internal_revenue_service number release date index number - ------------------------------------------------------------ ---------------- -------------------------------- ----------------------------------- ------------------ --------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-148250-06 date date dear -------------------- this letter is in response to your application_for an allocation of authority to issue dollar_figure------- ----------------- in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ---------------------------------------- ------------------------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than presp-148250-06 dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the projects owned by the borrowers listed in appendix b because such borrowers are governmental bodies and dollar_figure has already been allocated to applications requesting a smaller share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing clean renewable energy projects if you have any questions with respect to this allocation please contact --------------------- ------------------------------------------------------------------------------------------------------------------- - -------- or -----------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call 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 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in the appendices attached hereto is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation presp-148250-06 the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-148250-06 borrower name ----------------------------------- ----------------------------------- -------------- borrower name --------------------------------- --------------------------------- --------------------- --------------------------------- --------------------------------- --------------------- --------------------------------- --------------------------------- --------------------- total ---------------------------------- appendix a project type project location hydropower facility -------------------------------- ---------- amount allocated -------------- appendix b project type project location hydropower facility -------------------------------- ---------------------- hydropower facility hydropower facility -------------------------------- -------------------------------- -------------------------- -------------------------------- -------------------------------- -------------------------- amount requested --------------- --------------- --------------- ----------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------


significant index number department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division aug plan re plan no ein taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning this extension applies to the eligible amortization charge bases as identified in your application submission established as of the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 d a of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan's actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided in granting this ruling it is expected that the plan's assumptions and methods will be reviewed and updated as appropriate so that each prescribed assumption was applied in accordance with applicable law and regulations and each other assumption is reasonable taking into account the experience of the plan and reasonable expectations and such other assumptions in combination offer the best estimate of anticipated experience under the plan we have sent a copy of this letter to the manager ep classification in baltimore maryland to the manager ep compliance unit in chicago illinois and to your authorized representative pursuant to a power_of_attorney on file in this office this ruling is directed only to the taxpayer that requested it sec_611 o k of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact id at sincerely yours cc david m ziegler manager ep actuarial group - - - - - - - - - - - - - - - - - - - --- --- - - - ------------- ----


internal_revenue_service number release date index number -------------------------------------------- -------------------------------------- ---------------------------- ---------------------------- legend legend x department of the treasury washington dc person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - plr-136895-04 date oct -------------------------------------------- ----------------------- --------- ------------------- d1 state dear ------------- this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on d1 under the laws of the state x intended to be treated as an s_corporation for federal tax purposes effective d1 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective 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 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 ' a 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 an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under ' a effective d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b 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 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely s dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


internal_revenue_service number release date uil ------------------------- ------------------------------------ -------------------------------------- ------------------------------- department of the treasury washington dc person to contact ------------------------------ ---------------------- ----------------------------------------------------- telephone number --------------------- refer reply to cc psi - plr-143659-03 date date -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ---------------------------------------------------------------- legend x ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------ y ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------ trust ------------------------------------------------------------ state state date date date date date dear ----------- ---------------------------- -------------------------- ---------------------- ---------------------- ------------------ ------------- ------------ this responds to a letter dated date and subsequent correspondence the information submitted states that x was formed as a state corporation on submitted on behalf of x and y by their authorized representative requesting relief for x under sec_1362 of the internal_revenue_code additionally y requests a time extension under sec_301_9100-3 of the procedure and administration regulations for y to elect to treat x as a qualified_subchapter_s_subsidiary qsub facts date x intended to make an s_corporation_election effective date but due to inadvertence form_2553 election by a small_business_corporation was never filed x’s attorney was not aware of the relief provision in sec_1362 pursuant to advice from x’s attorney to rectify the missed election on date trust the sole shareholder of x formed y a state corporation and made a timely s election for y on date trust transferred its interest in x to y in exchange for all of the shares of y through this restructuring x became a wholly owned subsidiary of y y relied on its attorney to advise y of any necessary elections however y was not advised of the need to file a qsub election and thus no qsub election was filed on date x merged into y with y surviving y represents that provided the requested relief is granted this transaction qualifies as a reorganization under sec_368 law and analysis treated as an s_corporation sec_1362 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year 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 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 sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items of the s_corporation sec_1362 provides when an s election becomes effective if an s election sec_1362 provides that if no election is made pursuant to sec_1362 or sec_1362 provides that a small_business_corporation can elect to be sec_1_1361-3 of the income_tax regulations provides the time and sec_368 provides that the term reorganization means a mere sec_1_1361-4 provides that if an s_corporation makes a valid qsub sec_1_1361-3 provides that a qsub election cannot be effective more sec_1361 provides that a qsub is any domestic_corporation which is not an ineligible_corporation in which percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub change in identity form or place of organization of one corporation however effected manner of making a qsub election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center than two months and days prior to the date of filing election with respect to a subsidiary the subsidiary is deemed to have liquidated into the s_corporation sec_1_1361-4 provides that if an s_corporation makes a valid qsub election the tax treatment of the liquidation or of a larger transaction that includes the liquidation will be determined under the internal_revenue_code and the general principals of law including the step_transaction_doctrine thus for example if an s_corporation forms a subsidiary and makes a valid qsub election effective on the date of the subsidiary's formation the transfer of assets to the subsidiary and the deemed liquidation are disregarded and the corporation will be deemed to be a qsub from its inception and a the stock of a qsub shall be disregarded for all federal tax purposes the stock of the subsidiary on the day before the qsub election is effective the liquidation into the s_corporation occurs immediately after the time at which the s_corporation first owns of the stock sec_1_1361-4 provides that except as otherwise provided in sec_1_1361-4 relating to s_corporations making elections under sec_338 if a corporation for which an election under sec_1362 was in effect is acquired and a qsub sec_1_1361-4 provides that if an s_corporation does not own of sec_1_1361-4 provides that except for purposes of sec_1361 sec_301_9100-3 sets forth the standards that the commissioner uses to sec_301_9100-1 provides that the commissioner has discretion to grant election is made effective on the day the corporation is acquired the acquired_corporation is deemed to liquidate into the s_corporation at the beginning of the day the termination of its s election is effective as a result if corporation x acquires y an s_corporation and makes an s election for itself and a qsub election for y effective on the day of acquisition y liquidates into x at the beginning of the day when x's s election is effective and there is no period between the termination of y's s election and the deemed liquidation of y during which y is a c_corporation reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes 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 determine whether to grant a discretionary extension of time these standards indicate that the commissioner should grant relief when the taxpayer provides evidence proving 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 conclusion x has established reasonable_cause for failing to make a timely election to be an s_corporation accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective date within days following the date of this letter then such election will be treated as timely made for date a copy of this letter should be attached to that form additionally based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result y is granted an extension of time of days from the date of this letter to file form_8869 with the appropriate service_center to treat x as a qsub effective date accordingly provided that x makes the above-mentioned s_corporation_election and y makes a qsub election for x within days following the date of this letter effective date then such election will be treated as timely made for date a copy of this letter should be attached to the form_8869 additionally we conclude that there will be no period between the termination of x’s s election and the deemed liquidation of x during which x will be a c_corporation based solely on the facts submitted and representations made we conclude that except as expressly provided herein no opinion is expressed concerning the federal tax consequences of any aspect of the facts described above under any other provision of the internal_revenue_code in particular no opinion is expressed concerning whether x or y was or is a small_business_corporation whether x is or was eligible to be a qsub and whether the described transactions constitute a reorganization under sec_368 provides that it may not be used or cited as precedent letter is being sent to the taxpayer’s representative in accordance with the power_of_attorney on file with this office a copy of this this ruling is directed only to the taxpayer requesting it sec_6110 sincerely associate chief_counsel passthroughs and special industries heather maloy enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- ------------------ ----------------------- -------------- ----------------------- legend 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-143927-12 date date x y ------------------------------------------------------------ -------------------- ------------------------------------------------------------ ----------------- state country date -------------- ---------- ---------------------------- dear ---------------------- this letter responds to your letter dated date submitted on behalf of x by x’s representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes facts according to the information submitted x is a wholly owned subsidiary of y an association formed under the laws of state x was formed under the laws of country x intended to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date however form_8832 entity classification election was not timely filed plr-143927-12 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 an eligible_entity with at least two members can elect to be classified as either an association_taxable_as_a_corporation or a partnership sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owner of x filing within days of this letter all required returns or amended returns for all open years consistent with the requested relief these returns may include but are not limited to forms information_return of u s persons with respect to certain foreign_corporations a copy of this letter should be attached to any such returns plr-143927-12 except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely joy spies joy spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for purposes cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division may z014 u i l xxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx attention xxxxxxxxxxxx legend order a university b order c board d agreement e state f commission h entity k plan x plan y plan xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx plan plan plan plan directory z college n community m board p church dear xxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx this is in response to your letter dated april17 as supplemented by correspondence dated date and date submitted on your behalf by your authorized representative concerning whether plan x plan y and your five welfare plans plan plan plan plan and plan are church plans within the meaning of sec_414 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the rulings requested order a was incorporated in xxxxxxx in state f as a seminary for priesthood students order a is part of order c a church religious_order which consists of independent xxxxxxx communities university b includes a college of liberal arts and sciences and the school of theology university b operated under the full direction and responsibility of order a from xxxxxxxx until xxxxxxx from xxxxxx until xxxxxxxxxx university b remained an operating division of order a which was assisted in its governance functions by board d board consists of persons the xxxxxxx of order a appointed eight xxxxxxx to board and board self-selected the remaining members including one representative each nominated by the alumni association student government and faculty in response to a recommendation by commission h order a was restructured so that university b would be established as a separate tax-exempt_entity the restructure of order a was done in a two-step process in xxxxxx and xxxxxxx the first step occurred in xxxxxxxx when the xxxxxxx of order a created entity k a tax-exempt_organization entity k was incorporated with two classes of members class a members and class b members and a governing body called board p the two classes of members are made up of xxxxxxxx the class a members are five xxxxxxxx of the xxxxxxxx including the xxxxxxx and the xxxxxxx treasurer the class b members consist of the finally professed xxxxxxx of order a the second step occurred on xxxxxxxxxxxx when the functions assets and employees of university b were transferred to entity k order a transferred all assets necessary to operate university bas well as the associated liabilities to entity kat that time accordingly beginning xxxxxxxxxxxx the college of liberal arts and sciences and the school of theology have been operated by entity k and other functions and assets of order a have remained with order a entity k's initial board was composed of five xxxxxxxxx who make up the class a members of order a since date when entity k was created board p expanded its members through a process of self-appointment on an ongoing basis the class a members will elect one representative to board p and the class b members will elect four representatives to board p the remaining members of board pare self elected all nominees are subject_to the disapproval of the class a members a trustee may generally be removed by the affirmative vote of a majority of board p a trustee elected by the class a or class b members may be removed by the body that appointed such trustee class a members have the power and authority to remove all of the members of board p and name successor trustees but do not have the authority to remove and name successor trustees on an individual basis except with respect to class a and class b representatives the mission and purpose of entity k is the provision of education in the liberal arts and graduate theological disciplines within the church university tradition all staff providing services to university b have become employees of entity k except for faculty members who are xxxxxxx of order a these individuals are considered appointees of order a in the past compensation they received from entity k for their services was paid directly to order a effective xxxxxxxxxx paychecks for services performed by entity k employees are being issued by entity k and entity k will issue w- 2s to its employees for services performed by them on or after this date previously the xxxxxx of order a nominated the president who was then appointed by board d after the restructure the president of entity k is appointed by board p on its own initiative but the selection is subject_to the approval of class a members land located within the core campus has been leased from order a to entity k through a long term ground lease buildings located on the ground-leased land have been conveyed to entity k other space and facilities belonging to order a have been leased to entity k and entity k and preparatory school students continue to have the right to use the land and forest areas surrounding the order a xxxxxxxx for educational_purposes order a and entity k entered into agreement e that details the parties understanding regarding the relationship between entity k and order a in particular the parties acknowledge and commit to the fact that the formation of entity k and the restructure will not affect the xxxxxxxx status of university b entity k will remain a part of order a's juridical person for xxxxxxxx purposes order a and entity k realized and acknowledged the complexity of establishing a separate civil corporation that has this status but stressed that sustaining this status is of the paramount importance and in order to achieve this goal order a and entity k set out in detail their roles and responsibilities among the responsibilities of order a to entity k are be a living model of order a spiritually mission identity and values as well as a model of dedication and excellence in the performance of responsibilities with regard to entity k both as individuals and as a community foster the xxxxxxxxx relationship of entity k and order a by regular communication and consultation with the president of entity k and board p on matters of special concern such as mission and identity pastoral care religious practice and the care and maintenance of the campus support entity k's preference in hiring and retaining members of the xxxxxxxxx community and participate in the periodic process or updating this policy make the order a xxxxx and university b order available to entity k as the primary places of worship and reflection among the responsibilities of board p to order a are conduct entity k as an education leadership of order a as the xxxxxxxx juridical person looking to the xxxxxxxx community in order to define and deepen entity k's understanding of its church order a character under the together with the president of entity k foster entity k's and civil relationship with the xxxxxxx community through regular communication and consultation with the xxxxxxxx of order a senior council and xxxxxxx chapter on matters of special concern such as mission and identity pastoral care religious practice and the care and maintenance of the campus continue the use of the order a xxxxxxxxxx and university b order as entity k's primary places of worship and reflection uphold entity k's policy on order a preference in the hiring and retention of members of the xxxxxxxxxxxxxx community by ensuring its implementation by entity k administrators and periodically updating such policy as necessary in collaboration with the xxxxxxxxxx community and support the education of xxxxx for work at entity k in addition in order to sustain and promote the church order a character mission and identity of entity k board p is required to maintain and promote the order a heritage values and church identity as fundamental elements of entity k's mission charge the chair of board p and the president of entity k with the responsibility of a promoting understanding and appreciation of the xxxxxxxxxxxxxxx character mission and identity of entity k among trustees faculty administration staff alumni and the broader constituencies of entity k b ensuring that the xxxxxxxx xxxxxxxxx character of entity k is reflected in its curriculum programs policies and practices by reporting annually to the xxxxxxxx community on these matters and c collaborating with order a's leadership to foster the xxxxxxxxxx community's commitment to and participation in the mission of entity k recognize that the person holding the office of president of entity k serves as the director of an xxxxxxxx work of order a and church in this regard the trustees commit to encourage and promote qualified xxxxxxxx of order a as candidates as well as qualified xxxxxxx of other xxxxxxxxx xxxxxxxxxx further the trustees comm itted to selecting as president of entity k a qualified xxxxxxx who understands appreciates and will ensure the xxxxxxxx xxxxxxxx character mission and identity of entity k actively seek qualified members of the xxxxxxxxxx community for faculty staff and administrative positions consulting in advance with the xxxxxxxx of order a and his representatives according to the policy and procedures on xxxxxxxx preference outlined in entity k's governing documents and in the faculty administrative and support handbooks engage the xxxxxx community as an active partner in dialogue when discerning and promoting the church xxxxxxxxx character mission identity and religious practices of entity k keep the xxxxxx xxxxxxxxx character of entity k strong by promoting an orientation program for trustees faculty administration staff and students addressing this character promote and sustain the school of theology-seminary curriculum and program and the strength of the library's theology section so that a vibrant and active graduate school and seminary program can flourish preparing ministers for the church maintain and promote the faculty resident model of residential programming in cooperation with the xxxxxxxx community by recruiting and training xxxxxx of the xxxxxxxxx community to serve as faculty residents assuring that this program remains a central and unique xxxxxxxxx element of entity k educational experience maintain structures within entity k in cooperation with the xxxxxx community designed to promote the church xxxxxxx character mission and identity of entity k maintain a robust theology requirement with ample support and resources as an integral part of the curriculum for all undergraduate students and a distinctive academic program in theology that attracts strong undergraduate majors and minors ensure the continued presence of visible religious symbols throughout the campus such as crucifixes statues and artwork to provide a material culture of faith order a similarly is required to commit itself to ongoing collaboration with entity k leadership to sustain and strengthen the church order a character mission and identity of entity k including the training and promotion of order a xxxxxxxxxx in leadership faculty residential and ministry roles at entity k order a university and entity k are all organizations exempt from federal_income_tax under sec_501 a of the code as organizations described in sec_501 c of the code order a university and entity k are all listed in directory z also no employees of order a or entity k are employed in connection with any unrelated trades_or_businesses with the meaning of sec_513 of the code order a maintains two retirement plans for its employees plan x and plan y both of which are intended to comply with sec_403 of the code and were established prior to date order a also maintains welfare_benefit plans plan through plan for its employees prior to the restructure university employees participated in plan x plan y and plan through plan plans as employees of order a following the restructure entity k became a participating employer in the plans accordingly employees of entity k continue to participate in the plans in addition employees of college n participate in plan through plan college n is a women's college established by xxxxxxx of order a college n is a separate tax-exempt_organization that has received a favorable church_plan ruling on its retirement plans the plans are administered by a committee committee consisting of the chief financial officer cfo of order a the cfo of entity k and the cfo of college n the cfo pf order a is appointed by the xxxxxxx of order a the cfo of entity k is appointed by the president of entity k the cfo of college n is appointed by the president of college n the committee's primary purpose and function is the administration of the plans order a has not made an election under sec_41 d of the code to have the plans treated other than as church plans under sec_414 of the code in accordance with revproc_2011_44 2011_39_irb_446 a notice to employees with reference to plan x and plan y was provided on date this notice explained to participants of plan x and plan y the consequences of church_plan status based on the foregoing you request a ruling that plan x plan y and plan through plan are church plans as defined in sec_414 of the code also that plan x and plan y have been church plans since date plan has been a church_plan since date plan has been a church_plan since date plan has been a church_plan since date plan has been a church_plan since date and plan has been a church_plan since date sec_414 was added to the code by sec_1015 of erisa sec_1017 of erisa provided that sec_414 of the code applied as of the date of erisa's enactment however sec_414 of the code was subsequently amended by sec_407 of the multiemployer pension_plan amendments act of pub law to provide that sec_414 of the code was effective as of date sec_414 e of the code generally defines a church_plan as a plan established and maintained for its employees or their beneficiaries by a church or a convention or association of churches which is exempt from taxation under sec_501 of the code sec_414 of the code provides in part that the term church_plan does not include a plan that is established and maintained primarily for the benefit of employees or their beneficiaries of such church_or_convention_or_association_of_churches who are employed in connection with one or more unrelated trades_or_businesses within the meaning of sec_513 of the code or if less than substantially_all of the individuals included in the plan are individuals described in sec_414 of the code or sec_414 of the code or their beneficiaries sec_414 e a of the code provides that a plan established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches includes a plan 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 sec_414 of the code defines employee of a church or a convention or association of churches to include a duly ordained commissioned or licensed minister of a church in the exercise of his or her ministry regardless of the source of his or her compensation and an employee of an organization whether a civil law corporation or otherwise which is exempt from tax under sec_501 of the code and which is controlled by or associated with a church or a convention or association of churches sec_414 of the code provides that a church or a convention or association of churches which is exempt from tax under sec_501 of the code shall be deemed the employer of any individual included as an employee under subparagraph b sec_414 of the code provides that an organization whether a civil law corporation or otherwise is associated with a church or a convention or association of churches if the organization shares common religious bonds and convictions with that church_or_convention_or_association_of_churches sec_414 of the code provides that if a plan intended to be a church_plan fails to meet one or more of the church_plan requirements and corrects its failure within the correction_period then that plan shall be deemed to meet the requirements of this subsection for the year in which the correction was made and for all prior years sec_414 of the code provides in pertinent part 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 revproc_2011_44 2011_39_irb_446 supplements the procedures for requesting a letter_ruling under sec_414 of the code relating to church plans the revenue_procedure requires that plan participants and other interested persons receive a notice in connection with a letter_ruling request under sec_414 e of the code for a qualified_plan requires that a copy of the notice be submitted to the internal_revenue_service irs as part of the ruling_request and provides procedures for the irs to receive and consider comments relating to the ruling_request from interested persons in order for an organization that is not itself a church_or_convention_or_association_of_churches to have a qualified church_plan it must establish that its employees are employees or deemed employees of a church_or_convention_or_association_of_churches under sec_414 e of the code by virtue of the organization's control by or affiliation with a church_or_convention_or_association_of_churches employees of any organization maintaining a plan are considered to be church employees if the organization is exempt from tax under sec_501 of the code and is controlled by or associated with a church_or_convention_or_association_of_churches in addition in order to be a church_plan the plan must be administered or funded or both by an organization described in sec_414 of the code to be described in sec_414 of the code an organization must have as its principal purpose the administration or funding of the plan and must also be controlled by or associated with a church_or_convention_or_association_of_churches in this case order a university band entity k are all organizations exempt from federal_income_tax under sec_501 a of the code as organizations described in sec_501 c of the code order a university band entity k are all listed in directory z order a is a well-established religious_order of church that carries out church functions the mission and purpose of entity k is the provision of education in the liberal arts and graduate theological disciplines with the church university tradition entity k has two classes of members class a and class b both of which are representatives of order a order a exerts control_over entity k by its right to appoint five board p trustees through these two classes of members the class a members' right to disapprove new board p candidates the class a members' right to approve the president of entity k and the class a members' right to remove and reappoint the entire board p in view of the common religious bonds between order a university b entity k and church the inclusion of order a university b and entity k in directory z and the indirect control of university b and entity k by church through order a we conclude that university b and entity k are associated with a church_or_convention_or_association_of_churches within the meaning of sec_414 of the code that the employees of university band entity k meet the definition of employee under sec_414 of the code and that they are deemed to be employees of a church or a convention or association of churches by virtue of being employees of an organization which is exempt from tax under sec_501 of the code and which is controlled by or associated with a church or a convention or association of churches the administrative control of the plans is vested in the committee the committee is controlled by and shares common religious bonds with church through the controlling power that the cfos of order a entity k and college n exercise over the committee the cfo of order a is appointed by order a which is a religious_order of church the cfo of entity k is appointed by entity k which is an organization controlled by or associated with church the cfo of college n is appointed by college n who has received a favorable church_plan ruling on its retirement plans the committee's primary purpose and function is the administration of the plans thus the administration of the plans satisfies the requirements regarding church_plan administration under sec_414 of the code accordingly the plans are maintained by an organization that is associated with a church_or_convention_or_association_of_churches and the principal purpose or function of which is the administration of the plans for the provision of retirement and welfare benefits for the deemed employees of a church_or_convention_or_association_of_churches based on the foregoing facts and representations we conclude that plan x plan y and plan through plan are church plans as defined in sec_414 of the code also that plan x and plan y have been church plans since date plan has been a church_plan since date plan has been a church_plan since september plan has been a church_plan since date plan has been a church_plan since date and plan has been a church_plan since date this letter expresses no opinion as to whether plan x and plan y satisfy the requirements of sec_403 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you have any questions regarding this letter please contact xxxxx xxxxxxxxxxxx se t ep ra t3 at xxxxxxxxxxxxx i urs 6w- __-- arshawsky manager au a employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc xxxxxxxxxxxxxxxxx


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date date 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 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 file the returns in accordance with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty 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 follow the instructions in notice if you agree with our deletions you do not need to take any further action 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 is sincerely karen schiller acting director exempt_organizations rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division contact person identification_number contact number fax number employer_identification_number date date uil legend foreign_country foreign law foreign government bank foreign language date date 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 facts you are a nonprofit financial_institution incorporated under foreign_country general corporations law on date you operate under foreign law law which created a fund to promote the social and economic development of foreign_country through business using a cooperative structure you state that you also operate under uniform bylaws adopted by foreign_country you applied for recognition under sec_501 as a sec_501 c state-chartered credit_union on date you submitted documents supporting this application however those documents were in foreign language you provided no translation of those documents when asked to provide translations of these documents you provided a translation of the law but failed to translate any other documents including your articles of incorporation bylaws and financial statements in your initial application you state that you were created by the law to promote the social and economic development of foreign_country through business using a cooperative structure the law controls your operations specifically the law states that you are a non-lucrative corporation incorporated under foreign country's general corporations law your purpose is to be an investment and development vehicle for certain cooperative enterprises your members are cooperative enterprises that contribute to you and foreign government bank nine members compose your board_of directors four of which are from foreign government bank and five of which represent the cooperative enterprises that are your members and cooperative enterprises are entities organized under foreign_country law including cooperative credit and savings unions subsidiaries or affiliates organized or owned by one or more cooperative credit and savings unions insurance cooperatives the foreign government bank and other cooperatives any securities instruments certificates stocks shares or other evidence of investment participation you issue is exempt from foreign_country securities law in addition to providing an investment vehicle for your members the law permits you to assume an active role in the design gestation organization and capitalization of cooperative enterprises to conduct pertinent studies and analyses of those organizations and to invest in projects proposed by third parties consistent with your policies additionally you state that the law defines your loan terms including the loan's purpose security and rate of interest securities that qualify as legal investments and the distribution of dividends on your shares if any you provide no evidence indicating that you are operated under foreign_country credit_union law and do not state whether you conform to the requirements of the federal credit_union act law sec_501 exempts organizations described in sec_501 from federal income_taxation sec_501 c a describes credit unions without capital stock organized and operated for mutual purposes and without profit revrul_69_282 1969_1_cb_155 determined that an organization that did not operated under the state law governing credit unions did not qualify as a credit_union under sec_501 c a the ruling states that state law determines whether organizations are credit unions for purposes of exemption from federal income_taxation under sec_501 c revrul_69_283 1969_1_cb_156 determined that an organization formed by a group of individuals at a united_states military base in a foreign_country that met all but the territorial requirements of the federal credit_union act would be regarded as a credit_union under sec_501 c a the organization formed to accumulate savings and provide a source of credit at reasonable rates the organization restricted membership to united_states military personnel and civilians employed at the installation and provided services only to its members its purposes and method of operation conformed to the provisions of the act however the act applies only to the several states the district of columbia the several territories and possessions of the united_states the panama canal zone and the commonwealth of puerto rico the territorial requirement the organization was not located in one of these countries the ruling states that if an organization is not governed by the law of any of the states its status as a credit_union cannot be determined under state law nonetheless if the organization meets all but the territorial requirements of the act it will be regarded as a credit_union for purposes of exemption under sec_501 c a accordingly the organization qualified for recognition under sec_501 c a because it met all but the territorial requirements of the act revrul_72_37 1972_1_cb_152 clarifies that to qualify as a credit_union the organization must operate without profit and for the mutual benefit of its members as required by the federal statute in addition to being chartered under a state credit_union law as specified in rev_rul section dollar_figure of revproc_2013_4 2013_1_cb_126 updated annually provides that all requests for letter rulings and determinations must be submitted in english additionally all documents submitted in support of such requests must be in english or accompanied by an english translation in la caisse popu425_fsupp_512 d n h aff'd 563_f2d_505 st cir the united_states district_court for the district of new hampshire determined that st mary's operated for mutual purposes because b oth borrowers and savers alike are required to be members of the institution and participate in the earnings_of the institution by receiving dividends declared on capital shares rationale you do not qualify for recognition as a state-chartered credit_union under sec_501 c a first you failed to show that you are organized and operated without capital stock without profit and for mutual purposes because you failed to provide english translations of your supporting documents including your articles of incorporation bylaws and financial statements revrul_72_37 revproc_2013_1 nonetheless assuming that the law is a valid substitute for a translation of your articles of incorporation the law allows you to operate for purposes other than mutual purposes see revrul_72_37 a credit_union is operated for mutual purposes if b oth borrowers and savers alike are required to be members of the institution and participate in the earnings_of the institution by receiving dividends declared on capital shares la caisse popu425_fsupp_512 d n h aff'd 563_f2d_505 1st cir however the law allows you to assume an active role in the design gestation organization and capitalization of cooperative enterprises to conduct pertinent studies and analyses of these organizations and to invest in projects proposed by third parties consistent with your policies these purposes are broader than the mutual purposes described in sec_501 c accordingly you are operated for purposes other than mutual purposes within the meaning of sec_501 c a additionally you failed to show that you operate under a state law governing credit unions a credit_union recognized under sec_501 c a must operate under the state law governing credit unions revrul_69_282 you are organized and operated in foreign_country which is not a state accordingly you cannot be organized under a state law governing credit unions nonetheless you may still be recognized under sec_501 c a if you meet all but the territorial requirements of the federal credit_union act act revrul_69_283 however you failed to provide information showing that you meet the requirements of the act therefore you are not a state-chartered credit_union within the meaning of sec_501 c a conclusion you fail to meet the requirements of sec_501 and do not qualify for recognition under that section 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 your protest statement should 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 of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you if you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication 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 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 this address internal_revenue_service constitution ave n w washington dc you may also 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 sincerely karen schiller acting director exempt_organizations rulings and agreements


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc psi cam-113780-00 uilc internal_revenue_service national_office chief_counsel_advice memorandum for industry director financial services lmsb f from senior technician reviewer branch office of associate chief_counsel passthroughs and special industries cc psi subject denial of consent for change in method_of_accounting in accordance with section a of revproc_2002_1 2002_1_irb_1 this chief_counsel_advice advises you that consent for a change in accounting_method has been denied to a taxpayer within your jurisdiction pursuant to sec_6110 of the internal_revenue_code this chief_counsel_advice should not be cited as precedent legend taxpayer parent predecessor a b taxpayer formerly known as predecessor filed a form_3115 application_for change in accounting_method to request permission to change its treatment of supervisory goodwill from a non-depreciable asset to a depreciable asset beginning with the taxable_year beginning a year_of_change predecessor acquired one or more failing thrift institutions in tax-free reorganizations pursuant to sec_368 of the code using a carryover_basis in the assets acquired predecessor acquired the thrifts through supervisory mergers induced and arranged by the federal savings and loan insurance corporation fslic and the federal home loan banking board fhlbb the fslic permitted predecessor to account for the acquisitions using the purchase_method of cam-113780-00 accounting pursuant to this method predecessor valued each asset acquired at fair_market_value as a result the acquired thrifts had a negative net_worth the excess of the purchase_price which included liabilities assumed over the fair_market_value of the acquired assets was referred to as supervisory goodwill and was reported on predecessor’s balance_sheet for regulatory purposes pursuant to the fslic’s regulatory policies and procedures in effect at the time of acquisition of the failing thrifts predecessor was permitted to amortize the supervisory goodwill over a specified period for regulatory purposes and count the supervisory goodwill towards its regulatory capital reserve requirements on date congress enacted the financial institutions reform recovery and enforcement act of firrea which phased out over a five-year period the ability to count supervisory goodwill for the purposes of meeting regulatory capital requirements at the time of the acquisition of the failing thrifts predecessor did not assign any_tax basis to the supervisory goodwill for federal_income_tax purposes predecessor excluded the supervisory goodwill from its gross_income pursuant to sec_597 of the code as such section applied at the time of the acquisitions also predecessor never amortized the supervisory goodwill under the proposed method taxpayer formerly known as predecessor will depreciate under sec_167 of the code the tax basis of the supervisory goodwill over its useful_life hereinafter any reference to taxpayer includes predecessor taxpayer took the fair_market_value of the supervisory goodwill as its tax basis taxpayer takes the position that the contractual right to use the purchase_method of accounting along with the resultant purchased goodwill results in an asset on its books properly identified as supervisory goodwill taxpayer believes that this supervisory goodwill qualifies as other_property for purposes of sec_597 of the code and is a form of financial assistance provided by the fslic under sec_406 of the national housing act and as such the asset was properly excluded from gross_income pursuant to sec_597 relying on 507_us_546 taxpayer further believes that it as a result of the application of sec_597 has an ascertainable tax basis in its supervisory goodwill and that this asset with the enactment of the firrea had a limited useful_life we cannot accept this view based on our analysis as set forth below accordingly taxpayer’s requested change in method_of_accounting for supervisory goodwill was denied in a letter_ruling dated b law and analysis issue whether supervisory goodwill qualifies as money or other_property for purposes of sec_597 of the code cam-113780-00 supervisory goodwill is a creature of regulatory accounting principles although it bears a nexus to the generally_accepted_accounting_principles gaap asset of purchased goodwill that results under the purchase_method of accounting upon the acquisition of one corporation by another for federal_income_tax purposes taxpayer's acquisition of the failing thrifts qualified and were accounted for as tax-free reorganizations under sec_368 of the code thus taxpayer took a carryover_basis in the assets and liabilities from the acquired institutions at their financial book basis and recognized no gain_or_loss on the acquisitions as a general matter for federal_income_tax purposes purchased goodwill is not an acquired asset in a tax-free reorganization the value otherwise ascribed to purchased goodwill under gaap the excess of purchase_price including liabilities assumed over the fair_market_value of the assets acquired is already reflected in the book basis of the assets and liabilities acquired from the failing thrifts taxpayer at the time of its acquisition of the failing thrifts correctly did not recognize a separate intangible asset for federal_income_tax purposes comparable to its regulatory asset of supervisory goodwill that was booked on its acquisitions of the failing thrifts as that regulatory asset was derived from the gaap asset of purchased goodwill moreover even where goodwill is recognized as a tax asset it is not subject_to recovery by depreciation or amortization see 518_us_839 at n quoting 507_us_546 and winstar supra pincite n as discussed more fully in winstar supra during the years taxpayer acquired the failing thrifts the savings and loan industry was in crisis and the fslic lacked the funds necessary to liquidate all of the failing thrifts accordingly the fslic arranged mergers between healthy thrifts and failing thrifts as an inducement for these mergers the fslic allowed the acquiring thrifts to count supervisory goodwill toward regulatory capital reserve requirements set forth in c f_r dollar_figure and to amortize the goodwill over as much a sec_40 years in congress enacted firrea which impacted a thrift's ability to count supervisory goodwill towards satisfaction of its capital reserve requirements at the time taxpayer acquired the failing thrifts sec_597 of the code as added by sec_244 of the economic_recovery_tax_act_of_1981 publaw_97_34 date the act provided that the gross_income of a domestic_building_and_loan_association did not include any amount of money or other_property received from the fslic pursuant to sec_406 of the national housing act u s c f regardless of whether any note or other instrument was issued in exchange further sec_597 provided that no reduction in the basis of assets of a domestic_building_and_loan_association shall be made on account of such money or other_property received cam-113780-00 sec_246 of the act made sec_597 of the code applicable to payments made on or after date the use of the word payments in sec_246 of the act along with the statutory language of sec_597 of the code and sec_406 of the national housing act clearly indicates the congressional intent to limit sec_597 to forms of financial assistance provided by the fslic although the legislative_history to sec_244 of the act is somewhat sparse what legislative_history there is also supports a conclusion that sec_597 of the code covers only financial assistance provided by the fslic sec_597 as enacted appears to have been first added in the version of h_r that was passed by the house on date see cong rec at h5259 and h5279 daily ed date the legislative_history also indicates that this tax provision was initially agreed to in the senate as a floor amendment captioned section fslic financial assistance on date see cong rec at s8287 daily ed date in support of the senate amendment the congressional record reflects that the amendment would facilitate the infusion of capital to a failing savings and loan or the merger of a savings and loan with another financial_institution by clarifying that these transactions are nontaxable events id at s8288 further the use of terms such as payment capital infusion and repayment during the legislative process are further indications of a congressional intent to limit sec_597 of the code solely to forms of financial assistance see eg letter from richard t pratt then- chairman of the fhlbb cong rec at s8288 the conference_report moreover indicates that this amendment was intended to resolve the question of whether financial assistance from the fslic was to be included in income or treated as a non-shareholder contribution_to_capital with a consequential reduction in the tax basis of assets by the taxpayer h_r conf_rep no 97th cong 1st sess see also staff of the joint_committee on taxation 97th cong 1st sess general explanation of the economic_recovery_tax_act_of_1981 h_r 97th cong pub_l_no pincite to facilitate providing of financial assistance by the fslic and referring to the fslic's financial assistance program and the proper treatment under prior_law of such assistance payments from the fslic the fslic was created in with the passage of the national housing act chiefly to insure deposits made by the public see winstar u s pincite in addition to providing deposit insurance the fslic generally was authorized to make loans to to make deposits in to purchase the assets or securities of to assume the liabilities of or to make contributions to any insured institution see sec_406 of the national housing act u s c f as a result supervisory goodwill does not resemble any type of financial assistance listed in sec_406 of the national housing act rather the concept of supervisory goodwill was merely part of an accounting regime designed to induce healthy thrifts to acquire failing thrifts see winstar u s pincite the nature of cam-113780-00 supervisory goodwill is one of regulatory forbearance rather than financial assistance further based on the types of assistance that the fslic was authorized to render under sec_406 of the national housing act the fslic assistance given under this provision was intended to increase the capital of an institution so that the institution could meet its obligations to depositors supervisory goodwill does not enhance the capital of an institution rather it is the antithesis of capital as it relieves the institution and its shareholders of their obligations to meet otherwise applicable capital requirements nothing in the legislative_history to sec_597 of the code indicates it was intended to apply to forms of assistance other than financial assistance under these circumstances supervisory goodwill is not assistance within the meaning of sec_597 moreover both the statutory language and the legislative_history of sec_597 of the code limit application of sec_597 to financial assistance provided by the fslic under title of the united_states_code the regulatory forbearance that taxpayer claims created supervisory goodwill was not provided by the fslic generally the clear meaning of a statute will control its application unless it is established that congressional intent would require a different result congress clearly differentiated between the fhlbb and the fslic for purposes of applying various contemporaneously enacted provisions of the internal_revenue_code compare sec_243 and sec_244 of the act in which congress spoke only to actions by the fslic with sec_241 of the act in which congress spoke to actions by either the fhlbb or the fslic the fslic although working with the fhlbb in such matters was a separate corporation for tax purposes see 319_us_436 further the fslic had no authority to allow supervisory goodwill to be counted toward regulatory capital requirements under the rules of the fhlbb given the clear statutory reference in sec_597 of the code we cannot expand the meaning of the fslic to encompass actions of the fhlbb we do not agree that because the fslic and the fhlbb have been treated as indistinguishable for purposes of determining a breach of contract with respect to the use of supervisory goodwill to meet regulatory capital requirements the same result applies here we note that the supreme court in winstar supra did not hold that supervisory goodwill was provided by the fslic under sec_406 of the national housing act within the meaning of sec_597 of the code we also do not agree that sec_597 of the code extends to the right to use supervisory goodwill to meet regulatory capital requirements and that the fslic on taxpayer’s behalf obtained that right from the fhlbb and then conveyed it to taxpayer in connection with the acquisitions of the failing thrifts for the reasons set forth above we conclude that the right to use supervisory goodwill is not assistance provided by the fslic under sec_597 cam-113780-00 issue whether taxpayer properly established a tax basis in the book asset identified as supervisory goodwill for federal_income_tax purposes a taxpayer’s basis in property is generally established by reference to the taxpayer’s cost see sec_1012 of the code the taxpayer's cost is usually measured by the amount the taxpayer paid in cash or kind for the property see sec_1_1012-1 of the income_tax regulations when a taxpayer incurs no cost in connection with the acquisition of the property the taxpayer's basis in that property may be established under other provisions of the code however absent the application of a special provision that provides for the tax-free receipt of property a taxpayer generally must include the fair_market_value of the property received in income in order to obtain a tax basis in such property see eg sec_1 d of the regulations 91_tc_627 thus generally when a taxpayer acquires property without incurring any cost the amount of the taxpayer's basis in that property is equal to the amount included in income that is the property's fair_market_value taxpayer has no tax basis in supervisory goodwill for federal_income_tax purposes taxpayer's acquisition of the failing thrifts qualified as tax-free reorganizations under sec_368 of the code special basis rules apply in connection with assets and liabilities acquired by means of tax-free reorganizations under these rules for federal_income_tax purposes a taxpayer such as taxpayer generally steps into the shoes of the transferor_corporation such as the failing thrifts acquired by taxpayer with respect to basis see sec_362 because supervisory goodwill was not a pre-existing asset on the books of the failing thrifts acquired by taxpayer taxpayer could not obtain a carryover_basis in that asset see also sec_357 and sec_1032 as taxpayer could not obtain a carryover_basis for supervisory goodwill under sec_362 of the code taxpayer must identify a fresh source from which basis can be obtained taxpayer takes the position that sec_597 applies to provide a tax-free source_of_income from which this fresh basis can be said to derive for the reasons set forth above under issue sec_597 is not applicable to the acquisition of supervisory goodwill by taxpayer consequently taxpayer was not entitled to exclude the value of supervisory goodwill from gross_income under sec_597 as taxpayer did not separately pay for the purported asset and did not include the fair_market_value of that asset in gross_income taxpayer cannot now claim that it had a tax basis in that asset see sec_1_61-2 of the regulations strong v commissioner supra taxpayer has no tax basis in the right to use goodwill even assuming that taxpayer received an asset from the regulators that is recognizable for federal_income_tax purposes this asset can only be the right to cam-113780-00 use purchased goodwill to meet regulatory capital requirements further for federal_income_tax purposes this right is considered other_property and any_tax basis attributable to the acquisition of this right would be determined under rules applicable to the receipt of property see sec_1012 of the code as a general matter the creation of rights under governmental regulatory and licensing arrangements property rights will usually not result in the recognition of gross_income to the recipient of those property rights see eg revrul_92_16 1992_1_cb_15 holding that the issuance of emission allowance by the environmental protection agency does not result in gross_income to the taxpayer a utility that receives it moreover not even the excess of the fair_market_value of the property right over the cost of acquisition of that right will be income see eg revrul_67_135 1967_1_cb_20 holding that the excess of the fair_market_value over the cost of a lease obtained by a taxpayer in a lottery conducted by the united_states bureau of land management is not includable in gross_income even where a tax basis in such a property right is properly determined under sec_1012 of the code that basis is generally limited to the taxpayer's cost of acquiring the property right not the fair_market_value of the right itself the service's position with respect to the proper determination of any_tax basis to be accorded to the acquisition of these types of property rights has been implicitly adopted by a number of courts in cases holding that taxpayers' bases in similar_property rights were the respective taxpayers' costs of obtaining those rights see eg 191_f2d_934 5th cir 79_tc_109 aff'd per curiam 722_f2d_324 6th cir 31_tc_803 thus as taxpayer incurred no additional cost in order to obtain the right to use purchased goodwill for regulatory purposes its cost_basis in such an asset would be zero issue whether taxpayer is entitled to claim a deduction for depreciation of supervisory goodwill under sec_167 of the code sec_167 of the code provides as a depreciation deduction a reasonable allowance for the exhaustion wear_and_tear and obsolescence of property used in a trade_or_business or of property_held_for_the_production_of_income sec_167 of the code generally provides that the basis on which exhaustion wear_and_tear and obsolescence are allowed shall be the adjusted_basis provided in sec_1011 for the purpose of determining the gain on the sale_or_other_disposition of the property sec_1_167_g_-1 of the regulations provides that the basis upon which the allowance for depreciation is computed with respect to any property shall be the adjusted_basis provided in sec_1011 for the purpose of determining gain on the sale_or_other_disposition of the property sec_1_1011-1 provides the adjusted_basis for determining gain_or_loss from the disposition of property is the cost or other basis prescribed in sec_1012 or other applicable provisions of subtitle a of the code cam-113780-00 sec_1_167_a_-1 of the regulations provides that the allowance for the exhaustion wear_and_tear and obsolescence of property used in a trade_or_business or held_for_the_production_of_income is that amount which should be set_aside for the taxable_year in accordance with a reasonably consistent plan so that the aggregate of the amounts set_aside will at the end of the estimated_useful_life of the depreciable_property equal the cost or other basis of that property the allowance shall not reflect amounts representing a mere reduction in market_value sec_1_167_a_-1 of the regulations provides that the estimated_useful_life of an asset is not necessarily the useful_life inherent in the asset but the period over which the asset may reasonably be expected to be useful to the taxpayer in its trade_or_business or in the production of the taxpayer’s income this period shall be determined by reference to the taxpayer’s experience with similar_property taking into account present conditions and probable future developments sec_1_167_a_-3 of the regulations provides that an intangible asset that is known from experience or other factors to be of use in the business or the production_of_income for only a limited period the length of which can be estimated with reasonable accuracy may be the subject of a depreciation allowance an intangible asset the useful_life of which is not limited is not subject_to the allowance for depreciation no allowance for depreciation will be permitted merely because in the unsupported opinion of the taxpayer the intangible asset has a limited useful_life no deduction for depreciation is allowable with respect to goodwill sec_1_167_a_-10 of the regulations provides that the period for depreciation shall begin when the asset is placed_in_service and shall end when the asset is retired from service in order to claim a depreciation deduction under sec_167 of the code a taxpayer is required to have a determinable tax basis in the asset use the asset in the taxpayer’s trade_or_business or hold the asset for the production_of_income and have a useful_life determinable with reasonable accuracy for the reasons set forth above under issue taxpayer does not have a tax basis in the claimed intangible asset regardless of whether that asset is considered to be the regulatory asset of supervisory goodwill or merely the right to use such supervisory goodwill to meet regulatory capital requirements without a tax basis in that intangible asset even if we were to conclude that such asset was a depreciable asset taxpayer's depreciable basis would be zero pursuant to sec_167 of the code and sec_1_167_g_-1 of the regulations thus the amount of the depreciation deduction that would be allowable in any taxable_year would be zero even assuming that taxpayer had established a tax basis in the claimed intangible asset regardless of whether that asset is considered to be the regulatory asset of cam-113780-00 supervisory goodwill or merely the right to use such supervisory goodwill to meet regulatory capital requirements that asset is not depreciable under sec_167 of the code for gaap taxpayer’s acquisitions of the failing thrifts were accounted for under the purchase_method for business combinations the amount by which the fair_market_value of the liabilities assumed by taxpayer the acquisition price exceeded the fair_market_value of the assets received by taxpayer as a result of these acquisitions was recognized on taxpayer's books as purchased goodwill for regulatory purposes this purchased goodwill corresponded to taxpayer's regulatory asset identified as supervisory goodwill if the acquisitions of the failing thrifts created tax basis as taxpayer alleges then the calculation of the excess acquisition costs would be consistent with the residual_method of determining tax_accounting goodwill see eg 84_tc_476 aff'd 815_f2d_75 6th cir in order to be depreciable an identified asset requires a determination of value basis and a reasonably determinable useful_life 507_us_546 these two requirements are to be met based on information available as of the transaction date see banc one supra at most taxpayer received a right to use supervisory goodwill to meet regulatory capital requirements even assuming that such a right resulted in a recognizable asset for federal_income_tax purposes at the time of acquisition this right is not clearly severable from the residual tax asset of goodwill the mere fact that enactment of firrea eliminated taxpayer’s right to use its supervisory goodwill for regulatory purposes does not establish that its tax asset now also has a separately ascertainable value and a reasonably determinable useful_life taxpayer has failed to substantiate that the fair_market_value of the right to use supervisory goodwill is equal to the residual amount likewise the remaining useful_life determined by the taxpayer is for the right to use and not necessarily for the residual amount therefore taxpayer has failed to distinguish the right to use supervisory goodwill from nondepreciable goodwill further most of the value assigned to the regulatory book asset of supervisory goodwill was likely derived from loans and other assets that had declined in value because of rising interest rates see winstar u s pincite for federal_income_tax purposes because taxpayer took the loans and other assets from which the regulatory book asset of supervisory goodwill was derived at their historic that is unreduced book values tax basis was properly reflected directly in these loans and other assets rather than indirectly in a separately booked tax asset comparable to supervisory goodwill even if taxpayer had tax basis in supervisory goodwill such basis would be the fair_market_value of the right to use the supervisory goodwill toward regulatory capital requirements not the full amount of the regulatory forbearance claimed by taxpayer while supervisory goodwill was used to meet regulatory capital requirements the value is not equivalent to its capital cost and does not have a dollar for dollar value see 43_fedclaims_445 aff’d in part and vacated in cam-113780-00 part 245_f3d_1342 thus taxpayer has failed to substantiate the basis in its right to use supervisory goodwill consequently taxpayer has not met its burden of separately identifying valuing and lifing the right to use as required by the supreme court in newark morning ledger supra in order for such right to be subject_to a depreciation deduction under sec_167 of the code even assuming that the asset recognizable for federal_income_tax purposes is the regulatory asset of supervisory goodwill taxpayer also has not met its burden of separately valuing and lifing such asset as required by the supreme court in newark morning ledger supra therefore the claimed intangible asset regardless of whether that asset is considered to be the regulatory asset of supervisory goodwill or merely the right to use such supervisory goodwill to meet regulatory capital requirements is not depreciable under sec_167 and taxpayer is not entitled to a deduction for depreciation or amortization under sec_167 for this asset conclusion for the reasons set forth above taxpayer’s requested change in method_of_accounting with respect to its supervisory goodwill has been denied if you have any questions on this matter do not hesitate to call kathleen reed


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-123954-02 date date legend x y z d1 d2 d3 country1 country2 dear this letter responds to a letter dated date and subsequent correspondence by your authorized representative submitted on behalf of y requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for y to elect to be treated as a disregarded_entity under sec_301_7701-3 plr-123954-02 facts according to the information submitted x was formed as a company with limited_liability on d1 in country1 y a country2 company formed on d2 owns x z an individual u s citizen owns y operations for x and y began on d3 x and y each intended to elect to be an entity disregarded from its owner for federal tax purposes effective d3 however due to inadvertence x and y failed to make the necessary elections under sec_301_7701-3 law and analysis 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 sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_entity is an association if all members have limited_liability sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the applicable service_center sec_301_7701-3 provides in part that an election made under sec_301_7701-3 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 and can not be 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 a regulatory election as an election with a due_date prescribed by a regulation published in the federal_register 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_9100-1 sec_301_9100-2 provides automatic_extension s 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 plr-123954-02 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 conclusions based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result y is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d3 y should make the election by filing a properly executed form_8832 and attaching a copy of this letter to the election a copy is enclosed for that purpose this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely yours s heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes