department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date january uil dear contact person identification_number contact number employer_identification_number form required to be filed tax years this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in sec_501 c recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final since you do not qualify for exemption as an organization described in code sec_501 c donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 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 you should follow the instructions in notice if you agree with our deletions you do not need to take any further action le t t e r cg - catalog number in accordance with code sec_61 c we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter if you have any questions about your federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments i sec_1 sincerely acting director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number uil tax_exempt_and_government_entities_division date date legend b state c individual d title e title f organization g organization h program x date y dollar amount z dollar amount dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 a based on the information provided we have concluded that you do not qualify for exemption under code sec_501 c the basis for our conclusion is set forth below issues are your services commercial in nature and do they serve a substantial non exempt_purpose yes for the reasons described below are you operating exclusively for exempt purposes as described in sec_501 c of the internal_revenue_code no for the reasons stated below facts you incorporated on x pursuant to the provisions of the non-profit laws in the state of b you incorporated for charitable and educational_purposes and letter cg catalog number 47630w to instruct church and charity employees and volunteers with respect to sound fundraising practices to conduct and publish research with respect to the efficiency of charities to contribute funds to organization's exempt from tax under sec_501 c to engage in other charitable and educational activity as determined by the board_of directors you are governed by a board_of six directors and two officers your two officers are former officers at_f f is a for-profit company that offers charitable financial planning products manages donor_advised_fund accounts and provides administrative services for charitable projects presently none of your officers or directors are members or officers of f although your articles of incorporation state you shall not have members your statement of revenues and expenses reported membership fees as your primary income source for an annual membership fee of y dollars your members receive a book d and its accompanying cd and flash drive another book e and a dvd describing h a technique for fundraising the cost of annual membership also includes four hours of instruction and newsletters for members during the year d and e are authored by c your president the annual membership fee was determined by the costs a third party publisher charges to you for the books and materials the books and materials are available to non-members at a charge above the cost to produce the materials the purpose of charging a higher fee to non-members is to cover the costs of the materials and to encourage people to join instead of purchasing the materials separately you explained by joining a member shall not only receive the materials free of charge he shall also provide a contribution towards you receive newsletters and benefit from the educational training and programs you offer to members c has the copyrights to the materials you use you stated that c does not charge you a fee and has given you a royalty-free license for using the copyright materials there is no written_agreement between you and c for using the copyright materials you provided copies of the two books d and e written by c although c was the author f was named as the copyright owner you explained that c is no longer an officer of f and the copyright of e was assigned back to c when cleft f you explained there is no written documentation of the copyright transfer future editions of e will name c as the copyright owner the given purpose in the foreword portion of e is to provide philanthropy development training to a cadre of members of g g is an association of members who are primarily letter cg catalog number 47630w financial service professionals the book explains that g is an essential marketing arm of f the content of the book provides information about philanthropy and establishing charitable projects or foundations at_f e also describes the charitable financial planning products available at_f the foreword further explains that upon completion of both practicum and academic success a certificate in philanthropic development is awarded despite the content in e you state that you do not train or certify financial advisors that provide similar services as the philanthropy development consultants who market products for f although e discusses the advantages of establishing charitable projects and foundations at_f you claim you are completely unrelated to f you are not taking over the training activities of f nor are you assuming any activities or assets of f you also explained that the copy of e that was provided is an older version the reprint will not include the chapter on setting up donor_advised_fund accounts at_f or at any affiliated organization no further details were provided on the reprinted current version the dvd you provide to members is instruction on a fund raising compensation plan called h h was described as setting aside a predetermined percentage up to of funds raised into a special account the funds in the account are used to pay for professional fundraising purposes h is also promoted in e as a service or product used by f e further explains that hallows of money raised for charity can be held for hourly compensation in a special escrow account your fundraising training will cover the material in the books and in the accompanying cd you intend to present information on how to as well as helping to design and implement fl lndraising programs for your members non-members are also welcome at the training sessions in addition to the books and dvd members receive assistance from you in developing and implementing fund raising programs you provided a sample agreement for fund raising training and planning your obligations under this fund raising agreement are to provide a growing cadre of financial assistants who are both trained and motivated to raise funds for your clients projects and programs compensation to you will be of the net value of the funds raised the is calculated before deducting the amount put into the escrow agreement for h your client must also pay for your travel and per_diem for a minimum initial contribution of z dollars an individual can apply to you to begin a project you will help recruit train and motivate a growing cadre of people ready to raise funds for all appealing charitable projects you submitted a sample copy of an letter cg catalog number 47630w application to begin a project at your organization this application explains that all contributions to the project will be entirely under your authority you train and provide a project manager whose tenure is completely under the authority of you your services also include training a cadre of people who can assist in the operations of a member's charity along with the above you have generated six newsletters the topics of those newsletters have been the magic ofthe h the magic of the financial professional h - legal opinion helping a charity reach financial goals s motivating direct solicitation levels revolving loan fund and the importance of endowment when asked you stated the revolving loan fund is an idea that waits irs approval and the setting aside of funds and that there was no agreement at this time no further details were provided the only revenue you have projected is from membership fees you list two primary expenses - professional fees and other which includes travel conference and other fees associated with educating and training organizations through the us on fundraising methods you did not further elaborate on who would be in receipt of the professional fees however you did indicate that going forward you may have contractual agreements with members to provide services including reasonable payments for assistance in the design and implementation of fund raising programs law section s01 c of the internal_revenue_code exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for charitable scientific or testing for public safety among other purposes sec_1 s01 c -1 c ofthe income_tax regulations provide that an organization is operated exclusively for exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes specified in section s01 c it is not so operated if more than an insubstantial part of its activities do not further those purposes sec_1 s01 c -1 c of the regulations provides that an organization is not operated exclusively for exempt purposes if its net_earnings inure to the benefit of private individuals letter cg catalog number 47630w sec_1 c -1 d ii provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest it further states that lito meet the requirement of this subdivision it is necessary for an organization to establish that it is not organized and operated for the benefit of private interests in revrul_69_528 1969_2_cb_127 an organization that was regularly carrying out an investment service business that would be an unrelated_trade_or_business if carried on by any exempt_organization on whose behalf the organization operated was not found to be exempt under sec_501 c the organization was formed to provide investment services on a fee basis exclusively to organizations exempt from federal_income_tax under sec_501 c of the code it receives funds from the participating exempt_organizations invests in common stocks reinvests income and realized appreciation and upon request liquidates a participant's interest and distributes the proceeds to the participant in revrul_71_529 1971_2_cb_234 a nonprofit organization that provided assistance in the management of participating colleges' and universities' endowment or investment funds for a charge substantially below cost qualified for exemption under sec_501 c of the code revenue_ruling distinguished in revrul_72_369 1972_2_cb_245 an organization that was formed to provide managerial and consulting services at cost to unrelated exempt_organizations was not found to be exempt under sec_501 revenue_ruling distinguished in 326_us_279 the supreme court 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 the court found that a trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university in 70_tc_352 the court found that a corporation formed to provide consulting services was not exempt under sec_501 c because its activities constituted the conduct_of_a_trade_or_business that was ordinarily carried on by commercial ventures organized for profit its primary purpose was not charitable educational nor scientific but rather commercial in addition the court found that the organization's financing did not resemble that of the typical c organizations it had not solicited nor had it received voluntary contributions from the public its only source_of_income was from fees from services and those fees were set high enough to recoup all projected costs and to produce a profit moreover it did not appear that the corporation ever planned to charge a fee less than cost and finally the corporation did not limit its clientele to organizations that were se tion letter cg catalog number 47630w c exempt_organizations in living faith inc v commissioner t c m aff'd 950_f2d_365 cir the court said that the activities were conducted as a business and the organization was in direct competition with other restaurants and health food stores thus it did not qualify for exemption under sec_501 c the appellate court stated the factors that the court relied upon to find commerciality and thus offered the best contemporary explanation of the commerciality doctrine these factors include the organization sold goods and services to the public the organization was in direct competition with for profit businesses the prices set by the organization were based upon pricing formulas common in retail food businesses the organization utilized promotional material and commercial catch phrases to enhance sales the organization advertised its services and food the organization did not receive any charitable_contributions application of law you are not described in sec_501 c of the internal_revenue_code because you are not operated for a c purpose but rather in a commercial manner your consulting management products and fund raising services and fee structure are similar to the services provided by commercial businesses your operations are similar to f a related for profit entity you also use the same training materials that promote f products resulting in more than insubstantial private benefit these services demonstrate more than an insubstantial part of your operations do not further exempt purposes as described in sec_1 c -1 c of the regulations yoli publish and distribute materials for a fee that are owned by your president c although you claim to be no longer associated with f your services and products are similar to and in competition with f c a former officer at_f has written the books that train professionals who market f products the book you provide to members and non- members e also promotes the fundraising plan h that is used by both you and f although you claim c does not charge you a fee there is no written documentation or agreement to demonstrate this arrangement does not allow net_earnings to inure to c which prevents you from qualifying for exemption per sec_1 c -1 c of the regulations sec_1 c -1 d ii provides an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private letter cg catalog number 47630w interest you have failed to establish how your commercial operations to recruit train and motivate a growing cadre of people that provide management consulting and fund raising services serves a public rather than a private interest further you have failed to establish earnings will not inure to c either directly or indirectly through f similar to the organization described in revrul_69_528 you are carrying_on_a_trade_or_business you characterize your materials and services as free to members however your membership fees are determined by the cost you incur to provide services and published materials you also make your products and services available for sale to the general_public above cost thus you are providing services to members at cost while non members pay higher charges for the same services you differ from the organization described in revrul_71_529 because your managerial and consulting services are not priced to provide assistance substantially below cost you are similar to the organization described in revrul_72_369 as you are providing services to unrelated exempt_organizations under c at cost similar to the organization in better business bureau of washington you operate with an underlying commercial motive this is a substantial non exempt_purpose disqualifying you from exemption similar to the organization in b s w group your primary objective appears to be not charitable or educational but commercial your sole projected source_of_income is fees - both from members and non-members from the sale of your books and materials you are charging prices that are at or above cost - not below your activities are promoted to any organization or individual interested in fundraising you have been unable to substantiate that your activities are not conducted in a commercial manner like the organization in living faith inc v commissioner you sell goods and services to the public including your instructional course and fund raising plan h in direct competition with other for-profit entities offering similar products including f similar to the factors outlined in the ruling you set prices to cover costs offering memberships as incentives to receive your products and services your materials promote the products and services of c f and h you market your plans and have no projections for charitable_contributions applicant's position it is your contention that your programs are educational in nature and help further exempt purposes as described under sec_501 c of the code service response to applicant's position although you provide instruction on fundraising your consulting management and fundraising services are more than an insubstantial part of your operations and are letter cg catalog number 47630w structured in a nonexempt commercial manner like the organization in better business bureau of washington supra a substantial part of your activities consists of a non-exempt purpose that precludes exemption conclusion because you are operating for non-exempt commercial purposes and in furtherance of private rather than public interest you do not meet the operational_test as described in sec_1 c -1 c of the regulations and therefore do not qualify for exemption under sec_501 c of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax exempt status types of information that should be included in your protest can be found on page of publication under the heading filing a protest the statement of facts item must be accompanied by the following declaration under penalties of perjury i declare that i have examined this protest statement including accompanying documents and to the best ofmy know edge and belief the statement contains al relevant facts and such facts are true correct and complete the declaration must be signed by one of your officers or trustees with personal knowledge of the facts your protest will be considered incomplete without this statement if your representative submits a protest a substitute declaration must be included stating that the representative prepared the protest and accompanying documents and whether the representative knows personally that the statements of facts contained in the protest and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication letter cg catalog number 47630w practice_before_the_irs and power ofattorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to 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 may fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter enclosure publication sincerely kenneth corbin acting director exempt_organizations letter cg catalog number 47630w


internal_revenue_service number release date index number ------------------------------- -------------------------------------- -------------------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-145515-07 date date legend x year year state date property property property ------------------------------- ------------------------ ------- ------- ------ ---------------------- ---------------------------- ----------------------- --------------------------- -------------------------- ---------------------- ----------------------------- ----------------------------------- ---------------------------- ----------------------------- property ------------------------------------------------------- --------------------------------------- ------------------------------------ property --------------------------------------------------------------- -------------------- plr-145515-07 ----------------------------- property ----------------------------------------------------- ----------------------- property property ------------------------------------ ----------------------- -------------------- ------------------------------------- -------------------------- ---------------------------- ------------------------------------- property -------------------------------------------------------------------- -------------------------- ------------------------------------------------------- property -------------------------- ------------------------------ ------------------------------------ ---------------- ---------------- dollar_figurem dollar_figuren dear -------------- requesting a ruling that x’s rental income from property property property property property property property property property and property is not passive_investment_income within the meaning of sec_1362 of the internal_revenue_code facts this letter is in response to your letter on behalf of x dated date the information submitted states that x was incorporated in year in accordance with the laws of state x intends to elect to be an s_corporation effective date on date x expects to have accumulated_earnings_and_profits from prior years x owns property property property property property property property property property and property collectively the properties commercial real_estate properties that are leased to tenants x through its employees plr-145515-07 or independent contractors provides certain services with respect to the leasing of the properties these services involve maintaining and repairing the buildings appurtenances and grounds of the properties including cleaning painting electrical plumbing roof and structural maintenance hvac trash and snow removal landscaping services and extermination services in year x collected approximately dollar_figurem in gross rents and incurred approximately dollar_figuren in relevant operating_expenses law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1362 provides that an s_corporation_election shall be terminated whenever the corporation i has accumulated earning and profits at the close of each of consecutive taxable years and ii has gross_receipts for each of such taxable years more than percent of which are passive_investment_income the termination is effective on and after the first date of the first taxable_year beginning after the third consecutive taxable_year referred to in sec_1362 sec_1362 except as otherwise provided in sec_1362 sec_1362 provides that the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1375 imposes a tax on the income of an s_corporation if the s_corporation has accumulated_earnings_and_profits at the close of such taxable_year and gross_receipts more than percent of which are passive_investment_income sec_1362 provides that except as otherwise provided the term apassive investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 defines arent as amounts received for_the_use_of or right to use property whether real or personal of the corporation sec_1_1362-2 provides that the term arents does not include rents derived in the active trade_or_business of renting property rents are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based plr-145515-07 upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and types and amounts of costs and expenses_incurred other than depreciation conclusion based solely on the facts and representations submitted we conclude that the rental income that x derives from the properties is not passive_investment_income as described in sec_1362 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 specifically no opinion is expressed concerning whether x is a small_business_corporation eligible to make an s_corporation_election further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 the code provides that it may not be used or cited as precedent be sent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office a copy of this letter will this ruling is directed only to the taxpayer requesting it sec_6110 of sincerely s audrey ellis senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


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 b04 plr-116313-16 date date legend decedent --------------------- spouse date date ----------------------- ---------------------- --------------------------- dear --------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-116313-16 it is represented that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including any taxable_gifts made during her lifetime you request an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-116313-16 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 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 that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the 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 due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 plr-116313-16 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date it is represented that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void plr-116313-16 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 sincerely melissa c liquerman melissa c liquerman branch chief branch passthroughs special industries enclosures copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c nov tax oxempt and government entities division uniform issue list tiep raye legend church a church b school c school d organization e state m city n plan x dear this is in response to a request for a ruling submitted on your behalf by your authorized representative dated date as supplemented by letters dated date date and date under sec_414 of the internal_revenue_code the code the following facts and representations were submitted in connection with your request in church a established in three officials of church a the incorporators incorporated school church a is a member of organization e which forms part of a regional association of churches that accepts the constitution of church b school d d as a non-profit non-stock organization under the laws of state m incorporation provided that school d was organized on a directorship basis and that on dissolution all of the assets of school d would be distributed to church a school d’s original bylaws adopted in vested the power and authority to manage and control school d in its board_of directors board the members of which were originally named by the incorporators thereafter vacancies on the board were appointed by a group of church a members who managed the temporal affairs of church a determined that school d was an organization described under code sec_501 and exempt from tax under sec_501 in september of the internal_revenue_service the service the articles of in school d known as school c in honor of a former dean of church a amended its original bylaws amended bylaws school c received a letter from the service dated date recognizing that its exemption under code sec_501 was still in effect the amended bylaws provide that the board must have at least and not more than directors unless otherwise approved by a local body of church a in city n of state m chapter the chapter’s members are appointed by church a’s parish the spiritual leader of organization e and members elected by organization e under the amended bylaws a nominating committee recommends candidates to fill vacancies on the board due to expiring terms of directors the nominating committee consists of five individuals three of whom are directors selected by the board and two of whom are members of the chapter selected by the chapter the nominating committee is required to consult with the chapter regarding its recommendations the board has the power and authority to approve or reject the nominating committee’s recommendations however the board can only elect directors from the pool of nominated candidates to fill the vacancies any vacancy that occurs for reasons other than expiration of a director's term must be filled by majority vote of the remaining directors and the board’s selection is conditioned on the approval of the chapter removal of directors is done by majority vote of the directors and is also subject_to the chapter’s approval currently the nominating committee consists of three members of the chapter and two other individuals a presiding official dean of church a serves as chairman of the board is a voting member of the board and must approve the head of school selected by the board the head of school serves as chief_executive_officer of school c and is responsible for managing the day-to-day affairs of school c and implementing the board’s resolutions and programs the dean of church a may appoint a member of the clergy to serve as chaplain to school c the function of the chaplain includes tending to the spiritual well-being and concerns of all who are associated with school c school c’s curriculum requires that each student in the fifth through eighth grades attend regular christian education classes and all students must attend chapel on a weekly basis and recite a morning prayer church a manages school c’s endowment of which church a has contributed half this endowment is the source of the majority of financial aid and scholarships for students enrolled at school c church a owns the property on which school c is located and church a has made substantial loan repayments for school c’s building without any contributions from school c church a provides two-thirds of the operating costs of school c’s building and pays premiums for property and liability insurance for certain activities of school c church a also provides parking and electronic equipment for school c although there is no official church a directory organization e has included school c in the report of its annual convention and in its publication entitled daily cycle of prayer due to financial constraints school c as an operating institution is currently in the process of closing and will likely be dissolved school c maintains plan x a sec_403 plan that was originally established effective january for its eligible employees plan x was restated effective date since its inception plan x has been administered by a committee the principal purpose or function of which was to administer plan x however plan x’s documents failed to provide for the establishment of such a committee plan x’s documents have always provided that school c shall be the administrator of plan x although as of date plan x provided that school c as plan_administrator has authority to delegate full responsibility for the general administration of plan x to an administrative committee the committee the plan document provided that the members of the committee were to be appointed by the dean of church a with the consent of the chapter with a majority of those appointed being members of church a’s parish school c through its board has the authority to amend plan x the board will amend plan x to provide for the establishment of the committee the principal purpose and function of which is the administration of plan x based on the above facts and representations you request a ruling that the taxpayer's sec_403 plan plan x constitutes a church_plan under code sec_414 and has constituted a church_plan under sec_414 since date pursuant to the relief provided in code sec_414 code sec_414 generally defines a church_plan as a plan established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches which is exempt from taxation under sec_501 code sec_414 provides that the term church_plan does not include a plan a which is established and maintained primarily for the benefit of employees or their beneficiaries of a church_or_convention_or_association_of_churches who are employed in connection with one or more unrelated trades_or_businesses or b if less than substantially_all of the individuals included in the plan are church employees as described in sec_414 or sec_414 code sec_414 provides that a plan will be treated as a church_plan if it is maintained by an organization whether a civil law corporation or otherwise the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits or both for the employees of a church or a convention or association of churches if such organization is controlled by or associated with a church or a convention or association of churches code sec_414 provides that an employee of a church_or_convention_or_association_of_churches shall include an employee of an organization whether a civil law corporation or otherwise which is exempt from tax under sec_501 and which is controlled by or associated with a church or a convention or association of churches code sec_414 provides that a church or a convention or association of churches which is exempt from tax under sec_501 shall be deemed the employer of any individual included as an employee under subparagraph b code sec_414 provides that an organization whether a civil law corporation or otherwise is associated with a church_or_convention_or_association_of_churches if the organization shares common religious bonds and convictions with that church_or_convention_or_association_of_churches code sec_414 provides that if a plan established or maintained for its employees by a church_or_convention_or_association_of_churches which is exempt from tax under sec_501 fails to satisfy one or more of the requirements of sec_414 and corrects the failure within the correction_period the plan is deemed to meet the requirements of sec_414 for the year in which correction was made and for all ‘prior years code sec_414 provides that the term correction_period means the period ending days after the date of mailing by the secretary of-a notice of default with respect to the plan's failure to meet one or more of the church_plan requirements in order for an organization that is not itself a church_or_convention_or_association_of_churches to have a church_plan under code sec_414 that organization must establish that its employees are employees or deemed employees of a church_or_convention_or_association_of_churches under sec_414 employees of such an organization maintaining a plan are considered to be a church_employee if the organization is exempt from tax under sec_501 is controlled by or associated with a church_or_convention_or_association_of_churches and provides for administration or funding of the plan by e a an organization described in section in this case all of the participants in plan x are current and former employees of school c school c is closely linked to church a and church b school c is listed in official publications of organization e which forms part of the regional association of churches of church b the board and chief_executive_officer of school c are responsible for managing school c’s operations the nominating committee recommends candidates to the board to fill vacancies due to the expiration of directors’ terms and currently three of the five members on the nominating committee are members of the chapter the nominating committee is required to consult with the chapter regarding filling such vacancies and the removal of directors is conditioned on the chapter’s approval the chief_executive_officer must be approved by the dean of church a church a provides substantial financial support for school c daily prayer weekly chapel and religion classes infuse school c with the teachings of church a for these reasons we conclude that school c shares common religious bonds and convictions with churches a and b and is therefore considered to be associated with church a and church b under the church_plan rules accordingly because the employees of school c are employed by an organization that is exempt from tax under code sec_501 and associated with a church_or_convention_or_association_of_churches ie church a and church b these employees are deemed to be church a and church b employees under sec_414 conversely churches a and b are considered to be the employer of the employees of school c under sec_414 in addition the proposed amendment contained in the correspondence dated date establishes a committee the principal purpose and function of which is to under the proposed amendment the committee members will be administer plan x appointed by the dean of church a with the consent of the chapter and a majority of committee members is required to be members of church a’s parish because school c is associated with church a and church b within the meaning of code sec_414 the committee therefore will be considered to be associated with or controlled by a church or a convention or association of churches within the meaning of sec_414 the failure by plan x to satisfy the requirements of code sec_414 will be corrected within the correction_period defined in sec_414 by execution of the proposed amendment therefore plan x will be deemed to meet the requirements of sec_414 for the year in which the correction was made and for all prior years back to date accordingly we conclude that the taxpayer’s sec_403 plan plan x constitutes a church_plan described under code sec_414 and has constituted a church_plan described under sec_414 since date this ruling is conditioned on timely execution of the above amendment this letter expresses no opinion as to whether plan x satisfies the requirements for a tax- sheltered annuity plan under code sec_403 this ruling is directed only to the taxpayer that requested it code sec_6110 provides that it may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office should you have any questions or concerns please contact sincerely yours cotter a uettins carlton a watkins manager employee_plans technical group enclosures copy of deleted letter notice


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 ---------------------------------------------- telephone number -------------------- refer reply to cc pa apjp b01 plr-111170-06 date date sec_3406 -- backup withholding backup withholding sec_6041 -- information_at_source fixed or determinable gains profits or income payments specifically included sec_6045 -- returns of broker sec_6045 returns of brokers sec_6049 -- returns regarding payments of interest reportable interest legend taxpayer --------------------------------- fund --------------------------------- x -------------------------------------------- y ------------------- z --------------------- years -------------- year ------ dollar_figurea ------------------ dear ------------------ plr-111170-06 this letter responds to the letter dated date submitted on behalf of the fund requesting the following rulings settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6041 of the internal_revenue_code except in the case of payments made directly to participants in tax-qualified retirement plans settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6045 settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6049 for purposes of meeting any obligations it may have under sec_3406 as a payor of reportable payments the fund need not solicit taxpayer identification numbers tins from the individuals to whom it will make distributions the fund may obtain the tins from the mutual funds or tax-qualified plans in which such individuals held accounts or from transfer agents performing services for the funds or plans facts based upon the facts and the representations made the fund is a qualified_settlement_fund qsf as described in sec_468b and the regulations thereunder the fund was created in year to resolve an administrative_proceeding brought by the securities_and_exchange_commission commission against x relating to investment advice provided to certain mutual funds the proceeding related to the inadequate or nonexistent disclosure of x’s policy allowing market timing trading of mutual_fund units units and to the oversight monitoring or management of trades of such units trades during year sec_1 through in an order instituting proceedings oip directed at x and in related oips directed at individuals y and z the commission alleged that x made various material omissions and misrepresentations regarding market timing of funds and that x y and z committed certain other wrongful acts relating to trades in the units improper market timing impairs the value of mutual_fund shares by depressing their net asset value improper market timing also generates excess trading volume and thus increases the advisory fees mutual funds must pay to investment advisors such as x thus x’s conduct resulted in damage to the investors and a loss of capital the commission based on the improper conduct described above and the resulting damage to mutual_fund investors sought profit disgorgement and civil penalties after investigation and negotiations x y and z agreed to pay dollar_figurea to settle the commission’s claims pursuant to section a of the sarbanes-oxley_act of u s c the oips plr-111170-06 established a fair fund for the disgorgement and penalty components of the settlement thus permitting both components to be paid to injured investors those investors holding units of the mutual funds during any portion of the time period specified in the oip will be eligible to receive distributions from the fund the distributions will be based on the commission’s orders the amount available for distribution is the net settlement pool which includes the sum of dollar_figurea the amount transferred by x y and z into the fund and the amount of net_income earned by the fund investors will be allocated portions of the net settlement pool the commission’s orders provide that investors will first receive their proportionate share of losses suffered by the mutual funds due to market timing and then a proportionate share of advisory fees paid_by the mutual funds that suffered such losses during the period of market timing law and analysis ruling sec_1_468b-2 of the treasury regulations provides that in general distributions by a qsf are subject_to certain information reporting and withholding requirements sec_1_468b-2 provides that a qsf must make a return for or must withhold tax on a distribution to a claimant if one or more transferors would have been required to make a return or withhold tax had that transferor made the distribution directly to the claimant the regulations further provide that for purposes of sec_6041 and sec_6041a if a qsf makes a distribution on behalf of a transferor or a claimant the fund is deemed to make the distribution to the recipient of that payment or distribution in the course of a trade_or_business in such a situation the qsf is also deemed to have made the distribution to the transferor or claimant see sec_1_468b-2 c - d sec_6041 requires all persons engaged in a trade_or_business and making payment in the course of such trade_or_business to another person of rent salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more in any taxable_year to file an information_return with the service and to furnish an information statement to the payee sec_1_6041-1 provides that payments are fixed when they are paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained sec_1 a requires a payor to report sec_6041 amounts on form_1099 thus payments that are not fixed or determinable are not subject_to information reporting under sec_6041 amounts a taxpayer receives to restore a loss of capital are not income except to the extent that the payment exceeds the taxpayer’s basis in the injured property that is the subject of the payment 144_f2d_110 1st cir fund payments to investors for losses the mutual funds suffered from plr-111170-06 market timing appear to constitute compensation_for a loss of capital market timing permitted by x depressed the net asset value of mutual_fund shares compensation from the fund will compensate at least partially for this damage because the fund has no access to the investors’ tax basis in their mutual_fund accounts and has no need or occasion to collect information on tax basis the fund is unable to calculate how much of this compensation_for mutual_fund losses constitutes fixed or determinable income accordingly the fund has no information reporting obligations under sec_6041 for such compensation as noted above a portion of the fund payments will compensate investors for improper advisory fees paid_by the mutual funds to x although such payments may constitute gross_income to investors the fund cannot due to limitations on its data collecting authority determine whether the payments will constitute gross_income to investors the payments therefore are not fixed or determinable income within the meaning of the regulations under sec_6041 accordingly subject_to the exception noted below regarding distributions to qualified_retirement_plan participants the fund has no information reporting obligations under sec_6041 the fund states that it may make a certain number of distributions directly to participants in tax-qualified retirement plans sec_72 of the code controls the taxation of such distributions and the distributions must be reported on form 1099-r pursuant to sec_6041 subject_to the dollar_figure reporting threshold set forth in sec_6041 and sec_1_6041-1 ruling sec_1_468b-2 provides that a qsf must make a return for a distribution to a claimant if one or more transferors would have been required to make a return had that transferor made the distribution directly to the claimant sec_6045 provides generally that every person doing business as a broker shall when required by the secretary make a return in accordance with such regulations as the secretary may prescribe sec_6045 defines the term broker to include a dealer a barter_exchange and any other person who for a consideration regularly acts as a middleman with respect to property or services the regulations further define the term broker to mean a person that in the ordinary course of a trade_or_business during the calendar_year stands ready to effect sales to be made by others see sec_1_6045-1 sec_1_6045-1 provides generally that a broker shall make an information_return for each sale effected by the broker in the ordinary course of the broker’s trade_or_business sec_1_6045-1 defines a sale as any disposition of securities commodities regulated_futures_contracts or forward contracts for cash and as including redemptions of stock retirements of indebtedness and entering into short_sales plr-111170-06 the fund’s payments to investors do not result from a sale as that term is defined above the fund therefore has no information reporting obligations under sec_6045 with respect to these payments ruling sec_6049 provides that every person who makes payments of interest aggregating dollar_figure or more to any other person during any calendar_year or receives payments of interest as a nominee and who makes payments aggregating dollar_figure or more during any calendar_year to any other person with respect to the interest so received shall make a return according to the forms or regulations prescribed by the secretary sec_6049 b provides that the term_interest includes interest on any obligation issued in_registered_form or of a type offered to the public other than any obligation with a maturity at issue of a year or less which is held by a corporation pursuant to sec_6049 interest also includes interest on deposits with brokers as defined in sec_6045 the fund distributions in the present case do not relate to deposits with brokers or obligations issued in_registered_form and do not otherwise qualify as interest within the meaning of sec_6049 this is so even though interest earnings have accrued on the funds to be paid to investors from the time x y and z paid such funds to the fund the fund distributions to investors relate to violations of securities law and compensation_for financial harm not to obligations issued in_registered_form or other instruments that generate interest as sec_6049 defines that term accordingly the fund has no information reporting obligations under sec_6049 regarding its distributions to the investors ruling sec_3406 generally provides that in the case of any reportable_payment if a the payee fails to furnish his or her tin to the payor in the manner required b the secretary notifies the payor that the tin furnished by the payee is incorrect c there has been a notified_payee_underreporting of interest and dividends or d there has been a certification failure collectively referred to as payee failures then the payor shall deduct and withhold from such reportable_payment a backup withholding amount totaling of such payment sec_3406 provides that the term reportable_payment means any reportable_interest_or_dividend_payment and any other_reportable_payment sec_3406 provides that the term other_reportable_payment includes any payment of a kind and to a payee required to be shown on a return under sec_6041 or sec_6045 in light of rulings one through three above only direct payments by the fund to participants in tax-qualified plans will be reportable payments subject_to backup withholding under sec_3406 in order to meet its obligations under sec_3406 and to include tins on information returns it must provide for these reportable plr-111170-06 payments the fund plans to obtain those tins from one of the following sources the plan_administrator the mutual funds in which the participants invested or the transfer agents that provide services to the administrator or mutual funds obtaining the tins in this manner should prove more reliable and less burdensome and costly to the fund than soliciting the tins from the plan participants in light of the authority it has been granted by the commission the fund will be able to obtain the tins of plan participants from the plan administrators mutual funds or transfer agents the fund will not be required to solicit tins from the participants for purposes of applying the backup withholding rules of sec_3406 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 furthermore this letter expresses no opinion about information reporting requirements for fund distributions that are not made directly to the injured investors this letter also expresses no opinion about the income_tax consequences to investors of fund distributions 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 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 acting senior technician reviewer administrative provisions and judicial practice enclosure office of associate chief_counsel procedure and administration carol p nachman sincerely


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date contact person identification_number telephone number date date employer_identification_number uil legend debtors llc state dear this responds to your ruling_request dated date as to the federal tax consequences of the proposed transactions under the internal_revenue_code i r c and the federal tax regulations facts you are a_trust a voluntary employees' beneficiary association veba recognized as tax exempt as an organization described under sec_501 c you were established as a result of a settlement agreement approved by the united_states bankruptcy court after debtors filed voluntary petitions for relief under chapter of title of the bankruptcy code debtors had historically provided a number of benefits to their retired employees and the retirees' surviving spouses and eligible dependents through various welfare_benefit programs retiree welfare plans the bankruptcy court issued an order directing the office of the united_states trustee to appoint a retiree committee to represent the interests of the retiree welfare plans' retirees and beneficiaries following negotiations between debtors and the retiree committee the bankruptcy court issued an order approving a settlement agreement in which the parties mutually agreed to the termination and termination_date of the retiree welfare plans as part of the settlement agreement a settlement amount ofdollar_figure would be paid to a limited_liability_company llc whose single member is to be you llc was required to hold the settlement amount in its account for a minimum of five business days before distributions were to be made to you in your capacity as the single member of llc xxxxxxxxxxx xxxxxxxxxxx the settlement agreement further provided that the retiree committee intended that you provide medical benefits to eligible retiree claim holders based on an apportionment methodology in accordance with the terms of the settlement agreement the retiree committee established you shortly thereafter llc was formed under the laws of state with you as the single member no election has been made on a form_8832 entity classification election to treat llc as an association_taxable_as_a_corporation the llc agreement provides that the sole purpose of llc is to function as a conduit by which the consideration payable by debtors under the settlement agreement is to be contributed to you the llc agreement further provides that as soon as reasonably possible following llc's receipt of the settlement amount from debtors and after paying or making reasonable provision for any expenses liabilities reserves or other contingencies llc shall distribute all available funds to you moreover upon dissolution of llc and after paying or making reasonable provision for creditors all remaining funds of llc will be distributed to you the llc agreement further provides that the management of llc shall be vested solely in you but that you have the right to delegate its management rights and powers debtors paid an initial installment of the settlement amount to llc shortly after llc was formed the following month debtors paid the balance of the settlement amount to llc these amounts were deposited into an interest-bearing account maintained by llc the next month llc distributed the full settlement amount to you and the retiree welfare plans were terminated pursuant to your trust documents and the settlement agreement you will use the settlement amount to provide healthcare reimbursement benefits to retiree participants their spouses and their dependents as permitted under sec_501 c and based on the apportionment methodology as set forth in the settlement agreement ruling requested you have requested the following ruling that the settlement amount be treated as exempt_function_income under sec_512 with the further result that no portion of the settlement amount will be treated as unrelated_business_taxable_income to you law sec_501 provides that an organization described in sec_501 including a veba described in sec_501 c shall be exempt from taxation unless the exemption is denied under sec_502 or sec_503 sec_511 imposes tax on the unrelated_business_taxable_income as described in sec_512 of xxxxxxxxxxxxxxxxxxxxxx organizations described in sec_501 c sec_512 provides that in the case of an organization described in sec_501 c the term unrelated_business_taxable_income means the gross_income excluding any exempt_function_income less the allowable deductions that are directly connected with the production of gross_income excluding exempt_function_income both computed with specified modifications sec_512 provides that the term exempt_function_income means for a sec_501 organization the gross_income from dues fees charges or similar amounts paid_by members of the organization as consideration for providing the members or their dependents or guests goods facilities or services in furtherance of the organization to which such income is paid such term also means all income other than an amount equal to the gross_income derived from any unrelated_trade_or_business carried on by the organization which is set_aside to provide for the payment of life sick accident or other_benefits including reasonable costs of administration directly connected with the provision of such benefits sec_512 provides that the amounts set_aside as of the close of a taxable_year for the payment of life sick accident or other_benefits may not be taken into account for purposes of determining exempt_function_income to the extent that such amounts exceed the qualified asset limit determined under sec_419a and sec_419a for such taxable_year in calculating the qualified_asset_account limit for this purpose a reserve for post-retirement medical benefits under sec_419a is not to be taken into account see also temp sec_1 a - 5t q a-3 a and prop sec_1 a -5 sec_1_512_a_-5t q a-3 b provides that the exempt_function_income of a veba includes certain amounts paid_by members of the veba member contributions member contributions include both employee contributions and employer contributions to a veba sec_301_7701-1 a provides that the code prescribes the classification of various organizations for federal tax purposes whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law sec_301_7701-2 provides in part that a business_entity is any entity recognized for federal tax purposes including a disregarded_entity that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code a business_entity is domestic if it is created or organized in the united_states or under the law of the united_states or of any state see sec_301_7701-5 sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner xxxxxxxxxxx xxxxxxxxxxx sec_301 b ii provides in part that unless the entity elects otherwise a domestic eligible_entity is disregarded as an entity separate from its owner if it has a single owner sec_301 a provides in part that if the entity is disregarded its activities are treated in the same manner as a sole_proprietorship branch or division of the owner however for employment and certain excise_tax purposes a disregarded_entity is treated as a corporation see sec_301_7701-2 and v announcement r b provides that when the owner of an eligible_entity that is treated as a disregarded_entity is exempt from taxation under sec_501 a of the code it must include as its own information pertaining to the finances and operation of the disregarded_entity in its annual information_return announcement further states that when an entity is disregarded as separate from its owner its operations are treated as a branch or division of the owner analysis debtors contributed the settlement amount to llc under the settlement agreement llc was required after paying or making reasonable provision for any expenses liabilities reserves or other contingencies to distribute the remaining settlement amount to you which you will use to provide medical benefits to participants their spouses and eligible dependents of the reimbursement plan pursuant to your trust documents and the settlement agreement you will use the settlement amount specifically to provide healthcare reimbursement benefits permitted under sec_501 c based on the information provided you are the single member of llc and llc has not made an election to be treated as an association_taxable_as_a_corporation accordingly llc is disregarded as an entity separate from its owner and its activities are treated as yours as a result the settlement amount_paid to llc by debtors is treated as if paid to you by debtors further the retirees eligible to receive medical benefits from you had been employed by debtors and had been eligible to receive welfare benefits under debtors' retiree benefit plans based on these facts we conclude that the settlement amount is treated as employer contributions to you pursuant to sec_1_512_a_-5t q a-3 b employer contributions to a veba are treated as exempt_function_income and therefore excluded from the definition of unrelated_business_taxable_income accordingly we conclude that the settlement amount is exempt_function_income under the first sentence of sec_512 with the further result that no portion of the settlement amount will be treated as unrelated_business_taxable_income to you xxxxxxxxxxxxxxxxxxxxxx ruling based on the information submitted representations made and the authorities cited above we rule that the settlement amount is treated as exempt_function_income under sec_512 with the further result that no portion of the settlement amount will be treated as unrelated_business_taxable_income to you 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_611 o k 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 resolve 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 michael seto manager eo technical enclosure notice


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si br - plr-110276-00 date date legend x d1 state this responds to your letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated under state law on d1 the shareholders of x intended that x elect to be treated as an s_corporation effective d1 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective 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 was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year however sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year plr-110276-00 in the present case x failed to timely elect s_corporation treatment effective d1 however x has established reasonable_cause for not making a timely election and is thus entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center 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 specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent s christopher t kelley sincerely acting assistant branch chief branch office of the assistant chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


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-123580-10 date october x ----------------------------------------------------------------------------------------------------- ----------------------- state --------- date ---------------- dear ----------------------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes and relief to file a late s_corporation_election under sec_1362 of the internal_revenue_code facts x was formed on date as a limited_liability_company under the laws of state x intended to elect to be treated as an association_taxable_as_a_corporation and to elect to be treated as an s_corporation for federal tax purposes with both elections effective date neither form_8832 entity classification election nor form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it will be treated as an association_taxable_as_a_corporation and as an s_corporation effective date law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is an entity plr-123580-10 recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code sec_301_7701-2 an eligible_entity with at least two members can elect to be classified as either an association or a partnership sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is a partnership if it has two or more members sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed nor more than months after the date on which the election is filed 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 six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides guidance on when the s election becomes effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation's taxable_year then the corporation will plr-123580-10 not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year conclusion based solely on the information submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-3 as a result x is granted an extension of time of one hundred twenty days from the date of this letter to file a properly executed form_8832 with the appropriate service_center electing to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date a copy of this letter should be attached to the form in addition based solely on the information submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective date along with a copy of this letter with the appropriate service_center within one hundred twenty days from the date of this letter such election will be treated as timely made effective date 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 specifically no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes 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 letter is being sent to the taxpayer's authorized representatives plr-123580-10 the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries s danielle m grimm acting senior technician reviewer branch passthroughs special industries by enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number --------------------------------- -------------------------------- ------------------- ------------------------- in re --------------------------------------------------- ------------------------------------------------ ----------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------ telephone number -------------------- refer reply to cc ita b01 plr-150903-05 plr-107747-05 date february legend tribe ----------------------------------------------------------------------------------------- ----------------------- ---------------------------------------------------- ----------------------- ------ --- ----------------------------------------------------- --------------------------------------------------------------- -------------------------------------------------- general council council reservation authority housing entity ---------------------------------------------- date year a dear------------------- this responds to tribe’s request for a ruling that authority is an instrumentality of tribe for purposes of sec_7871 of the internal_revenue_code facts and representations tribe located on reservation is listed in revproc_2001_15 2001_1_cb_465 as an indian_tribal_government that is an entity that exercises governmental functions for purposes of the indian_tribal_government tax status act of title ii of pub_l_no 1983_1_cb_510 as amended by pub_l_no 1983_2_cb_309 indian tribes listed in revproc_2001_15 are to be treated similarly to states for specified purposes under the internal_revenue_code general council composed of all adult members of tribe is the supreme governing body of tribe council is a business council of representatives from tribe all members plr-150903-05 of council are elected by vote of general council general council has authorized council to act on behalf of tribe to exercise a variety of powers including the authority to establish or charter public bodies by official resolution authority was chartered by resolution of council on date to provide low-income_housing for tribe members authority is tribe’s housing entity and as such is designated by tribe to obtain federal grants awarded to recognized indian tribes for the development of housing projects authority’s daily operations are managed by an executive director and a board_of commissioners all members of authority’s board_of commissioners are appointed by council all decisions by authority’s board_of commissioners concerning governance including appointment of an executive director and removal of commissioners or an executive director are made subject_to council’s authority to insist that such decisions be made only with the consent of council general council has the authority to direct council to remove an executive director or members of the board_of commissioners authority is required to submit an annual report to council summarizing in part the year’s activities authority’s financial condition significant problems and or accomplishments and future plans tribe through council may withdraw at will authority’s housing entity designation if it so chooses council may also withdraw at will authority’s ability to submit tribe’s housing plan to the federal government for approval submission of a housing plan is a prerequisite to tribe’s eligibility to receive the federal grants in year authority’s federal housing funds represented most a percent of its annual budget subject only to federal regulations limiting the disposition of assets acquired with federal funds upon dissolution of authority title to all assets of authority would vest in tribe law and analysis sec_170 allows subject_to certain limitations a deduction for charitable_contributions as defined in sec_170 payment of which is made within the taxable_year sec_170 includes in the definition of charitable_contribution a contribution or gift made for exclusively public purposes to or for_the_use_of a state a possession_of_the_united_states or any political_subdivision of any of the foregoing or the united_states or the district of columbia sec_7701 provides that the term indian_tribal_government means the governing body of any tribe band community village or group of indians or if applicable alaska natives which is determined by the secretary after consultation with the secretary of the interior to exercise governmental functions plr-150903-05 sec_7871 provides that an indian_tribal_government shall be treated as a state for purposes of determining whether and in what amount any contribution or transfer to or for_the_use_of such government or a political_subdivision thereof is deductible under sec_170 relating to income_tax deduction for charitable etc contributions and gifts sec_7871 provides that the term indian_tribe means any indian_tribe band nation or other organized group or community which is recognized as eligible for the special programs and services provided by the united_states to indians because of their status as indians sec_170 provides in relevant part that in the case of an individual the deduction provided in sec_170 shall be allowed for any charitable_contribution to a governmental_unit referred to in sec_170 to the extent that the aggregate of such contributions does not exceed percent of the taxpayer's contribution_base for the taxable_year sec_170 provides that the term contribution_base generally means adjusted_gross_income entities eligible to receive tax-deductible contributions include not only governmental units described in sec_170 but also wholly-owned instrumentalities of states or political subdivisions see revrul_75_359 1975_2_cb_79 revrul_79_323 1979_2_cb_106 revrul_57_128 1957_1_cb_311 sets forth the following factors to be taken into account in determining whether an entity is an instrumentality of one or more governmental units whether the organization is used for a governmental purpose and performs a governmental function whether performance of its function is on behalf of one or more states or political subdivisions whether there are any private interests involved or whether the states or political subdivisions have the power and interests of an owner whether control and supervision of the organization is vested in a public authority or authorities whether express or implied statutory or other authority is necessary for the creation and or use of the organization and whether this authority exists and the degree of financial autonomy of the entity and the source of its operating_expenses tribe is recognized as an indian_tribal_government that is to be treated similarly to a state for specified purposes under the internal_revenue_code authority is used for a governmental purpose and performs a governmental function on behalf of tribe authority was created by tribe to obtain federal grants available to tribe for the development of low-income_housing projects for tribe members there are no private interests in authority and tribe has the power and interests of an owner subject only to regulatory limitations on the disposition of assets acquired with plr-150903-05 federal funds all of authority’s assets will be distributed for tribe’s benefit upon dissolution of authority authority is tribe’s housing entity and is controlled solely by tribe all members of authority’s board_of commissioners are appointed by council and general council has the authority to direct council to remove any executive director or commissioner all decisions by authority’s board_of commissioners concerning governance including appointment of an executive director and removal of commissioners or an executive director are made subject_to council’s authority to insist that such decisions be made only with the consent of council statutory authority for the creation of authority is found in the tribal requirement that authority be chartered by resolution of council tribe controls the financial affairs of authority authority is required to submit an annual report to council summarizing the year’s activities as well as authority’s financial condition and authority’s funding may be withdrawn at will by tribe because council can withdraw at will the ability of authority to submit housing plans for federal approval council controls authority’s eligibility to receive the federal funds that represent most of authority’s annual budget conclusion we conclude that authority is an instrumentality of tribe for purposes of sec_7871 we further conclude that contributions made to authority exclusively for public purposes are charitable_contributions as defined in sec_170 of the internal_revenue_code and deductible pursuant to sec_170 to the extent otherwise allowed by sec_170 except as specifically provided herein no opinion is expressed or implied on the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that this ruling may not be used or cited as precedent in accordance with a power_of_attorney on file we are sending a copy of this letter to tribe the ruling contained in this letter is based upon information and representations submitted by authority and accompanied by a penalty of perjury statement executed by an appropriate party plr-150903-05 while this office has not verified any of the materials submitted in support of the request for a ruling it is subject_to verification upon examination sincerely karin goldsmith gross senior technical reviewer branch income_tax accounting cc