than the exclusive benefit of plans’ participants or the payment of trust expenses trust is irrevocable however if all liabilities owed to plans’ participants are satisfied or if plans and plans’ benefits have been terminated and there is any balance remaining it must be applied for the exclusive benefit of plans’ participants to provide post-retirement medical benefits law and analysis sec_115 of the code provides that gross_income does not include income derived from any public_utility or the exercise of an essential_governmental_function and accruing to a state or a political_subdivision of a state in revrul_77_261 1977_2_cb_45 income from an investment fund established under a written declaration of trust by a state for the temporary investment of cash balances of the state and its participating political subdivisions was excludable from gross_income for federal_income_tax purposes under sec_115 the ruling indicated that the statutory exclusion was intended to extend not to the income of a state or municipality resulting from its own participation in activities but rather to the income of a corporation or other entity engaged in the operation of a public_utility or the performance of some governmental function that accrued to either a state or municipality the ruling stated that it may be assumed that congress did not desire in any way to restrict a plr-122568-09 state’s participation in enterprises that might be useful in carrying out projects that are desirable from the standpoint of a state government and which are within the ambit of a sovereign properly to conduct the ruling concluded that because the participating political subdivisions have an unrestricted right to receive in their own right their proportionate share of the investment fund’s income as it is earned the fund’s income accrues to them within the meaning of sec_115 in revrul_90_74 1990_2_cb_34 the service determined that the income of an organization formed funded and operated by political subdivisions to pool various risks arising from their obligations regarding public liability workers’ compensation or employees’ health is excludable from gross_income under sec_115 in this ruling private interests did not materially participate in the organization nor did they benefit more than incidentally from the organization trust was established as a separate_entity by ordinance pursuant to the exercise of city’s legislative power by payment of medical_expenses and health insurance premiums trust provides health benefits to retirees and their eligible dependents providing such benefits to former public employees constitutes the performance of an essential_governmental_function within the meaning of sec_115 see revrul_90_74 and revrul_77_261 the provision of health benefits to participating retirees and their dependents satisfies a city obligation to provide those benefits thus the income of the trust accrues to the benefit of the city which is an instrumentality of the state no private interests participate in or benefit from the operation of trust other than as providers of goods and services the benefit to retired city employees is incidental to the public benefit see revrul_90_74 sec_61 of the code and sec_1_61-21 of the income_tax regulations provide that except as otherwise provided in subtitle a of the code gross_income includes compensation_for services including fees commissions fringe_benefits and similar items however sec_106 of the code provides that gross_income of an employee does not include employer-provided coverage under an accident_or_health_plan sec_1_106-1 of the regulations provides that the gross_income of an employee does not include contributions which his employer makes to an accident_or_health_plan for compensation through insurance or otherwise to the employee for personal injuries or sickness incurred by him his spouse or his dependents as defined in sec_152 the employer may contribute to an accident_or_health_plan either by paying the premium or a portion of the premium on a policy of accident_or_health_insurance covering one or more of his employees or by contributing to a separate trust or fund including a fund referred to in sec_105 which provides accident and health benefits directly or through plr-122568-09 insurance to one or more of his employees however if the insurance_policy trust or fund provides other_benefits in addition to accident or health sec_106 applies only to the portion of the contributions allocable to accident or health benefits coverage provided under an accident_and_health_plan to former employees and their spouses and dependents is excludable from gross_income under sec_106 see revrul_62_199 1962_2_cb_32 revrul_82_196 1982_2_cb_53 sec_105 provides that except as otherwise provided in sec_105 amounts received by an employee through accident_or_health_insurance for personal injuries or sickness shall be included in gross_income to the extent such amounts are attributable to contributions by the employer which were not includible in the gross_income of the employee or are paid_by the employer sec_105 provides that except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 relating to medical_expenses for any prior taxable_year gross_income does not include amounts referred to in subsection a if such amounts are paid directly or indirectly to the taxpayer to reimburse the taxpayer for expenses_incurred by him for the medical_care as defined in sec_213 of the taxpayer his spouse and his dependents as defined in sec_152 of the code based on the information submitted and representations made we conclude as follows the income of trust is derived from the exercise of an essential_governmental_function and will accrue to the political_subdivision of a state for purposes of sec_115 consequently we rule that trust’s income is excludable from gross_income under sec_115 of the code contributions paid to plans and payments made from plans which are used exclusively to pay for the accident or health coverage of retired employees their spouses and dependents as defined in sec_152 of the code are excludable from the gross_income of retired employees and retired employees’ spouses and dependents under sec_106 and sec_105 of the code no opinion is expressed as to the classification of trust as a_trust for federal tax purposes further no opinion is expressed concerning the federal tax consequences of plans or trust under any other provision of the code other than those specifically stated herein in particular sec_3 of revproc_2009_1 2009_1_irb_107 provides that the service will not issue a ruling concerning whether a self-insured_medical_reimbursement_plan satisfies the requirements of sec_105 for a plan_year accordingly no opinion is expressed concerning whether plans satisfy the nondiscrimination requirements of sec_105 of the code and sec_1_105-11 of the regulations plr-122568-09 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely harry beker chief health and welfare branch office of division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service number release date index no cc dom p si - plr-116753-99 date x a b c d d1 year dear this responds to your letter dated date and subsequent correspondence submitted by x’s authorized representative on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 of year the shareholders of x are a b c and d b as x's secretary represents that the shareholders of x intended for x to elect to be an s_corporation from year its first taxable_year x relied on its attorneys to file the necessary documents for purposes of obtaining s_corporation status however the attorneys believed that a shareholder of x was going to prepare form_2553 election by a small_business_corporation therefore due to a mis-communication the form_2553 was not filed sec_1362 of the code provides that if-- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's first taxable_year year accordingly provided that x makes an election to be an s_corporation by filing a form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically ruled upon above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provisions of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours h grace kim branch office of the assistant chief_counsel passthroughs and special industries assistant to the chief enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c ta x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n sin toll free contact number name of qualified_subsidiary employer_identification_number person to contact and id number number release date se t eo ra tpu pe 3r3 date date dear ------------ this letter is in reply to your request for a ruling concerning the status for federal tax purposes of your qualified_subsidiary x your exemption as a title-holding corporation under sec_501 of the internal_revenue_code was recognized by our exemption_letter to you dated y your qualified_subsidiary was formed by you for the purpose of holding title to real_property the information submitted shows that percent of the stock of your subsidiary has been held by you at all times during its existence sec_501 of the code provides for the exemption from federal_income_tax of title-holding corporations or trusts that hold title to real_property and otherwise meet the requirements of sec_501 sec_501 of the code provides that a corporation may be a qualified_subsidiary of an exempt title-holding organization if percent of its stock is held at all times during such corporation's existence by an exempt title-holding organization the code further provides that the qualified_subsidiary will not be treated as a separate corporation for federal tax purposes in addition all of the qualified subsidiary's assets liabilities and items of income deduction and credit will be treated as belonging to the exempt parent title-holding organization based upon the information provided we rule that the above-named subsidiary is your qualified_subsidiary corporation as described in sec_501 of the code therefore you and your qualified_subsidiary shall be treated for federal tax purposes as a single entity as long as you and your qualified_subsidiary continue to meet all of the requirements of sec_501 your activities and those of your qualified_subsidiary corporation will be considered in the aggregate to determine whether you continue to qualify for exempt status consequently any activity conducted by a qualified_subsidiary corporation that is not permitted under sec_501 may cause you to lose your exempt status your qualified_subsidiary corporation is not required to file federal tax and information returns that are generally required under federal tax law since it is treated as part of its exempt parent title-holding organization as the exempt parent title-holding organization you are required to file all federal returns including form_990 return of organization exempt from income_tax required by sec_6033 of the code using your employer_identification_number the form_990 must include financial information applicable to your qualified_subsidiary corporation the information pertaining to your qualified_subsidiary corporation should not be listed separately but should be aggregated with the information applicable to you therefore you and your qualified_subsidiary corporation must be on the same annual_accounting_period form_990 should be filed with the ogden service_center ogden ut when form_990 return of organization exempt from income_tax is filed please provide the information listed below with your return the name address and employer_identification_number if any of each qualified_subsidiary a statement that you have held percent of the stock of each named qualified_subsidiary at all times during the subsidiary's existence the name and address of any previously qualified_subsidiary and an explanation as to why the subsidiary is no longer a qualified_subsidiary a statement describing any changes during the tax_year in the purposes character or method of operation of each qualified_subsidiary please use the employer_identification_number indicated in the heading of this letter on all returns you file and in all correspondence with the internal_revenue_service your qualified subsidiaries should not apply for their own employer_identification_number because this letter could help resolve any questions about your exempt status you should keep it in your permanent records if you have any questions about this letter call the toll free number indicated in the heading of this letter or send correspondence to internal_revenue_service te_ge customer service p o box cincinnati oh please see enclosed information for organizations exempt under sections other than c for some helpful information about your qualified subsidiary’s responsibilities as an exempt_organization enclosure information for organizations exempt under sections other than c lois g lerner director exempt_organizations rulings agreements ronald j shoemaker sincerely


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date oct -9 2pni ll a - oo- oo employer_identification_number contact person identification_number telephone number t eo b4 dear sir or madam this in response to your letter dated date in which you requested certain rulings with respect to a proposed transfer of assets from b to c b is exempt under sec_501 of the internal_revenue_code and is classified as a private_foundation under sec_509 we have determined that c is tax-exempt under sec_501 of the code and have classified it as a private_foundation under sec_509 in separate correspondence - the current directors of b are d e and f the directors of c are d and e i b proposes to transfer one-half of its assets to c the transferred assets will form part of c’s capital endowment b will continue in existence after the transfer b will carry out this proposed transfer only if b and c receive favorable rulings pursuant to this request and c is recognized as tax-exempt under sec_501 c of the code and is classified as a private_foundation under sec_509 b has not notified the service that it intends to terminate its private_foundation_status nor has b ever received notification that its status as a private_foundation has been terminated sec_507 of the code provides for the voluntary and involuntary termination of private a foundation status it states in part that except for transfers described in sec_507 an organization's private_foundation_status will be terminated only if the organization notifies the service of its intent to terminate or there have been either willful repeated acts or failures to act or a willful and flagrant act or failure to act giving rise to liability for tax under chapter sec_507 of the code provides that when a private_foundation transfers assets to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as a new organization sec_507 of the code imposes a tax on an organization that terminates its private_foundation_status under sec_507 of the code sec_1_507-1 of the income_tax regulations provides that neither a transfer of all of the assets of private_foundation nor a significant disposition of assets as defined in sec_1_507-3 by a private_foundation whether or not any portion of such disposition of assets is made to another private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 of the code unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 is applicable sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this subsection the transferee organization shall not be treated as a newly created organization a transferee organization to which this paragraph applies shall be treated as possessing those attributes and characteristics of the transferor organization which are described in subparagraphs and of this paragraph sec_1_507-3 the regulations provides that if a transferor private_foundation transfers assets to a private_foundation which is effectively controlled within the meaning of sec_1_482-1a directly or indirectly by the same person or persons who effectively control the transferor foundation the transferee foundation will be treated as if it were the transferor foundation for purposes of sec_4940 through and through of the code where a private_foundation transfers less than all of its assets to a transferee foundation such transferee shall be treated as if it were the transferor in the proportion which the fair_market_value of the assets less encumbrances transferred to such transferee bears to the fair_market_value of the assets less encumbrances of the transferor immediately before the transfer sec_1_507-3 of the regulations provides in pertinent part that a transfer under sec_507 includes any significant disposition of or more of the transferor private foundation’s assets to one or more private_foundations in one or more related dispositions sec_1_507-4 of the regulations provides that the tax on termination of private_foundation classification imposed by sec_507 of the code generally does not apply to a transfer of assets under sec_507 of the code because b intends to transfer more than percent of the fair_market_value of its net assets to c the transfer will constitute a significant disposition of b's assets the transfer will thus be a transfer between private_foundations within the meaning of sec_507 of the code because a transfer of assets as described in sec_507 will not cause a termination of an organization’s private_foundation_status the transfer of b’s assets to c will not terminate b’s status as a private_foundation b will not terminate its status as a result of this transaction therefore the transfer of b’s assets to c will not result in the imposition of tax under sec_507 of the code because b and c are effectively controlled by the same persons for purposes of chapter of the code and sec_507 through of the code c will be treated subsequent to the transfer of b's assets as if it were b in the proportion which the fair_market_value of the assets less encumbrances transferred bears to the fair_market_value of b’s assets less encumbrances immediately before the transfer thus c can succeed to b's qualifying distributions carryover for purposes of sec_4942 of the code and in proportions determined in accordance with sec_1_507-3 of the regulations consistent with succeeding to b’s tax_attributes accordingly based on the information furnished we rule as follows the proposed transfer will be a transfer described in sec_507 of the code the proposed transfer will not result in a termination of b’s classification as a private_foundation under sec_507 of the code the proposed transfer will not result in the imposition on either b or c of the private_foundation termination_tax under sec_507 of the code following the transfer c will succeed to the aggregate tax benefits of b in proportion to the value of assets received from b we are informing the ohio te_ge office of this action please keep a copy of this ruling in your organization’s permanent records this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely bereta v srck gerald v sack manager exempt_organizations technical group joyv


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 b03 plr-121868-17 date december x ------------------------------------------------- ----------------------- ----------------------- --------------------- --------------------- ------ ------ --------------------------- date date date year year a partnership --------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- llc state ---------------------------------- ------- dear ----------------- this letter responds to your letter dated date and subsequent correspondence requesting relief under sec_1362 of the internal_revenue_code facts the information submitted states that x was organized on date as a corporation under the laws of state effective date x elected to be treated as an s_corporation as of year a was a shareholder of x also as of year a and a’s spouse and were the sole owners of llc a limited_liability_company treated as a disregarded_entity for federal tax purposes a a’s spouse and llc were the owners of partnership a state limited_partnership during year a requested that x transfer his shares in x to partnership even though x’s articles of incorporation and bylaws prohibited this transfer x issued a stock certificate in the name of partnership on date during year x discovered that it had plr-121868-17 inadvertently made this transfer and immediately thereafter rescinded the transfer and restored ownership of the transferred shares to a x represents that x and its shareholders intended for x to remain an s_corporation effective date and that x has filed all returns consistent with x’s status as an s_corporation since date x further represents that during the years at issue all income of both llc and partnership attributable to x was allocated to the individual partners as though the individual partners owned the x stock directly x and its shareholders agree to make any adjustments required as a condition of obtaining relief under the inadvertent_termination_rule as provided in sec_1362 of the code law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation which does not a have more than shareholders b have as a shareholder a person other than an estate and a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 provides than an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 further provides that the termination shall be effective on and after the date of cessation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary plr-121868-17 conclusion based on the facts submitted and the representations made we conclude that x’s s_corporation_election may have terminated on date when x issued a stock certificate in the name of partnership however we conclude that any such termination was inadvertent within the meaning of sec_1362 therefore x will be treated as continuing to be an s_corporation from date and thereafter provided x’s s_corporation_election was otherwise valid and apart from the inadvertent termination ruling described above has not otherwise terminated under sec_1362 except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation the ruling contained in this letter is based upon information and representations submitted by the taxpayer and is 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 this request it is subject_to verification on examination this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely bradford r poston special counsel office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number u i l no washington dc person to contact telephone number refer reply to cc psi plr-116683-00 date date legend company state shareholder a b dear this letter responds to a letter dated date and subsequent correspondence 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 currently has one shareholder shareholder it is represented that company has intended to be an s_corporation since its inception company and all of its shareholders reported consistent with a valid s election for all taxable years since company’s inception however company discovered that its s election had not been timely filed company requests a ruling under sec_1362 that its sec_1362 election will be treated as timely made for its taxable_year that begins on b 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 plr-116683-00 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 b however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of b 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer 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 donna m young acting chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index numbers -------------------------------------------- ------------------------------------------ --------------------------------- -------------------------------- 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 b3 plr-103268-16 date date x -------------------------------------------- ----------------------- legend y ------------------------ a ---------------------- -------------------------------------- -------------------- b -------------------------------------- ---------------------- c -------------------------------------- trust ----------------------- state ------------- date ----------------------- date --------------- ------- date ------------------ date ------------------- plr-103268-16 dear ------------ this letter responds to a letter dated date submitted on behalf of x by its authorized representatives requesting a ruling under sec_1362 of the internal_revenue_code code facts the information submitted states that x was incorporated under the laws of state on date x elected to be an s_corporation effective date on date the shareholders of x were a and b however b failed to consent properly to x’s s_corporation_election accordingly x’s s_corporation_election was ineffective in addition on date x entered into a common share purchase agreement for the sale of common_stock of x to y an ineligible shareholder under sec_1361 the sole member of y is trust an eligible shareholder pursuant to sec_1361 the grantor and trustee of trust is c on date x y and c as trustee for trust entered into a first amendment to common shares purchase agreement which provided that trust was substituted for y as the purchaser of x shares effective date x represents that there was no tax_avoidance or retroactive tax planning involved in the failure of b to properly execute x’s form_2553 and in the transfer of shares of x to y in addition x and its shareholders agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary x also represents that x and all its shareholders have filed consistently with x being treated as an s_corporation in addition x represents that all items allocable to the shares originally purchased by y were allocated to and reported by trust an eligible shareholder law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other requirements have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual plr-103268-16 sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter of the code as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 is terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that any termination under sec_1362 is effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 or sec_1361 by any corporation i was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or ii was terminated under sec_1362 or or sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation for which the election was made or the termination occurred is a small_business_corporation or a qsub as the case may be or to acquire the required shareholder consents and the corporation for which the election was made or the termination occurred and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agree to make the adjustments consistent with the treatment of the corporation as an s_corporation or a qsub as the case may be as may be required by the secretary with respect to this period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation shall be treated as an s_corporation or a qsub as the case may be during the period specified by the secretary conclusion based solely on the facts submitted and representations made we conclude that x’s s_corporation_election was ineffective on date as a result of the improper consent to x’s s_corporation_election we further conclude that the ineffectiveness of x’s s_corporation_election constituted an inadvertent invalid election within the meaning of sec_1362 in addition because x had an ineligible s_corporation shareholder on date we conclude that x’s s_corporation_election would have terminated on date had x’s s_corporation_election been effective on date we further conclude that the termination of x’s s_corporation_election on date was inadvertent within the meaning of sec_1362 plr-103268-16 consequently under sec_1362 x will be treated as an s_corporation from date and thereafter provided that x’s s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 as a condition of the rulings b must sign a written_statement as described in sec_1_1362-6 consenting to x’s s_corporation_election effective date the written_statement must be filed with the appropriate service_center within days from the date of this letter indicating that the statement is to be associated with x’s originally filed form_2553 except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was otherwise a valid s_corporation 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 for precedent pursuant to a power_of_attorney on file we are sending a copy of this letter to x’s authorized representatives the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the rulings requested it is subject_to verification on examination sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c tax exempt and overnment entities dwviaion number release date date fune vil code contact person identification_number telephone number employer_identification_number we have considered your ruling_request dated aprit relating to the proposed change in your activities facts you are a nonprofit corporation located in the community and have been recognized as an organization described in sec_501 of the internal_revenue_code code you are currently classified as a supporting_organization described in sec_509 ‘your articles of incorporation state that your purpose is to promote the health and well-being of the residents of the community by supporting the charitable scientific and educational activities of two specifically named hospitals described in sec_501 c of the code one of which is l the articles state that your support includes financial assistance and other services directly to these organizations and such other assistance services and activities as may be authorized or requested by either of the supported organizations and agreed to by your board_of trustees in year y for the purpose of creating an integrated healthcare delivery system for the community your predecessor entered into a joint_venture arrangement with m an unrelated hospital described in sec_501 of the code under this arrangement each party contributed one or more sec_504 c hospitals to a new sec_501 organization system as a result your predecessor and now you own a a percent membership interest in system m owns a b percent interest system is the parent of various hospitals and healthcare facilities including you have the right to nominate directors of system subject_to the approval of m you have no control_over the operations of the subordinate not-for-profit hospitals and related health care operations moreover you and m are subject_to capital calls by system in proportion to each member's respective membership interest over which neither you nar m have control you have no right to withdraw or transfer your interest in system to a third party this joint_venture arrangement was the subject of a letter_ruling dated date x which resulted in your classification as a supporting_organization under sec_509 since the formation of system it has made no distributions of income to either you or m contemplated that any such distribution will be made in the foreseeable future you state that itis not l has directed that you provide financial assistance and other services in support of any healthcare related activity benefiting residents of the community and determined by your board_of directors to be worthy of receiving such support and assistance as a result you have been providing financial assistance directly to l and to various other nonprofit healthcare organizations located in the community ‘your revenue consists entirely of passive_income including interest dividends and capital_gains derived from investments in securities and limited_partnerships you propose to amend your articles of incarporation to eliminate as your purpose tha support of the two specifically named hospitals instead your amended articles will state that your purpose includes the promotion of the health and well-being of the residents of the commurity following the adoption of this amendment you will continue fo provide financial support ta l and to various other nonprofit healthcare organizations located in the community rulings requested the proposed amendment to your articles of incorporation will not adversely affect your current status as an organization described in sec_501 of the code after you make the proposed amendment to your articles of incorporation you will be classified as a private fourdation within the meaning of sec_509 of the code after you adopt the proposed amendment to your articles of incorporation and file the amendment with the appropriate state_agency your membership interest in system will be excluded in determining your minimum investment return’ for purposes of sec_4942 of the code law sec_170 c b of the code describes the purposes for which a charitable deduction will be permitted including religious charitable scientific literary and educational_purposes sec_170 c2 d of the code describes an organization that is not disqualified for tax exemption under sec_501 c by reason of attempting to influence legislation and participating in or intervening in any political campaign on behalf of or in opposition to any candidate for political office sec_501 of the code provides in part for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable scientific purposes provided no part of the organization's net_earnings inures to the benefit of any private_shareholder_or_individual or educational sec_1_501_c_3_-1 of the income_tax regulations ‘regulations’ states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section dollar_figure c 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 c -1 of the regulations states that the term charitable is used in sec_501 of the code in its generally accepted legal sense sec_509 of the code states that the term private_foundation means a domestic or foreign organization that is described in sec_501 other the organizations described in sec_509 a through a sec_509 and sec_170 a vi of the code include organizations that normally receive a substantial part of their support from a governmental_unit o from public contributions sec_509 of the code describes organizations that normally receive more than one-third of their support each year from gifts grants contributions or membership fees and gross_receipts from certain activities and not more than one-third of their support each year from certain passive_income sec_509 a of the code describes the requirements for organizations that are not private_foundations because they qualify as supporting organizations sec_509 states that one of these requirements is that the organization must be organized and operated exclusively for the benefit of to perform the functions of or to carry out the purpose of one or more specified organizations that are public_charities described in section a or a sec_509 a of the code describes an organization that is organized and operated exclusively for testing of public safety sec_4942 of the code imposes an excise_tax on the undistributed income’ of a private_foundation for any taxable_year sec_4942 of the code defines the term undistributed_income for any taxable_year as the amount by which the distrioutable amount for the taxable_year exceeds qualifying distributions sec_4942 of the code defines the term distributable_amount for any taxable_year as an amount equal to the sum of the ‘minimum investment return plus certain modifications less the taxes paid for the taxable_year under sec_4940 saction e of the code states that the minimum_investment_return for any taxable_year is five percent of the excess of a the aggregate fair_market_value of all the private foundation's assets other than those which are used or held for use directly in carrying out the foundation's exempt_purpose over b certain acquisition_indebtedness sec_53_4942_a_-2 c v of the foundation and similar excise_tax regulations ‘foundation regulations’ states that the assets taken into account in determining minimum_investment_return do not include among athers any assets used or held for use directly in carrying out the foundaticn’s exempt_purpose sec_53_4942_a_-2 of the foundation regulations states that an asset is ‘used or held for use directly in carrying out the foundation's exempt purpose’ only if the asset is actually used by the foundation in the carrying out of the charitable educational or other similar purpose which gives rise to the exempt status of the foundation whether an asset is held_for_the_production_of_income or for investment rather than used or held for use directly by the foundation to carry out its exempt_purpose is a question of fact sec_53_4942_a_-2 c i d of the foundation regulations provides examples of assets that are ‘used or held for use directly in carrying out the foundation's exempt_purpose inciuding any interest in a functionally_related_business or in a program-ralated investment as defined in sec_4944 sec_4944 of the cade states that ‘investments the primary purpose of which is to accomplish one or more of the purposes described in sec_170 and no significant purpose of which is the production_of_income or the appreciation of property shall not be considered as investments which jeopardize the carrying out of exempt purposes sec_53_4944-3 a of the foundation regulations states that a program-related_investment shall not be classified as an investment which jeopardizes the carrying out of exempt purposes of a private_foundation a ‘program-related investment’ is an investment which possesses the following characteristics i the primary purpose of the investment is to accomplish one or more of the purposes described in sec_170 c b i no significant purpose of the investment is the production_of_income or the appreciation of property and i no purpose of the investment is to accomplish one or more of the purposes described in sec_170 sec_53_4944-3 of the foundation regulations states that an investment is considered as made primarily to accomplish one or more of the purposes described in sec_170 of the cade if it significantly furthers the accomplishment of the private foundation's exempt_activities and if the investment would not have been made but for such relationship between the investment and the accomplishment of the foundation's exempt_activities sec_53_4944-3 of the foundation regulations states that in determining whether a significant purpose of an investment is the production_of_income or the appreciation of property itis rslevant whether investors solely engaged in the investment for profit would be likely to make the investment on the same terms as the private_foundation sec_53 a iv of the foundation regulations provides that an investment shall not be considered to accomplish one or more of the purposes described in sec_170 if the recipient of the investment appears before or communicates to any legislative body with respect to legislation_or_proposed_legislation of direct interest to such recipient revrul_67_149 c states that an organization formed for the purpose of providing financial assistance to several different types of organizations that are exempt under sec_501 of the code and which carries on no operations other than to receive contributions and incidental investment_income and to make periodic distributions of income to these organizations qualifies for exemption under sec_501 analysis ruing no ‘your current articles of incorporation state that your purpose is to promote the health and well- being of the residents of the community by supporting the charitable scientific and educational activities of two specifically named hospitals described in sec_601 of the code one of which is l the articles state that your support includas financial assistance and other services directly to these organizations and such other assistance services and activities as may be authorized or requested by one of these supported organizations and agreed to by your board_of trustees l has directed that you provide financial assistance and other services in support of any healthcare related activity benefiting residents of the community and determined by your board to be worthy of receiving such support and assistance providing financial assistance directly to l and to various other nonprofit healthcare organizations located in the community as a result you have been under the proposed amendment to your articles your purpose will include the promotion of the health and well-being of the residents of the community consistent with this purpose you will continue to provide financial support to l and to various other nonprofit healthcare organizations in the community an organization whose sole charitable activity is providing financial assistance to sec_501 organizations by distributing its income to these organizations qualifies for exemption under sec_501 of the code see revrul_67_149 supra following the adoption of the proposed amendment to your articles you will continue to be organized and operated exclusively for charitable purposes within the meaning of sec_501 c ruling no under section a of the code an organization described in sec_507 is classified as a ‘private foundation unless it meets one of the exceptions in sec_509 through a your revenue consists entirely of passive_income including interest dividends and capital_gains derived from investments in securities and limited_partnerships thus you will not meet the public support tests in sec_509 a and b a vi or sec_509 you propose to amend your articles of incorporation to eliminate as your purpase the support of the two specifically named hospitals thus you will no longer qualify as a supporting_organization described in sec_509 of the code nor will you qualify as an organization described in sec_509 a because you are not engaged in testing for public safety as a result because you will not meet any of the exceptions listed in sec_509 through a of the code after you adopt the proposed amendment to your articles of incorporation and you file the amendment with the appropriate state_agency you will be classified as a private foundation’ within the meaning of sec_509 ruling no ‘your membership interest in system as explained below meets the requirements for constituting a program related investment’ and will be excluded from the computation of your minimum_investment_return to determine the amount of ineome a private_foundation must distribute to avoid the excise_tax under sec_4942 of the code it is necessary for a private_foundation to determine its minimum_investment_return a private foundation’s minimum investment retum generally is five percent of the value of its assets with the exception of assets it uses directly to carry out its exempt_purpose whether a private_foundation uses an asset for its exempt_purpose is a question of fact one example of an asset used for an exempt_purpose is an interest in a program-related_investment see sec_4942 and sec_4942 and sec_53 a - and sec_3 a -2 c of the foundation regulations there are three specific characteristics set forth in the regulations that must be met in order to determine if an investment is a ‘program related investment see sec_53_4944-3 of the foundation regulations the first requirement is that the investment's primary purpose must be to accomplish one or more exempt purposes described in sec_170 of the code an investment is considered as made primarily to accomplish one or more of the purposes described in sec_170 if it significantly furthers the accomplishment of the private foundation's exempt_activities and the investment would net have been made but for the relationship between the investment and the accomplishment of the foundation's exempt_activities see section sec_3 a i of the foundation regulations your a percent membership interest in system is a direct result of the implementation of your stated exempt_purpose which is the promotion of the health and well-being of the residents of the community by supporting the tax-exempt activities of l and by providing financial assistance to various other nonprofit healthcare organizations in the community therefore your a percent membership interest in system significantly furthers the accomplishment of your exempt purposes further you represent that such investment would not and in fact could nat have been made but for the relationship between the investment and the accompiishment of your exempt purposes which include supporting the activities of a community hospital and the provision of medical services and health care for the well-being of the greater community therefore your membership interest in system meets the first requirement for a program related investment in sec_53_4944-3 of the foundation regulations the second requirement of a program related investment is that no significant purpose of the investment is the production_of_income or the appreciation of property sec_53 a ii of the foundation regulations states that a relevant factor is whether for-profit investors would likely make the investment on the same terms as the private_foundation the only other member in system is m an organization described in sec_501 of the code which owns ab percent intarest you have restrictions placed on your membership interest in system for instance although you have the right to nominate directors of system such nominations are subject_to the approval of m and you have no contro over the operations of the affiliated not-for-profit hospitals and related health care operations subject_to capital calls by system over which you have no control you have no right to withdraw or transfer your membership interest to a third party of system it has made no distributions to you or m and you state that it is not contemplated that any such distribution will be made in the foreseeable future as a result it is unlikely that any for-profit investor would be willing to acquire an interest in system under the same terms therefore bacause no significant purpose of your membership interest in system is the production_of_income or the appreciation of property your membership interest in system meets the second requirement for a program-related_investment in sec_53_4944-3ii of the foundation regulations furthermore since the formation moreover you are the third requirement of a program related investment is that no purpose of the investment may be to accomplish one or more of the prohibited purposes described in sec_170 d af the code sec_170 d purposes include attempting to influence legislation and not participating in or intervening in including the publishing or distributing of statements any political campaign on behalf of or in apposition to any candidate for public_office sec_53_4944-3 of the foundation regulations further provides that an investment is not considered as made to accomplish one or more of the purposes described in sec_170 d of the code if the recipient of the investment appears before or communicates to any legislative body with respect to legislation_or_proposed_legislation of direct interest to such recipient ‘you entered into the joint_venture arrangement with m and acquired your membership interest in system for the purpose of creating an integrated healthcare delivery system for the community there is no evidence that you will attempt to influence legislation or to interfere in including the publishing or distributing of statements any political campaign on behalf of or opposition to any candidate for public_office within the meaning of sec_170 of the code a conclusion supported by your amended articles therefore your membership interest in system meets the third requirement for a program-reiated investment in sec_53 ii of the foundation regulations because your membership interest in system qualifies as a program-related_investment within the meaning of sec_53_4944-3 of the foundation regulations this interest will be excluded from the computation of your minimum investment retunt for purposes of sec_4942 of the code ruling sec_1 the proposed amendment to your articles of incorporation will not adversely affect your current status ae an organization described in sec_501 of the code after you make the proposed amendment to your articles of incorporation you will be classified as a private_foundation within the meaning of sec_509 of the code after you adopt the proposed amendment to your articles of incorporation and fie the amendment with the appropriate state_agency your membership interest in system will be excluded in determining your minimum_investment_return for purposes of sec_4942 of the code this ruling will be made available for public inspection under sec_6110 of tha code after cartain deletions of identifying information are mada for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you shauld follow the instructions in notice this ruling is directed only to the organization that requested it provides that it may not be used or cited by others as precedent sec_6110 of the code this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resclved questions concerning your federal_income_tax status this ruling should be kept in your permanent records 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 in accordance with the power_of_attorney currently on file with the internat revenue service we are sending a copy of this letter to your authorized representative sincerely manager exempt_organizations technical group enclosure notice


third party communication none date of communication not applicable cca_2013112209201201 id uilc number release date from sent friday date am to cc bcc subject re tefra question the carryforward amount of any adjustment is a computational affected_item under 172_f3d_1311 fed cir cummings v commissioner t c memo 849_fsupp_500 wd tex when the tmp signs a form 872-p he extends the minimum period for assessment any_tax attributable to a disallowed partnership loss regardless of which return a partner claimed that loss on so when he extends the period for assessing tax attributable to a partnership loss for partnership year he is extending the assessment_period for all partner returns claiming that loss including carryforward years there is nothing in the form 872-p that limits the assessment to a partner return for year


department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date uil code date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can’t deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we’ll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action we’ll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely stephen a martin director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 c redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s department of the treasury internal_revenue_service cincinnati oh legend r state s date t term v term w term x organization y number dear date date employer id number contact person id number contact telephone number contact fax number vil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you incorporated in the state of r on s according to your articles of incorporation you are organized exclusively for charitable religious educational and scientific purposes as specified in sec_501 of the code upon dissolution your board_of directors shall after paying or making provision for the payment of all of the liabilities of the corporation distribute all the assets of the corporation to one or more organizations then qualified under sec_501 according to your application you hope to advance the availability and quality of healthcare through research education and increased transparency that facilitates leadership development quality outcomes and informed investment decisions in the healthcare delivery system you assert that despite rising healthcare costs and costs to finance medicare medicaid and other public health programs there is insufficient information that can be used to help consumers policymakers and healthcare providers understand the underlying cost drivers of healthcare to determine how best to reduce such costs your stated mission is to promote and conduct independent research and analyses on the causes of rising health spending and to provide stakeholders with better more transparent information on what is driving health care costs with the goal of discovering ways to reduce them ultimately you would like the results to be used to help consumers health care providers states and the federal government control spending while improving health care access efficiency and outcomes you hope to study various characteristics of health care costs such as medical costs insurance coverage reimbursement models and consumer health care expenses and distribute this information to improve overall health care the study you want to design would use the results of your research along with existing data sets to study and help others study the health care system evaluate existing and new ways to contain costs and assess quality your initial research will focus on the healthcare claims process - the costs associated with the process and how improvements can impact access to healthcare research will be primarily conducted under supervision of a lead researcher by your research assistants who will use multiple inputs such as data sets provided by the centers for medicare and medicaid and data sets available from commercial insurers interviews with providers and payers to identify areas of deficiency and online polling to providers and consumers the research assistants will conduct literature and data reviews and then design the research study collecting and analyzing the various modes of data they will prepare the interview questions identify and interview subjects and maintain records of interviews they will provide this information to their lead researcher and or supervisor results of the research will be summarized and published electronically on your website as well as sent to a subscription user base via email you will be operated primarily by volunteers except for the researchers who will be paid as independent contractors and eventually as employees you hope to obtain funding through grants and donations any monies raised will be used to pay the researchers and to educate policy makers consumers and providers about the results of your research you provided your website address your website states that you are a non-profit organization that hopes to advance the availability and quality of healthcare for americans through research education and increased transparency it also states you are focused on connecting payers with providers thereby reducing healthcare expenses your website also includes information about you that substantially departs from the information you provided in your application the website states that you will provide a blockchain platform that enables all stakeholders to share information in a secure environment your website provides a direct link to another website which has the same web address as yours with a different domain suffix this second website provides more information about blockchain technology the second website states that the problem is that traditional centralized systems are slow redundant and expensive providers and payers must each employ their own staff and maintain separate software stacks to facilitate their medical claims processes these isolated systems make the sharing of basic information not only difficult and costly but prone to errors and fraud the second website describes a t platform which is advantageous over the current information systems because it uses smart contracts and blockchain technology designed to service the healthcare industry specifically the letter rev catalog number 47630w blockchain provides four advantages no central agent is required to approve transactions transactions can’t be altered or deleted once added to the chain via consensus all nodes contain a copy of the blockchain data removing a central point of failure and transactions in the blockchain are visible to all parties with appropriate access to decrypt and review the website also explains why you are a non-profit organization you feel strongly the only effective way to solve the challenges in administrative expenses within the healthcare industry is to have an organization with characteristics that match the blockchain as best possible for this reason the best current business_entity for this is a non-profit having a non-profit business structure allows for transparency and stakeholder feedback through a board_of directors comprised of healthcare payers providers and financial institutions this will provide the strong governance model required for the continuing development and maintenance of a blockchain that also allows industry stakeholders a chance to collaborate and drive down expenses while meeting their common needs information posted on the second website states that there is an s-corp incorporated in r and fully held by you the corporation is governed by you as a non-profit entity to ensure strong governance financials will all roll_up to you and you are bound by strict financial reporting requirements providing a high level of financial transparency the second website contains a whitepaper that states the t business model combined with blockchain technology will increase the efficiency and effectiveness of the healthcare industry as a whole your vision is to reduce costs of authorization and settlement services while providing insurers current data for actuarial models and increasing the use of healthcare savings accounts managed by banks the whitepaper describes you as the business_entity which creates maintain and provides updates to the public t blockchain it explains that you are a non-profit entity whose core objective is the establishment of the t platform to reduce the cost of healthcare and make it more affordable to patients it further explains that your board contains stakeholders from the banking payer and provider space to drive adoption of the t platform while conforming to the industries’ specific needs it further states that the software is free to use the only expense to an organization wishing to utilize the platform is the initial purchase of digital assets when the platform is launched a relatively insignificant expense would be incurred for a stakeholder as the platform is more fully utilized the shares must be purchased at market_value and should thus increase in value as demand for the shares increases the shares themselves behave as an asset of the business the whitepaper describes the process of obtaining healthcare services and the number of steps involved in claims processing the multiple steps and involvement of each individual stakeholders’ internal processes results in a costly system the expenses of which are passed on to subscribers of the healthcare plan you assert that no intermediary has been able to provide a solution to address the expenses of the claims submission process because the need for trust and control is too great for a traditional business model to meet t addresses this by providing a blockchain platform governed by a non-profit business_entity responsible for developing and maintaining the platform this platform is freely available to all parties and uses a v concept v allows for a blockchain participant to ‘prove’ they are a member of the decentralized blockchain by possessing tokens or coins that represent their ‘stake’ in the blockchain this v provides for voting rights smart contract creation alteration authorization of funding methods and generation of ‘gas’ to process transactions on the chain basing the technology solution letter rev catalog number 47630w on v allows t to then adapt a non-profit organizational business model to provide an equal level of transparency and governance that is provided by the technology platform the purpose of t as a business_entity is to update the publicly available software used for the blockchain under the recommendations of the advisory board members who are representative of all three stakeholder types payers providers and financial institutions you are the business_entity which creates maintains and provides updates to the public t blockchain you are a non-profit entity whose core objective is the establishment of the t platform to reduce the costs of healthcare and make it more affordable to patients you provided additional information as part of the application process in which you explained that all activities related to the blockchain are occurring in a fully held subsidiary s-corporation formed in the state of r under the name x you state that neither creating nor deploying blockchain technology is part of your mission or operating activities you will however use any data produced by the platform for educational and research related work the website states that you will initially fund yourself and the development of the blockchain from the proceeds of an initial crowd sale or initial coin offering ico the website also indicates that a full crowd sale for you is open x’s revenue comes from the appreciating value of the shares possession of w allows for the t end user to ‘vote’ on proposed software changes in this manner the shares act as a proxy for stock in the organization ancillary revenue streams are possible through patient opt-in of record sharing with drug manufacturers and medical_device_manufacturers you said that the confusion between your website and the second website should be resolved when x moves from the second website to a third one that has yet to be created the second website will forward users to the third website you also state that you have corrected the language which indicated that you will fund yourself from an ico x will fund itself this way you assert your role to x is to provide oversight with a higher level of financial transparency than is required from privately held firms you said that many entities operating in the blockchain space are either fraudulent or at best deceiving those who have participated in the creation of their platforms you feel that the non-profit filing_requirements are the most transparent way to reveal financial information available to you thus you interact with x in the following ways a your board_of directors will also serve as the board_of directors for x this provides a method of public acknowledgement through annual filings of any compensation to directors due to x b you will hold y million w these will be held and distributed to participants and developers on the platform since you will be holding these instead of x this will provide transparency to other participants in the blockchain you said that you have not generated any revenue to date you expect that whitepapers on your research will be sold to interested parties and you will generate fees from speaking engagements and seminars the subsidiary_organization x has also not generated any revenue expectations are that adoption of a functional blockchain will create an economic ecosystem wherein holding digital assets will become a proxy for the value of the system alternate streams of revenue are also being explored letter rev catalog number 47630w law sec_501 of the code provides for exemption from federal_income_tax of organizations organized and operated exclusively for charitable educational scientific and other purposes provided that no part of the net_earnings inures to the benefit of any private_shareholder_or_individual sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 of the code provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services an activity does not lose its identity as a trade_or_business merely because it is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may or may not be related to the exempt purposes of the organization sec_1_501_c_3_-1 provides that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one of 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 states that an organization is not operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest it must not be operated for the benefit of designated individuals or the persons who created it sec_1_501_c_3_-1 defines the term educational as the instruction or training of the individual for the purpose of improving or developing his capabilities or the instruction of the public on subjects useful to the individual and beneficial to the community sec_1_501_c_3_-1 provides that an organization may meet the requirements of sec_501 only if it serves a public rather than a private interest a ‘scientific’ organization must be organized and operated in the public interest the term ‘scientific’ therefore includes the carrying on of scientific research in the public interest sec_1_501_c_3_-1 further provides that scientific research does not include activities of a type ordinarily carried on as an incident to commercial or industrial operations as for example the ordinary testing or inspection of materials or products or the designing or construction of equipment buildings etc sec_1_501_c_3_-1 provides in part that scientific research will be regarded as carried on in the public interest if the results of such research including any patents copyrights processes or formulae letter rev catalog number 47630w resulting from such research are made available to the public on a nondiscriminatory basis and such research is directed toward benefiting the public sec_1_501_c_3_-1 provides that an organization may meet the requirements of sec_501 although it operates a trade_or_business as a substantial part of its activities if the operation of such trade_or_business is in furtherance of the organization's exempt_purpose or purposes and if the organization is not organized or operated for the primary purpose of carrying on an unrelated_trade_or_business as defined in sec_513 in determining the existence or nonexistence of such primary purpose all the circumstances must be considered including the size and extent of the trade_or_business and the size and extent of the activities which are in furtherance of one or more exempt purposes an organization which is organized and operated for the primary purpose of carrying on an unrelated_trade_or_business is not exempt under sec_501 revrul_54_305 1954_2_cb_127 concerns an organization whose purposes are to secure for hospitals and other charitable institutions the advantages of cooperation in establishing uniform standards as to quality and kind of supplies and the purchasing of the same and to promote the economical and efficient administration of hospitals and other institution and to establish and maintain a central purchasing agency the ruling holds that operating and maintaining a purchasing agency for the benefit of otherwise unrelated members who are exempt from federal_income_tax as charitable organizations would be unrelated activities if carried on by any one of the tax-exempt organizations served therefore the organization is not entitled to exemption under sec_101 the precursor of sec_501 revrul_69_528 1969_2_cb_127 found that an organization regularly carrying on an investment service business that would be unrelated_trade_or_business if carried on by any of the exempt_organizations on whose behalf it operates is not exempt under sec_501 this organization was free from the control of the participants and had the absolute and uncontrolled discretion in investment of the property sale of investments and reinvestment of the proceeds payment of taxes and liens distributions of income and principal or the addition of accumulated income to principal and dealing with the property and managing the funds as if it were absolute owner thereof revrul_72_369 1972_2_cb_245 concerns an organization formed to provide managerial and consulting services for nonprofit_organizations exempt under sec_501 of the code to improve the administration of their charitable programs the organization enters into agreements with unrelated nonprofit_organizations to furnish managerial and consulting services on a cost_basis the ruling states that the provision of managerial and consulting services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit the fact that the services in this case are provided at cost and solely for exempt_organizations is not sufficient to characterize this activity as charitable within the meaning of sec_501 furnishing the services at cost lacks the donative element necessary to establish this activity as charitable accordingly the ruling holds that the organization's activities are not charitable and therefore the organization does not qualify for exemption under sec_501 revrul_76_206 1976_1_cb_154 considered an organization formed to promote broadcasting of classical music in a particular community the organization carried on a variety of activities designed to stimulate public interest in the classical music programs of a for-profit radio station and thereby enable the station to continue broadcasting such music the activities included soliciting sponsors soliciting subscriptions to the station's program guide and distributing pamphlets and bumper stickers encouraging people to listen to the station the organization's board_of directors represented the community at large and did not include any representatives of letter rev catalog number 47630w the for-profit radio station the ruling concludes that the organization's activities enable the radio station to increase its total revenues and therefore benefit the for-profit radio station in more than an incidental way therefore the organization is serving a private rather than a public interest and does not qualify for exemption in 326_us_279 the supreme court determined that while some activities of the organization were educational a substantial purpose of the organization was to promote business and thus the organization was not operating exclusively for educational_purposes it held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes in 365_f2d_792 8th cir the court_of_appeals affirmed the findings of tax_court that foundation was pursuing a substantially non-exempt purpose in the publication and commercial exploitation of the writings of the founder director and prime functionary of foundation the founder had control of the foundation's day to day activities complete control of its finances and the founder’s personal funds were to a degree commingled with the funds of the foundation and that the evidence clearly supported the finding that the foundation was pursuing a substantial non-exempt purpose application of law you are not described under sec_501 of the code or sec_1_501_c_3_-1 because you do not meet the operational_test a substantial part of your activities does not further exempt purposes you create maintain develop promote and provide governance and direction to the development of blockchain technology as a commercial enterprise as stated in sec_1_501_c_3_-1 an organization is operated exclusively for one or more exempt purposes only if it primarily engages in activities which accomplish such exempt purposes providing blockchain technology to payers providers and financial institutions for use in the conduct of their businesses is not educational within the meaning of sec_1_501_c_3_-1 to qualify as a scientific_organization under sec_501 of the code an organization must serve a public rather than a private interest as described in sec_1_501_c_3_-1 i your activities are aimed at promoting a type of technology to benefit payers providers and financial institutions your activities are also not considered scientific research as described in sec_1_501_c_3_-1 because it excludes activities ordinarily carried on in a commercial manner for the above reasons you do not meet the qualifications for conducting scientific research per the regulations sec_1_501_c_3_-1 infers that an organization that is organized and operated for the primary purpose of carrying on an unrelated_trade_or_business does not meet the requirements of sec_501 of the code as illustrated in revrul_54_305 providing blockchain technology engaging in the public offering of w to finance the technology and providing a means to increase the value of w to holders is an activity which is carried on for the production_of_income from the sale_of_goods or the performance of services as defined in sec_513 and sec_513 of the code you are engaged in such activities would be deemed organized and operated for the primary purpose of carrying on an unrelated_trade_or_business and consequently would fail to meet the requirements of sec_501 your activities are like those described in revrul_69_528 this ruling held that if a tax-exempt_organization provides investment services for a fee to another unrelated tax-exempt_organization such activity would constitute an unrelated_trade_or_business thus it was reasoned that an organization formed for the sole purpose letter rev catalog number 47630w of providing such services is not described in sec_501 of the code because it is organized and operated for the primary purpose of carrying on an unrelated_trade_or_business you are like the organization described in revrul_72_369 because your services are not inherently charitable you do not qualify for exemption under sec_501 of the code because you operate in a manner similar to a trade_or_business ordinarily carried on for profit although you said you aren’t conducting the blockchain activities have provided no evidence that these are activities being carried out by any other entity other than yourself your website and all the links and whitepapers contained therein indistinguishably entangles your activities with the activities of x even if you were to provide documentation that these activities are being conducted through the wholly-held subsidiary you are still providing governance and direction to the commercial operation you are holding ownership of the enterprise through possession of y million shares of w you are offering these w for sale to the public and you intend to report the financial transactions through your returns in effect these activities are attributable to you like the organization in revrul_76_206 because you are furthering the business interests of a for-profit enterprise you are serving a private rather than a public interest sec_1_501_c_3_-1 gi states an organization is not operated exclusively for exempt purposes unless is serves a public rather than a private interest as in parker your activities of publishing a whitepaper and hosting a website that advertises and promotes the t blockchain technology as well as offering w for sale are commingled to such a degree with a for-profit subsidiary that they are furthering a private non-exempt purpose per better business bureau of washington d c inc a substantial non-exempt purpose will destroy exemption regardless of the number or importance of truly exempt purposes conclusion based on the above facts and analysis you do not qualify for exemption under sec_501 of the code because you are not operated exclusively for exempt purposes the facts show you are engaging in non-exempt operations to a substantial degree and benefitting a private interest a for-profit enterprise rather than a public interest accordingly we conclude you do not qualify for exemption under sec_501 if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations letter rev catalog number 47630w for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if ‘ so we'll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements letter rev catalog number 47630w you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47630w