t c memo united_states tax_court dean g steele petitioner v commissioner of internal revenue respondent docket no filed date dean g steele pro_se blake ferguson and timothy lohrstorfer for respondent memorandum opinion panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency in all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the continued petitioner's federal_income_tax in the amount of dollar_figure and additions to tax pursuant to sec_6651 and sec_6654 in the amounts of dollar_figure and dollar_figure respectively the issues for decision are whether petitioner is liable for taxes on nonemployee compensation and interest_income earned by him in whether petitioner is liable for additions to tax for failure_to_file a return and failure to pay estimated_tax and whether petitioner is subject_to a penalty under sec_6673 some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in lakeland florida at the time the petition was filed for the year ended date petitioner earned the following amounts of nonemployee compensation from the following sources source of compensation amount phoenix home life mutual dollar_figure phoenix home life mutual big_number mutual of omaha insurance co big_number protective life_insurance co total big_number petitioner earned the following amounts of interest from the following sources during the year ended date continued tax_court rules_of_practice and procedure source of interest amount publix employee federal credit_union dollar_figure lexington federal total dollar_figure petitioner did not file a federal_income_tax return for the taxable_year ended date petitioner argues that the income_tax is not a direct_tax but an excise_tax he further suggests that the excise_tax is a tax on taxable activities and that the terms excise_tax and privilege_tax are synonymous he concludes that respondent has not submitted any evidence that petitioner has engaged in any privileged activities resulting in the requisite amount of income to incur a tax_liability for we begin by noting that respondent's determinations are presumed correct and petitioner bears the burden of proving that those determinations are erroneous rule a 290_us_111 moreover deductions are a matter of legislative grace and petitioner bears the burden of proving that he is entitled to any deductions claimed 503_us_79 petitioner did not file a federal_income_tax return for the taxable_year respondent determined and petitioner has agreed that petitioner earned nonemployee compensation and interest_income in this court as well as other federal courts has consistently and uniformly held for many years that compensation is income e g 793_f2d_139 6th cir affg per curiam 82_tc_766 791_f2d_68 7th cir 784_f2d_1006 9th cir 760_f2d_1003 9th cir 737_f2d_439 5th cir 733_f2d_709 9th cir 687_f2d_264 8th cir affg tcmemo_1981_506 661_f2d_71 5th cir affg tcmemo_1981_122 640_f2d_1014 9th cir petitioner's arguments are basic protester rhetoric as the court_of_appeals for the fifth circuit has remarked we perceive no need to refute these arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir we need not say any more respondent's determination with respect to the deficiency and additions to tax is sustained we now consider respondent's motion for an award of a penalty against petitioner under sec_6673 as relevant herein sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty not in excess of dollar_figure whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceeding is frivolous or groundless the record in this case convinces us that petitioner was not interested in disputing the merits of either the deficiencies in income taxes or the additions to tax determined by respondent in the notice_of_deficiency rather the record demonstrates that petitioner regards this case as a vehicle to protest the tax laws of this country and espouse his own misguided views a petition to the tax_court is frivolous if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law coleman v commissioner supra pincite petitioner's position as set forth in the petition as well as in the other documents that petitioner submitted consists solely of tax_protester rhetoric and legalistic gibberish based on well established law petitioner's position is frivolous and groundless we are also convinced that petitioner instituted and maintained this proceeding primarily if not exclusively for purposes of delay having to deal with this matter wasted the court's time as well as respondent's moreover taxpayers with genuine controversies may have been delayed finally we are convinced that petitioner is and was at the time that he filed his petition well aware of the provisions of sec_6673 as demonstrated by the references to that section in correspondence between petitioner and respondent which was attached to respondent's motion nevertheless petitioner chose to ignore well-established precedent of this and other federal courts and pursue instead his protest agenda in view of the foregoing we will exercise our discretion under sec_6673 and require petitioner to pay a penalty to the united_states in the amount of dollar_figure coleman v commissioner supra pincite crain v commissioner supra pincite8 coulter v commissioner 82_tc_580 82_tc_403 to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service p o box cincinnati oh release number release date date date legend y country z amount dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates that you will operate a fellowship program you indicate that the purpose of the program is to provide fellowship grants to individuals to help increase gender diversity in universities in y in the areas of science and engineering by supplementing the post-doctoral research stipend offered at the university where they have been accepted to research you plan to award z new fellowships each year and the amount of the stipends are varied depending upon the available funds the applicants must meet the following criteria a are post-doctoral researchers who are residents of y b demonstrate financial needs c are women d received their phd from a y research university in the last three years in the fields of mathematics computing sciences or engineering and e have been accepted to continue their research at a university outside of y individuals who are employed by you employed by organizations controlled by your director s members of your board_of directors or related by blood or marriage to employees or your directors or organizations controlled by your director s will not be eligible for the grants applicants will be assessed based on a the quality of completed research b the relevance of their post-doctoral research plan and c their long term goals with respect to their research work preference will be given to candidates who intend to become a professor at a university in y in the fields of mathematics computing or engineering after the completion of their fellowship the fellowship_grant may be extended for one more year based on progress made on the grantee’s research plan you will require each recipient to sign a grant agreement before any funds are disbursed you will require periodic reports as specified in the grant agreement and will monitor and evaluate the expenditures of the funds and the progress made by each recipient you will require the supervising faculty_member or other appropriate university official to review and approve the reports prepared by the fellow any apparent misuse of grant funds will be promptly investigated if you discover that funds have been misused you will require the recipient to return the funds immediately and you will make no further distributions to that recipient you plan to appoint six to eight members of the selection committee who are distinguished researchers in mathematics computing and other relevant fields the selection committee will analyze the applications and interview candidates who are potential awardees no person on the selection committee will be in a position to derive private benefit directly or indirectly if certain potential grantees are selected over others basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - aschoiarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a-specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient letter catalog number 58222y to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination e this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representatives as indicated in your power_of_attorney letter catalog number 58222y please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58222y


department of the treasury internal_revenue_service washington d c date cc dom fs fi p uilc number release date internal_revenue_service national_office field_service_advice memorandum for from subject assistant chief_counsel field service cc dom fs internal_revenue_service national_office field_service_advice this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend entity year date date underwriter bank agent m n p s t x y issue s whether entity issued registration-required obligations within the meaning of sec_163 if entity issued registration-required obligations and did not satisfy the requirements of sec_163 is entity liable for the excise_tax imposed pursuant to sec_4701 conclusion given the facts that we have received we conclude that entity did not issue registration-required obligations because the debt obligations were issued with maturities of less than one year see sec_163 given our conclusion with respect to issue we further conclude that entity is not liable for the excise_tax imposed pursuant to sec_4701 facts in year entity commenced a commercial paper program which was underwritten by underwriter entity arranged a liquidity facility with bank to support the program during periods of market disruption entity also selected agent to be the program’s issuing and paying agent the commercial paper received an x rating from standard poor’s and a y rating from moody’s the program involved the issuance of short-term paper in bearer form all of the paper issued pursuant to the program had a maturity significantly less than one year entity’s paper generally had a n-day maturity however entity constantly rolled over the paper entity approved the issuance of dollar_figurem worth of paper through the program but never issued more than dollar_figurep entity used the proceeds from the sale of commercial paper to fund the development of several real_estate ventures there is no indication that entity issued its short-term commercial paper with the intention of avoiding tax from date through date entity issued the commercial paper to s investors the list of investors included commercial banks and other financial institutions governmental entities retirement_funds and corporations the list of investors included only united_states entities and the interest on the paper was payable within the united_states the examining agents propose to assert an excise_tax pursuant to sec_4701 on the grounds that the debt obligations issued through the commercial paper program are registration-required obligations which were not issued in_registered_form law and analysis pursuant to sec_4701 an excise_tax is imposed on any person that issues registration-required obligations which are not in_registered_form thus the threshold issue is whether the obligations issued pursuant to the commercial paper program constitute registration-required obligations sec_4701 refers to sec_163 for the definition of the term registration-required obligations in general sec_163 defines the term registration-required_obligation to mean any debt obligation other than an obligation which is issued by a natural_person is not of a type offered to the public has a maturity at issue of not more than one year or is designed to be sold only to a person who is not a united_states_person with the payment of interest payable only outside the united_states here elements and are answered in the negative that is to say entity is not a natural_person the debt obligations were offered to the public and the sale of the commercial paper was sold to united_states persons accordingly the only issue that we must consider is whether the debt obligations had a maturity at issue of more than one year if the facts show that the debt obligations had a maturity of one year or less then the obligations are not registration-required obligations the facts as developed indicate that the debt obligations issued pursuant to the short-term commercial paper program possessed maturities that were significantly less than one year given this information we conclude that the debt obligations were not registration-required obligations within the meaning of sec_163 accordingly entity is not liable for the sec_4701 excise_tax the examining agents and district_counsel contend that although the debt obligations specified maturities of less than one year it is appropriate to consider entity’s intent at the time it issued the commercial paper to determine the length of maturity based on the facts the examiners and district_counsel conclude that entity intended to issue debt obligations with maturities in excess of one year the field bases its conclusion on the following grounds first the short- we agree with your analysis of elements and and thus will not reiterate that discussion here -4- term paper program was instituted to fund long-term real_estate development projects second entity established a practice of continually rolling over the commercial paper we respectfully disagree with the field’s conclusion our research has failed to produce any authority in the code legislative_history treasury regulations or case law that would support the implementation of an intent standard when construing sec_163 the statute is clear on its face that a registration-required_obligation does not include debt obligations with maturities of one year or less neither the language of the statute nor the legislative_history of sec_163 leave room to incorporate such an intent standard moreover even assuming a legal basis exists to consider entity’s intent the economic climate of the early t would support entity’s position that it intended to issue short-term commercial paper to take advantage of falling interest rates although entity could have achieved the same result by issuing floating rate debt the use of short-term commercial paper provided a measure of flexibility to entity to lock in a fixed rate when it deemed such action reasonable and appropriate case development hazards and other considerations -5- if you have any further questions please call deborah a butler by carol p nachman carol p nachman special counsel financial institutions products field service


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 ita b05 plr-127081-18 date date legend taxpayer date date date form year owner accountant first effective year dear -------------- -------------------------------------------------------------------- ---------------------- ------ --------- ------------------------------------------------------------------- ------- -------------------- ---------------------------- ---------------------------- this letter responds to your letter requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make a regulatory election specifically you have asked for an extension of time to request under revproc_2006_46 an automatic approval to adopt change or retain annual_accounting_period under sec_442 of the internal_revenue_code and sec_1_442-1 of the income_tax regulations facts taxpayer was established on date as a development entity and is owned by owner taxpayer files its annual federal_income_tax return on a fiscal_year that ends on date in early march of year accountant became aware of the business situation that required taxpayer to change its accounting_period by the time accountant completed her review of the documents the due_date for submitting a request through the exclusive automatic procedure under revproc_2006_46 had expired plr-127081-18 taxpayer submitted the request for the change within days from the due_date for filing form and has not filed its tax_return for the first effective year taxpayer represents that it relied on accountant for advice on appropriate actions and to for timely filing of the necessary documents with the internal_revenue_service taxpayer also represents that granting relief under sec_301_9100-3 will not result in a lower tax_liability in the aggregate for all years to which the requested change would apply than taxpayer would have had if the change had been timely made law and analysis revproc_2006_46 2006_45_irb_859 provides the exclusive procedures for a certain taxpayer to obtain an automatic approval to adopt change or retain its annual_accounting_period under sec_442 of the internal_revenue_code and sec_1_442-1 of the income_tax regulations section of revproc_2006_46 provides that the form_1128 application to adopt change or retain a tax_year must be filed no earlier than the day following the end of the first effective year and no later than the due_date including extensions for filing the federal_income_tax return for the first effective year sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than specific automatic extensions covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer requests relief before the failure to make the regulatory election is discovered by the service reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election however a taxpayer is not considered to have reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts in addition sec_301_9100-3 provides that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer- i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests plr-127081-18 relief and the new position requires or permits a regulatory election for which relief is requested was fully informed in all material respects of the required election and related tax consequences but chose not to make the election or uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief ii iii sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable_year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section based on the information submitted by taxpayer we conclude that taxpayer has acted reasonably and in good_faith under sec_301_9100-3 and the interests of the government will not be prejudiced by the granting of relief under sec_301_9100-3 we are returning taxpayer’s form with this letter taxpayer must change its accounting_period in accordance with the appropriate provisions of revproc_2006_46 the form must be filed with the director internal_revenue_service center attention entity control where taxpayer files its federal_income_tax return in order to assist in the processing reference to this revenue_procedure must be made a part of the form by either typing or legibly printing the following statement at the top of page filed under revproc_2006_46 further taxpayer must attach a copy of the form to the federal_income_tax return filed for first effective year taxpayer must also submit any additional information required to be submitted by section of revproc_2006_46 a copy of this letter should be attached to certify that taxpayer had received an extension of time to file form conclusion plr-127081-18 accordingly based solely on the facts and information submitted and the representations made in the ruling_request we grant taxpayer an extension of days from the date of this letter_ruling to file form and the return for first effective year to make the change under revproc_2006_46 this ruling is directed only to taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the ruling contained in this letter is based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination 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 william a jackson branch chief branch office of associate chief_counsel income_tax accounting enclosure


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax_exempt_and_government_entities_division release number release date date date no third party contacts uil legend company program dear this letter is in response to your request for a letter_ruling relating to the proposed adoption of program described below facts you are a public benefit corporation organized and operated to carry on charitable and educational activities you have been recognized as tax-exempt under sec_501 of the internal_revenue_code code as an organization described in sec_501 in addition you have been classified as a public charity under sec_509 and sec_170 you were founded for the primary purpose of providing grants to individuals who are employees and retirees of company who are experiencing emergency and crisis situations and in need of assistance involving food shelter and other basic necessities of life your board_of directors is comprised of thirteen individuals none of whom are your employees you indicate that your board_of directors is comprised of persons wholly independent of any credit counseling or debt management service providers and none of the board members have a financial interest in your activities additionally the members of your board possess special knowledge or expertise in financial education and are community leaders you indicate that as a way of enhancing your charitable purposes your board_of directors has considered a variety of ideas and conducted extensive research to address the issues of financial instability plaguing low-skilled and low-income workers with little financial education and savings to avert future emergencies by targeting and educating this financially vulnerable population you hope to prevent conditions of financial distress before it occurs in particular your board has recommended creating and operating program which offers financial management and literacy courses as well as a counseling program its goal is to educate lower income persons about the benefits of personal savings and to encourage fundamental changes in the manner in which they view save and use money as currently envisioned program will have four phases phase i introduction to financial management in phase participants will attend individually or in some cases with their children a basic financial literacy course during phase participants will discuss and learn about topics including household budgeting monthly income analysis understanding credit managing debt identifying financial priorities and the critical role of savings to provide the highest quality instructors who are best able to meet the current needs of financially stressed and or less educated individuals you will hire qualified unaffiliated third party organizations or independent contractors third party instructors will be selected on the bases of their comprehensive expertise in counseling skills personal finance budgeting and credit and debt management their ability to develop options and recommendations that address the particular circumstances of each participant their ability to identify underlying personal problems such as illness that might contribute to financial problems and their ability to make appropriate referrals and how thoroughly and effectively they develop and present options to match the particular circumstances of each participant these instructors will be paid a flat rate or a set amount per class phase ii advanced financial literacy courses in phase il participants will be required to take two or more additional financial literacy courses offered through qualified unaffiliated third party organizations or independent contractors as described in phase i from a menu of subjects to reinforce and expand upon the principles learned in the basic course courses may include organizing financial documents taxes financial management retirement savings and saving for a child’s college education through a sec_529 college savings_plan to the extent needed you will assist individuals in selecting courses that should be taken based upon the individual’s specific circumstances phase ill individual counseling phase ill which may run concurrently with phase ii will discuss individual counseling needs for those participants in need of such personalized services as with phase and phase il you will provide these services through third party providers selected on the basis of the quality of counseling provided counselors will be paid a flat rate or a set amount per individual you will not receive or pay any referral fees for this service phase iv enrollment in savings programs for participants that successfully complete phases through iii or who are actively completing at least through phase ii you will facilitate enrollment in savings programs like sec_401 retirement plans or sec_529 college savings plans you indicated that this phase in conjunction with the previous phases offers a powerful incentive to change savings behavior and help break the cycle of poverty in which participants’ families may be stuck in phase iv participants in the college match program may be eligible to receive a match up to a specified dollar amount this match is based on completing coursework and consistency of savings on an annual basis provided that participants demonstrate good savings practices as taught by the courses offered in phase and il the regular use of payroll deductions to make contributions to that plan this would be accomplished by your opening and awarding matching funds to sec_529 entity accounts earmarked for qualifying beneficiaries access to the entity_account would be turned over to the beneficiary at age eighteen with proof of college enrollment it is evidenced by establishing a sec_529 plan and to be eligible to participate in the college match program participants must have worked for company for at least six months have at least one dependent_child less than twenty-one years old and have an annual family income below the applicable state geographic area’s median income level applicants must formally apply and supply you with information regarding their sources of income assets liabilities and expenses once the applicant provides all the requested information and assuming the applicant is below the threshold low-income levels as determined the applicant will be enrolled at no cost although financial need will be assessed for initial eligibility it need not be revalidated every year a committee of your board will oversee program the committee has at least three members from your board and at all times will include at least percent independent persons who are not your employees or employees of company the committee shall include persons who represent the broad interests of the public specifically those possessing community leadership skills special knowledge or expertise in credit and financial education or both you represent that you do not provide any loans under program and that you do not provide direct services related to improving credit records credit history or credit ratings furthermore participants in program are not charged a fee for participating in such and thus the ability or inability to pay fees is not a criterion you further represent that you do not solicit contributions from participants moreover you have no control profit interest or beneficial_interest in any other entity receive fees for debt management plans or similar services and do not pay any amounts for referrals finally you do not provide debt management services and therefore do not ruling requested based on the above representations creating and operating program will not adversely affect your status as an organization described in sec_501 law sec_501 provides in part for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the organization’s net_earnings inures to the benefit of any private_shareholder_or_individual sec_501 imposes additional requirements on organizations otherwise described in sec_501 if the provision of credit_counseling_services is a substantial purpose sec_501 provides that an organization with respect to which the provision of credit_counseling_services is a substantial purpose shall not be exempt from tax under sec_501 unless it is organized and operated in accordance with specific requirements the organization must provide credit_counseling_services tailored to the specific needs and circumstances of consumers the organization cannot make loans or negotiate the making of a loan on behalf of consumers and the organization cannot charge a separately_stated fee for services to improve a consumer's credit record credit history or credit rating sec_501 provides that an organization cannot refuse services to a consumer due to the inability of the consumer to pay or because of the ineligibility or refusal of the consumer to enroll in a debt management plan sec_501 provides that the organization's fees must be reasonable and the fee policy must allow for the waiver of fees for consumers who are unable to pay the organization can not refuse to provide credit_counseling_services to a consumer due to the inability of the consumer to pay the ineligibility of the consumer for debt management plan enrollment or the unwillingness of the consumer to enroll in a debt management plan except to the extent allowed by state law this section prohibits the charging of any fee based in whole or in part on a percentage of the consumer’s debt the consumer’s payments to be made pursuant to a debt management plan or on the projected or actual savings to the consumer resulting from enrolling in a debt management plan sec_501 provides that at all times the board_of directors of a credit counseling service_organization must be controlled by persons who represent the broad interests of the public such as public officials acting in their capacities as such persons having special knowledge or expertise in credit or financial education and community leaders not more than percent of the voting power of the board_of directors can be vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization's activities furthermore not more than percent of the board may be employees of the organization creditors or those who will benefit financially sec_501 provides that an organization cannot own more than a percent of the total combined voting power the profit interest or beneficial_interest of any organization which is in the business of lending money repairing credit or providing debt_management_plan_services payment processing or similar services sec_501 provides that the organization receives no amount for providing referrals to others for debt_management_plan_services and pays no amount to others for obtaining referrals of consumers sec_501 imposes additional requirements upon organizations otherwise described in sec_501 these requirements include the organization does not solicit contributions from consumers during the initial counseling process or while the consumer is receiving services from the organization and the aggregate revenues of the organization which are from payments of creditors of consumers of the organization and which are attributable to debt_management_plan_services do not exceed the applicable_percentage of the total revenues of the organization as set forth in sec_501 sec_501 defines credit_counseling_services as providing educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit assisting individuals and families with financial problems by providing them with counseling or a combination thereof sec_501 defines for purposes of sec_501 the term debt_management_plan_services to mean services related to the repayment consolidation or restructuring of a consumer's debt and includes the negotiation with creditors of lower interest rates the waiver or reduction of fees and the marketing and processing of debt management plans 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 sec_501 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 provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_a_-1 defines the words private_shareholder_or_individual in sec_501 to refer to persons having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 states that an organization may be exempt as one described in sec_501 if religious or charitable purposes designated in that section it is organized and operated exclusively for one or more purposes such as sec_1_501_c_3_-1 provides that the term charitable is used in sec_501 in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged as well as the advancement of education sec_1_501_c_3_-1 states that the term educational as used in sec_501 relates to a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community in revrul_67_138 1967_1_cb_129 a nonprofit organization created to provide instruction and guidance to low-income families in need of adequate housing and interested in building their own homes was recognized as exempt under sec_501 the organization's activities directed toward assisting low-income families obtain improved housing included conducting a training course relative to various aspects of house building and homeownership coordinating and supervising joint construction endeavors purchasing building sites for resale at cost and lending aid in obtaining home construction loans no fees were charged for any of these services these activities were held to further educational_purposes since the training is useful to and develops the capabilities of the individuals who receive it and benefits the community the organization’s other activities in assisting families in need to obtain adequate housing are charitable since they provide relief to the underprivileged lessen the burdens of government and are a means of combating community deterioration in revrul_68_167 1968_1_cb_255 an organization formed to assist needy women in earning income was recognized as exempt under sec_501 it operated a market selling the cooking and needlework of these women who were not otherwise able to support themselves and their families the organization charged a small sales commission for its services but was not self-supporting and depended on public contributions the service recognized that an organization can relieve the poor and distressed other than through direct grants such as by providing necessary services in revrul_69_441 1969_2_cb_115 an organization was formed to help reduce the incidence of personal bankruptcy by informing the public on personal money management and by assisting low-income individuals and families who have financial problems it provides information to the public on budgeting buying practices and the sound use of consumer credit it aids low-income individuals and families who have financial problems by providing them with individual counseling and if necessary by establishing budget plans and related_services without charge the revenue_ruling concluded that the organization is relieving the poor and distressed and it is instructing the public on subjects useful to the individual and beneficial to the community therefore it qualified as an organization described in sec_501 analysis sec_501 provides in part for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable or educational_purposes provided that no part of the organization’s net_earnings inures to the benefit of any private_shareholder_or_individual the term charitable is used in sec_501 in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged as well as the advancement of education see sec_1_501_c_3_-1 the term educational includes the instruction or training of individuals for the purpose of improving or developing their capabilities see sec_1 c - d likewise the education of low-income individuals on personal money management and aiding low-income individuals and families with financial problems is considered a charitable activity see revrul_69_441 supra program separately and collectively is educational within the meaning of sec_1_501_c_3_-1 and is similar to the program described in revrul_69_441 supra phases through iii of program are a comprehensive educational program designed to provide instruction to eligible low-income employees and retirees of company about the benefits of personal savings and to encourage changing the way they view save and use money program may also include individual financial counseling for those participants in need of such personalized services see revrul_67_138 supra holding that an organization's activities were furthering educational_purposes since the training is useful to and develops the capabilities of the individuals who receive it and benefits the community because your educational program falls within the definition of credit_counseling_services as defined in sec_501 and is a substantial purpose you are also subject_to the additional requirements set forth in sec_501 you meet the requirements of sec_501 your financial courses and individual counseling services are tailored to the specific needs and circumstances of the participants for example phase iii of program includes discussions of individual counseling needs and referrals that focus on the particular needs of the participant you do not provide loans or services related to an individual’s credit record credit history or credit rating you do not charge a fee for participating in program and do not provide debt management services you meet the board_of director’s requirement because your board members are volunteers no board member has a financial interest in your activities your board is comprised of persons wholly independent of any credit counseling or debt management service provider and your board represents the broad interests of the public you do not have control a profit interest or beneficial_interest in any other organization in the business of lending money repairing credit or providing debt_management_plan_services payment processing or similar services finally you do not receive any fee or amount for referrals you also meet the requirements of sec_501 you do not solicit contributions from individuals during their initial counseling sessions or at any time while they are participating in program further you do not provide debt_management_plan_services so the fair share requirement is not applicable accordingly we conclude that program is operated in compliance with the additional requirements of sec_501 in addition to the educational and counseling features of program participants completing phases through ill will be eligible to participate in phase iv phase iv of program enables participants to enroll in savings programs like sec_401 retirement plans or sec_529 college savings plans participants in the college match program are eligible to receive a match up toa specified dollar amount based on completion of coursework and consistency of savings on an annual basis provided that participants demonstrate good savings practices as taught by the courses offered in phase and ii and as evidenced by the establishment of a sec_529 plan and the regular use of payroll deductions to make contributions to that plan self-help programs are often used to ameliorate the problems of poverty for instance the marketing of cooking and needlework of needy women was considered a necessary service to further the organization’s charitable purposes in revrul_68_167 supra similarly providing building lots and supplies was considered an appropriate means to achieving the charitable purposes of an organization operating a self-help housing program for low-income families in revrul_67_138 supra you indicate that you have designed program to maximize your charitable and educational_purposes by addressing the issues of financial instability plaguing low-skilled and low-income workers with little financial education and savings to avert future emergencies by targeting and educating this financially vulnerable population you hope to prevent conditions of financial distress before it occurs in particular the college match program in phase iv is an incentive uniquely designed to encourage low-skilled low-income workers to change their savings behaviors and to steer them toward a more secure future because the college match program is an appropriate means to achieving your exempt purposes the private benefit to the participants is incidental ruling based on the information submitted we rule as follows creating and operating program will not adversely affect your current status as an organization described in sec_501 this ruling will be made available for public inspection under sec_6110 after certain deletions of identifying information are made 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 should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 provides that it may not be used or cited by others as precedent 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 resolved 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 internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely enclosure notice acting manager exempt_organizations technical group


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc intl br1-plr-109462-98 date date contact person’s unique identifying number ty a date b country c year d date e date f dear this is in response to a letter dated date as supplemented by a letter dated date submitted by a’s authorized representative requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s loss of u s citizenship did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements 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 a was born on date b and became a citizen of country c by reason of her birth in country c a moved to the united_states in year d and became a naturalized citizen_of_the_united_states on date e a formally renounced her united_states citizenship on date f by making an oath of renunciation at the united_states consulate in country plr-109462-98 c on the date of a’s expatriation her net_worth exceeded dollar_figure sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed on u s source income as modified by sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen or former long term-resident whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary's determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_27_irb_30 modifying notice_97_19 1997_1_cb_394 an eligible former citizen will not be presumed to have a principal purpose of tax_avoidance if that former citizen submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_97_19 because she is described in the categories of individuals eligible to submit ruling requests a is eligible to submit a request because a is a citizen of country c the country in which she was born a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission accordingly based solely on the information submitted and the representations plr-109462-98 made it is held that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 and therefore a will not presumed to have expatriated with a principal purposes of tax_avoidance however because the information submitted does not clearly establish the existence or lack of a principal purpose to avoid taxes under subtitle a or b of the code no opinion is expressed as to whether a’s expatriation had for one of its principal purposes the avoidance of such taxes while this ruling rebuts the presumption of tax_avoidance under sec_877 it is not conclusive as to whether a subsequently may be found to have a principal purpose of tax_avoidance under sec_877 sec_2107 and sec_2501 based on all the facts and circumstances see sec_877 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a’s u s tax_liability for taxable periods prior to her loss of u s citizenship or for taxable periods after her loss of u s citizenship under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return 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 representative sincerely edwards williams senior technical reviewer cc assistant_commissioner international


internal_revenue_service numbe 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 qp1 plr-t-103164-15 date may legend state a plan b board c statuted statute e dear this letter is in response to a ruling_request submitted by your authorized representative on behalf of plan b dated date as supplemented by correspondence dated date and date with respect to the federal_income_tax treatment of certain contributions to plan b under sec_401 sec_414 sec_415 and sec_3401 of the internal_revenue_code the code the following facts and representations are submitted under penalties of perjury in support of your request plan b is a cost-sharing multiple employer defined_benefit_plan that is intended to constitute a qualified_plan under sec_401 a and a governmental_plan within the meaning of sec_414 the governing provisions of plan bare statutorily promulgated by the legislature of state a plan b is administered by board c plan b has two different benefit structures tier and tier the tier and tier benefit structures each have a benefit formula that multiplies three variables the member's final average salary as defined in the plan hereinafter referred to as plr-t-103164-15 fas a statutory multiplier specified in the plan and the member's years_of_service in the legislature of state a enacted statute d which among other things provides tier members with certain elections with respect to their employee contribution rates and statutory multiplier under statute d an individual who is a tier member of plan bon date will have a one-time irrevocable election during a 90-day period established by board c to either increase their employee contributions from to of compensation effective date and from to effective date and increase their multiplier from to of fas times years_of_service earned on and after date or continue to make an employee contribution of of compensation and have their multiplier drop from to of fas times years_of_service earned on and after date statute d further provides that tier members that fail to make such an election during the applicable_election_period are treated as if they elected to increase their employee contributions and multiplier as specified in immediately above with respect to tier members statute d provides that effective date a tier member will have a one-time irrevocable election during a 90-day period established by board c to either continue to make an employee contribution of have a multiplier of of fas times years_of_service but without a cost-of-living adjustment cola or continue to make an employee contribution of of compensation have a multiplier of of fas times years_of_service earned on and after date with a cola in the state a legislature enacted statute e which revised the amount of required member contributions and the benefit multiplier under plan b for tier and tier members of the plan as follows an individual who is a tier plan b member on date will have the election provided in statuted described above only if the internal_revenue_service irs approves the election if the irs does not the irs does not approve or disapprove a statutory provision or a proposed transaction however upon receipt of a proper submission by a taxpayer the irs will issue a ruling regarding the federal tax plr-t-103164-15 approve the election the increase in the member contribution and the increase in the multiplier under statuted will be automatic ie members will not be permitted an election accordingly under statute e if the irs does not approve the member election allowed under statute d for tier members the following will occur a b the required employee contributions for individuals who are tier members on date will automatically increase from to of compensation effective date and from to effective date and the statutory multiplier with respect to such tier members will automatically increase from to of fsa times years_of_service earned on and after date an individual who is a tier plan b member on date will not have any election and the following will occur a b c the employee contribution rate will remain pincite of compensation effective date the multiplier automatically increases from of fsa to times all years_of_service and members retiring on or after date will no longer be entitled to a cola that is provided to tier members retiring before such date the statutory provisions setting forth plan b explicitly provide that each participating employer with respect to plan b must pick up and pay in accordance with sec_414 the contributions to plan b that would otherwise by payable by members based on the above facts and representations you request the following rulings that the elections permitted tier members of plan b under statute d if implemented will not constitute a cash_or_deferred_arrangement within the meaning of sec_401 k that the mandatory member contributions required to be made under statute e by a tier and tier active member of plan b that are picked up by state a or a participating employer as employing units on behalf of such member shall continue to be treated as employer contributions to plan b under sec_414 for federal_income_tax purposes consequences of a proposed transaction under its private_letter_ruling program see revproc_2015_1 i r s plr-t-103164-15 that the mandatory tier and tier member contributions made and picked up as described in ruling_request above will not be included in a member's gross_income for federal_income_tax purposes until distributed or otherwise made available to the member that the mandatory tier and tier member contributions made and picked up as described in ruling_request above do not constitute wages as described in sec_3401 a that the mandatory tier and tier member contributions made and picked up as described in ruling_request above will not be treated as annual_additions for purposes of sec_415 with respect to plan b with respect to your first requested ruling sec_401 a provides that a_trust created or organized in the united_states and forming a part of a qualified_stock bonus pension or profit sharing plan of an employer constitutes a qualified_trust only if the various requirements set out in sec_401 a are met sec_401 k provides that a profit-sharing or stock_bonus_plan a pre-erisa_money_purchase_plan or a rural_cooperative_plan shall not be considered as not satisfying the requirements of sec_401 a merely because the plan includes a qualified_cash_or_deferred_arrangement as defined in sec_401 k sec_1 k -1 a of the income_tax regulations provides in pertinent part that a plan other than a profit-sharing stock bonus pre-erisa money purchase pension or rural_cooperative_plan does not satisfy the requirements of sec_401 a if the plan includes a cash_or_deferred_arrangement thus a qualified defined_benefit_plan is not permitted to include a cash_or_deferred_arrangement furthermore sec_401 k b ii provides that a cash_or_deferred_arrangement shall not be treated as a qualified_cash_or_deferred_arrangement if it is part of a plan maintained by a state_or_local_government or political_subdivision thereof or any agency_or_instrumentality thereof section f b i of the tax_reform_act_of_1986 p l provides a transition rule pursuant to which the prohibition of sec_401 k b ii of the code does not apply to any cash_or_deferred_arrangement adopted by a state_or_local_government or political_subdivision thereof before date thus if a governmental employer maintains a qualified defined_contribution_plan the plan cannot generally include a qualified_cash_or_deferred_arrangement within the meaning of sec_401 k unless the cash_or_deferred_arrangement was adopted before date sec_1 k -1 a provides that subject_to certain exceptions which are inapplicable in this case a cash_or_deferred_arrangement is an arrangement under plr-t-1 which an eligible_employee may make a cash or deferred election with respect to contributions to or accruals or other_benefits under a plan that is intended to satisfy the requirements of sec_401 a sec_1 k -1 a i defines a cash or deferred election as any direct or indirect election or modification of an earlier election by an employee to have the employer either a provide an amount to the employee in the form of cash or some other taxable benefit that is not currently available or b contribute an amount to a_trust or provide an accrual or other benefit under a plan deferring the receipt of compensation sec_1 k -1 a v provides that a cash_or_deferred_arrangement does not include a one-time irrevocable election made no later than the employee's first becoming eligible under the plan or any other plan or arrangement of the employer that is described in sec_219 to have contributions equal to a specified amount or percentage of the employee's compensation including no amount of compensation made by the employer on the employee's behalf to the plan and a specified amount or percentage of the employee's compensation including no amount of compensation divided among all other plans or arrangements of the employer for the duration of the employee's employment with the employer in the present case the employee elections provided under plan b pursuant to statute d result in tier members being given the option to have state a or a participating employer either provide a greater or lesser amount to the member in the form of cash that is not currently available or contribute an amount to plan b or provide an accrual under plan b which is a plan deferring the receipt of compensation thus employees are given a cash or deferred election right within the meaning of sec_1 k - a with respect to their designated employee contributions under plan b accordingly the elections granted to tier members under statute d with respect to employee contributions would if implemented constitute a cash_or_deferred_arrangement within the meaning of sec_1 k -1 a in addition even though the elections granted to tier members under statuted would be one-time and irrevocable the elections would not constitute one-time irrevocable elections within the meaning of sec_1 k -1 a v in order to be a one-time irrevocable election under sec_1 k -1 a v the election must be made no later than an employee's first becoming eligible under any plan that is described in sec_219 of the employer in this case the employees are already participating in plan b a type of plan that is described in sec_219 during the time they are eligible to make the elections under statute d accordingly the tier member elections under statute d would not be excluded from constituting a cash_or_deferred_arrangement by reason of sec_1 k -1 a v and would thus be an impermissible cash_or_deferred_arrangement plr-t-1 with respect to your second requested ruling sec_414 provides that any amount contributed to an employees' trust described in sec_401 a shall not be treated as having been made by the employer if it is designated as an employee contribution sec_414 provides that for purposes of sec_414 in the case of any plan established by the government of any state or political_subdivision thereof or by any agency_or_instrumentality of any of the foregoing or a governmental_plan described in the last sentence of sec_414 relating to plans of indian tribal governments where the contributions of employing units are designated as employee contributions but where any employing unit picks up the contributions the contributions so picked up shall be treated as employer contributions the federal_income_tax treatment to be afforded contributions that are picked up by the employer within the meaning of sec_414 has been described in a series of revenue rulings in revrul_77_462 c b the employer school district agreed to assume and pay the amounts employees were required by state law to contribute to a state pension_plan revrul_77_462 concluded that the school district's picked-up contributions to the plan were excluded from the employees' gross_income until such time as they were distributed to the employees revrul_77_462 further held that under the provisions of sec_3401 the school district's contributions to the plan were excluded from wages for purposes of the collection of income_tax at the source on wages therefore no withholding was required for federal_income_tax purposes from the employees' salaries with respect to such picked-up contributions revrul_81_35 1981_1_cb_255 and revrul_81_36 1981_1_cb_255 established that the following two criteria must be met the employer must specify that the contributions although designated as employee contributions are being paid_by the employer in lieu of contributions by the employee and the employee must not be given the option of choosing to receive the contributed amounts directly instead of having them paid_by the employer to the pension_plan revrul_87_10 c b provides that the required specification of designated employee contributions must be completed before the period to which such contributions relate if not the designated employee contributions paid_by the employer are actually employee contributions paid_by the employee and recharacterized at a later date the retroactive specification of designated employee contributions as paid_by the employing unit ie the retroactive pick-up of designated employee contributions by a governmental employer is not permitted under sec_414 thus employees may not exclude from current gross_income designated employee contributions to a qualified_plan that relate to compensation earned for services rendered prior to the date of the last governmental action necessary to effect the pick-up plr-t-103164-15 revrul_2006_43 2006_35_irb_329 amplifying and modifying revrul_81_35 revrul_81_36 and revrul_87_10 describes the actions required for a state or political_subdivision of a state or an agency_or_instrumentality of either to pick-up employee contributions to a plan qualified under sec_401 a so that the contributions are treated as employer contributions pursuant to sec_414 specifically revrul_2006_43 provides that a contribution to a qualified_plan established by an eligible_employer ie a governmental employer will be treated as picked-up by the employing unit under sec_414 if two conditions are satisfied first the employing unit must specify that the contributions although designated as employee contributions are being paid_by the employer for this purpose the employing unit must take formal action to provide that the contributions on behalf of a specific class of employees of the employing unit although designated as employee contributions will be paid_by the employing unit in lieu of employee contributions a person duly authorized to take such action with respect to the employing unit must take such action the action must apply only prospectively and be evidenced by a contemporaneous written document eg minutes of a meeting a resolution or ordinance second the pick-up arrangement must not permit a participating employee from and after the effective date of the pick-up to have a cash or deferred election right within the meaning of sec_1 k -1 a of the regulations with respect to designated employee contributions thus for example no participating employee may be given the right to opt_out of the pick-up arrangement described in sec_414 or to receive the contributed amounts directly instead of having them paid_by the employing unit to the plan revrul_2006_43 states that the pick-up rules expressed in revrul_81_35 and revrul_81_36 apply even if the employer picks up contributions through a reduction in salary or through an offset against future salary increases in the present case statute e provides that if the irs does not approve the member elections described in statute d then increases in the member contribution rate and the statutory multiplier under plan b will be automatic ie members will not be permitted an election accordingly because the irs concluded with respect to ruling one above that the tier member elections would result in an impermissible cash_or_deferred_arrangement statute e requires that the following occur effective date required employee contributions for any individual who is a tier plan b member on date automatically increases from to of compensation plr-t-103164-15 effective date required contributions with respect to such tier members further increases from to effective date the statutory multiplier with respect to such tier members automatically increases from to of fsa times years_of_service earned on and after such date based on the facts represented the employee contributions that are mandated by statute e are to be picked up by each participating employer with respect to plan b under sec_414 in accordance with revrul_81_35 revrul_81_36 and revrul_2006_43 appropriate formal action has been taken to provide that such mandatory employee contributions although designated as employee contributions will be paid_by the employing unit in lieu of employee contributions the state a legislature specifically provided in the statutory provisions setting forth plan b that in accordance with sec_414 each participating employer with respect to plan b must pick up and pay the contributions to plan b that would otherwise be payable by members additionally consistent with revrul_87_10 because the relevant statutory plan b provisions are prospective the required specification of the designated employee contributions was completed before the period to which such contributions relate furthermore because the irs concluded with respect to ruling one above that the tier member elections that would otherwise be allowed under statute d would result in an impermissible cash_or_deferred_arrangement statute e does not allow for any member elections with respect to mandatory employee contributions to plan b thus as regards the mandatory employee contributions made in accordance with statute e with respect to tier and tier plan b members which are picked up by the employing unit under the terms of plan b the tier and tier members are not given the option of choosing to receive the contributed amounts directly instead of having them paid_by the employer to plan b consequently in accordance with revrul_81_35 revrul_81_36 and revrul_2006_43 the tier and tier members are not permitted from and after the effective date of the pick-up to have a cash or deferred election right within the meaning of sec_1 k -1 a with respect to the designated employee contributions therefore the pick-up arrangement under plan b as described in the facts represented is a valid pick-up arrangement consistent with revrul_81_35 revrul_81_36 and revrul_2006_43 with respect to your third and fourth requested rulings sec_402 generally provides that any amount actually distributed to any recipient by any employees' trust described in sec_401 a which is exempt from tax under sec_501 shall be taxable to the recipient in the taxable_year of the distribution under sec_72 relating to annuities plr-t-103164-15 sec_1_402_a_-1 a i provides that if an employer makes a contribution for the benefit of an employee to a_trust described in sec_401 a for the taxable_year of the employer which ends within or with a taxable_year of the trust for which the trust is exempt under sec_501 a the employee is not required to include such contribution in his income except with respect to the year or years in which such contribution is distributed or made available to him in the present case because the mandatory tier and tier member contributions that are made in accordance with statute e and picked up by a participating employer under the terms of plan b will be made pursuant to a valid pick-up arrangement they will be treated as employer contributions therefore pursuant to sec_402 and sec_1_402_a_-1 a i the picked-up employee contributions to plan b will not be included in gross_income of the member for federal_income_tax purposes until distributed or otherwise made available to the member furthermore consistent with revrul_77_462 and in accordance with sec_3401 a a the picked-up employee contributions to plan b are excluded from wages for purposes of the collection of income_tax at the source on wages in addition all payments of remuneration by an employer for services performed by an employee are generally subject_to taxes under the federal_insurance_contributions_act fica unless the payments are specifically excepted from the term wages or the services are specifically excepted from the term employment_fica_taxes include social_security and medicare taxes sec_3121 v b provides that other than the social_security_tax wage_base limitation nothing in sec_3121 a excludes from the term wages any amount picked up as an employer_contribution under sec_414 if the pickup is pursuant to a salary reduction agreement whether evidenced by a written instrument or otherwise for these purposes the term salary reduction agreement includes any salary reduction arrangement regardless of whether there is approval or choice of participation by individual employees or whether such approval or choice is mandated by state statute h_r conf_rep no 98th cong 2d sess see also public employees' retirement board v shalala f 3rd h cir therefore under sec_3121 if an employee's services are covered included in employment for social_security_tax purposes pickup contributions under sec_414 that are made pursuant to a salary reduction agreement are generally subject_to social_security_taxes unless the maximum wage_base exception applies also under sec_3121 if an employee's services are covered included in employment for medicare_tax purposes pick-up contributions under sec_414 that are made pursuant to a salary reduction agreement are subject_to medicare taxes without any limit based on the_amount_of_wages this does not constitute a ruling on whether the pick-up contributions are made pursuant to a salary reduction agreement for fica tax purposes plr-t-103164-15 with respect to your fifth requested ruling sec_401 a provides that a_trust shall not constitute a qualified_trust under sec_401 a if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of sec_415 sec_415 a provides that a defined_benefit_plan is not a qualified_plan if the plan provides for the payment of benefits with respect to a participant which exceed the limitation of sec_415 sec_415 prescribes limitations that are based on the annual_benefit determined under sec_415 sec_415 provides for adjustments in accordance with regulations to the benefit determined under the plan if employees contribute or make rollover_contributions to the plan sec_415 provides that a defined_contribution_plan is not a qualified_plan if the contributions and other additions under the plan with respect to any participant for any taxable_year exceed the limitation of sec_415 sec_415 places specified limitations on annual_additions as defined in sec_415 to a participant's account under a defined_contribution_plan sec_1 b -1 b prescribes rules for the determination of the annual_benefit for purposes of sec_415 sec_1_415_b_-1 b ii provides that an annual_benefit for purposes of determining the sec_415 limitation does not include the annual_benefit attributable to employee contributions however sec_1_415_b_-1 b ii a provides that for purposes of determining the annual_benefit under a defined_benefit_plan attributable to employee contributions contributions that are picked up by a governmental employer as provided in sec_414 are disregarded accordingly employee contributions that are picked up by a governmental employer as provided in sec_414 are treated as employer contributions for purposes of determining the sec_415 limitation and are not treated as annual_additions for purposes of sec_415 sec_1_415_c_-1 a ii b provides that mandatory employee contributions as defined in sec_411 and sec_1_411_c_-1 regardless of whether the plan is subject_to the requirements of sec_411 to a defined_benefit_plan are treated as contributions to a defined_contribution_plan however sec_1_415_c_-1 further states that for this purpose contributions that are picked up by the employer as described in sec_414 are not considered employee contributions in the present case the mandatory tier and tier member contributions that are made in accordance with statute e and picked up by a participating employer under the terms of plan b will be made pursuant to a valid pick-up arrangement therefore pursuant to sec_1 b -1 b ii a and c -1 a ii b the picked-up contributions will be treated as employer contributions to plan b for purposes of sec_415 consequently the picked-up contributions will not be treated as annual_additions for purposes of sec_415 with respect to plan b rather in accordance with sec_1 b -1 b ii a such amounts are treated as employer contributions for plr-t-103164-15 purposes of determining the member's annual_benefit under plan b for purposes of the limitation of sec_415 in summary based on the represented facts we conclude if implemented the elections permitted tier members of plan b under statute would constitute a cash_or_deferred_arrangement within the meaning of sec_401 k if the elections permitted tier members of plan b under statute are not implemented the mandatory employee contributions made under statute e with respect to tier and tier members that are picked up by the employing unit shall be treated as employer contributions to plan b under sec_414 for federal_income_tax purposes the mandatory tier and tier member contributions made and picked up as described in above will not be included in the member's gross_income for federal_income_tax purposes until distributed or otherwise made available to the member the mandatory tier and tier member contributions made and picked up as described in above are excluded from wages as described in sec_3401 a the mandatory tier and tier member contributions made and picked up as described in above will not be treated as annual_additions for purposes of sec_415 with respect to plan b rather such amounts will be treated as employer contributions for purposes of determining the member's annual_benefit under plan b for purposes of the limitation of sec_415 this ruling is based on the assumption that plan b satisfies the qualification requirements set forth in sec_401 a and constitutes a governmental_plan within the meaning of sec_414 at all relevant times except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 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 representative plr-t-103164-15 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 sincerely laura b warshawsky senior tax law specialist qualified_plans branch tax exempt and government entities cc


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-124374-17 date date legend a -------------------------- -------------------------------------------- b -------------------------- -------------------------------------------- year1 ------- dear -------------------------- this responds to a letter dated date submitted on your behalf by your authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_469 of the internal_revenue_code and sec_1_469-9 of the income_tax regulations to treat all interests in rental real_estate as a single rental real_estate activity according to the information submitted a and b taxpayers are married individuals who filed a joint tax_return in year1 the information submitted further states that in year1 a was engaged in a real_property business as defined by sec_469 and that taxpayers were qualified under sec_469 to make an election to treat all interests in rental real_estate as a single rental real_estate activity however taxpayers were not advised by their professional tax_return_preparer that the election under sec_469 was available to them it is represented that taxpayers filed their joint tax_return for year1 without the statement required under sec_1_469-9 in addition it is represented that the joint tax_return of taxpayers for year1 along with subsequent returns were filed consistent with making this election under sec_469 the term passive_activity generally includes any rental_activity sec_469 provides a limited exception to this rule for taxpayers in a real plr-124374-17 property trade_or_business specifically sec_469 provides that if a taxpayer meets the requirements of sec_469 the taxpayer’s rental real_estate activity will no longer be presumptively passive by its terms the exception under sec_469 is to be applied as if each interest of the taxpayer in rental real_estate were a separate activity however under sec_469 a taxpayer may elect to treat all interests in rental real_estate as a single activity sec_1_469-9 provides that a qualifying taxpayer makes the election to treat all interests in rental real_estate as a single rental real_estate activity by filing a statement with the taxpayer’s original income_tax return for the taxable_year sec_1_469-9 describes the information that must be contained in the statement under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 provides that except as provided in sec_301_9100-3 through iii when a taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the taxpayer will be deemed to have acted reasonably and in good_faith based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result taxpayers are granted an extension of time of days from the date of this letter to make an election under sec_469 to treat all interests in rental real_estate as a single rental real_estate activity effective year1 the election must be in the form of the statement required by sec_1_469-9 and attached to an amended_return for year1 a copy of this letter should be attached to the election plr-124374-17 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether taxpayers satisfy the requirements under sec_469 or whether taxpayers materially participate in any activity the ruling contained in this letter is based upon information and representations submitted by taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination this ruling is directed only to the taxpayers 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 we are sending a copy of this letter to your authorized representative sincerely acting associate chief_counsel passthroughs special industries _________________________________ james a quinn senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purpose-s


department of the treasury internal_revenue_service washington d c date uil cc el ct-104896-97 rkdelmar number release date memorandum for assistants regional_counsel criminal tax from barry j finkelstein assistant chief_counsel criminal tax cc el ct subject treasury_inspector_general_for_tax_administration the secretary recently issued treasury order setting out the authority and responsibility of the newly-created treasury_inspector_general_for_tax_administration tigta in addition the commissioner and the acting tigta recently entered into an mou regarding the investigative jurisdiction of irs-cid and the tigta copies of both documents are attached the mou project originally represented an effort by the assistant_commissioner criminal investigation and the then-chief inspector to delineate the two functions’ responsibilities to prevent disputes and facilitate cooperation the irs restructuring and reform act of p l transferred most of inspection’s functions to the tigta as well as creating expanded authority for the tigta paragraph a of the treasury order refers to the respective responsibilities of the tigta and the irs to enforce criminal_law and directs the two entities to develop policies and procedures to assure a clear delineation of their respective jurisdictions the mou is the result points of interest regarding tigta’s authority include the provision of money laundering jurisdiction mou ii and t o sec_2 a and the final say in matters regarding substantive tax offenses committed by irs personnel mou ii i and iii the treasury order states that tigta will not perform actual program operating responsibilities sec_1 g if questions arise concerning the interpretation of these documents or if you are consulted in the context of ci-tigta jurisdictional issues please call on rich delmar who may be reached on attachments