department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date t e0- 6b legend o i t i o i o o i i m i u i k x l i t u k k i n i dear sir or madam this is in response to your request for a ruling regarding a proposed reorganization and its effect under sec_501 and of the internal_revenue_code a is exempt from federal_income_tax under sec_501 of the code and is classified as a public charity pursuant to sec_509 and sec_170 a owns and operates a hospital and prior to the restructuring owned or controlled several other health care related entities a provides comprehensive health care services to the x community b is being granted exemption from federal_income_tax under sec_501 of the code and is being classified as a public charity pursuant to sec_509 by letter of even date b was created to serve as the parent organization of the restructured health system and to support a and c cis being granted exemption from federal_income_tax under sec_501 of the code and is being classified as a public charity pursuant to sec_509 and sec_170 by letter of even date c was created to operate the clinics and facilities of the health care system to employ physicians and staff medical clinics and facilities and provide medical services to the communities served by b in a’s board_of trustees approved the establishment and funding of a separate division c operating as a division of a dedicated to the operation of physician medical practices a owned all accounts_receivable attributable to the physicians it employed through c a provided a set number of support services to the employed physicians of c and specialty physicians and all respective mid-level providers such as physician assistants and nurse practitioners as well as all other related clinical and administrative personnel prior to the funding of this separate division an unrelated physician practice was managed by an unrelated publicly traded physicians practice management company c employed primary care a was the sole member of a managed care entity d d is a limited_liability_company treated as a disregarded_entity for federal_income_tax purposes d provides payor contracting services to a and the employed physicians of c operating as a division of a directly with d and provided access to those covered lives for its employed physicians c the division contracted proposed restructuring in this role b will undertake certain supervision oversight and coordination pursuant to the restructuring transaction b was formed to serve as the common parent of a and other entities as described below b was formed as a supporting_organization to a and the newly formed c activities that were previously the responsibility of a and will ensure that the activities of the hospital and related_organizations are planned managed and coordinated to maximize opportunities to deliver cost effective quality medical_care to the x community b will also increase the ability to ensure that clinical best practices can effectively and efficiently be shared between the members of the integrated health care delivery system a and d have been repositioned as subsidiaries of b and have amended their articles of incorporation and bylaws to reflect this relationship a has provided a copy of a’s proposed amended articles of incorporation and has represented that such articles of incorporation and bylaws will be finalized upon receipt of a favorable ruling from the internal_revenue_service such a representation indicates that the articles of incorporation will be filed with the proper state authorities in addition c has been formed as a newly incorporated subsidiary of b to employ certain physicians previously employed by c operating as a division of a and all respective mid-level providers for those employed physicians such as physician assistants and nurse practitioners b also formed e a management services organization e is organized as a limited_liability corporation and its sole member is b e is treated as a disregarded_entity for federal_income_tax purposes in other instances all non-employee physicians have medical staff in most instances physicians currently employed by c operating as a division of a have been offered continued employment with c upon expiration of their current employment contract c will operate from the same offices from which c the operating division of a conducted operations these offices are located in close proximity to a the offices that a intends to lease the non-employee physicians as well as e are part of these offices these physicians have been offered either affiliated or independent physician status and will become non-employee physicians collectively the affiliated and independent physicians are referred to as non-employee physicians privileges at a affiliated physicians at their discretion will practice as solo practitioners or in a group practice setting with other current or former physician employees of c operating as a division of a affiliates will have exclusive payor contracting accessed through d and receive certain other management services from b or its subsidiary organizations in addition affiliated physicians will be given the opportunity to lease office space from a and buy the equipment related to their on-site ancillary service lines a states that affiliated physicians will not be given the opportunity to purchase any medical office space affiliated physicians will be given the opportunity to purchase equipment determined on a case-by-case basis depending on a’s need for the equipment at the time the sale price will be based on the appraised fair_market_value of the equipment a third party independent_appraiser will determine the fair_market_value of the equipment at the time of the sale affiliated physicians will be asked to sign a non-compete duplicative services agreement as part of the overall management services affiliation agreement with b or its subsidiary organizations in order to avoid duplication of services provided by a independent physicians include those former c operating as a division of a physicians that will transition into independent private practice with only limited contact with c payor contracting through d will be available to independent physicians if restrictive covenants currently exist with a then payor contracting through d will be exclusive for a term tied to the length of existing covenants with a independent physicians may lease office space buy equipment purchase management services excluding billing and collections or lease non-physician employees from e or a a states that independent physicians will not have the option to buy medical office space b and its subsidiaries will actively enforce any restrictive covenants with respect to independent physicians in current employment contracts as well as those employment contracts purchased from the unrelated physician practice management company if no restrictive covenants exist then contracting may be non-exclusive all non-employee physicians will pay b or its subsidiaries an amount equal to fair_market_value for any management services or other services or equipment sold or otherwise provided by b or its subsidiaries total gross_income derived by b from services provided to the non-empioyee physicians is not expected to exceed y percent of its gross_income from all sources gross_income derived by a from leases including leased employees to non-employee physicians is not expected to exceed z percent of its consolidated gross_income from all sources c will lease from a the land and building space attributable to the employed physicians while furniture and equipment will be transferred to c or leased to c via an internal charge at fair_market_value no more than z percent of the building will be available for lease of office space by the non-employee physicians employee_benefits provided by c will remain unchanged from those previously provided by c operating as a division of a in addition c will contract directly with d to provide medical services on a fee for service or a capitated basis for the covered lives contracted by d with payors hmos ppos pos self-insured employer groups and indemnity insurance c will also own all accounts_receivable attributable to the physicians employed by c bwill fund any c operating deficits the annual level of funding will be prospectively determined based on operating budgets at the beginning of each fiscal_year e wil provide administrative and management services including certain patient billing and collection services to the c employed physicians and the non-employee physicians pursuant to this arrangement e will purchase a portion of these services from a pursuant to a formal purchased services agreement these purchased services will represent a portion of the total cost within the total management services package which will be offered and provided to the c employed physicians and the non-employee physicians and are independent of any anticipated management services which will be developed internally by e or those which are purchased from an outside vendor in accordance with the formal purchased services agreement a will receive from e consideration in an amount equal to the fair_market_value for these purchased services in addition e will employ all non-physician employees clinical and administrative only but no physician extenders associated with the c employed physicians and the if applicable non-employee physicians and lease them to either c or the non-employed physician as appropriate e will provide billing and collection services and other management services to the affiliated physicians subsequent to the reorganization a no longer employs physicians a will lease land and buildings to c and e at fair_market_value for the c employed physician’s office space and the e administrative space respectively the non-empioyee physicians will have the option to lease their office space from a from a to c be transferred from a to c non-employee physicians will have the option of purchasing their clinical assets and office furniture from c at fair_market_value non-employee physicians will not have the option to buy medical office space all administrative assets not covered under purchased service arrangements will all clinical assets and physician office furniture will be transferred all transactions undertaken between a d c b e and or the non-employee physicians pursuant to and subsequent to the reorganization will be based on fair_market_value for such goods and services exchanged the ultimate governance of a c and e will vest in b’s community based board_of trustees b’s board_of trustees is comprised of the eight physicians serving on c’s and e’s board_of trustees plus all members of a’s board_of directors b’s board_of trustees elects and removes a's c’s and e’s trustees or directors furthermore b a c and e operate through interlocking directorates a’s board_of directors consists of three physician members and fifteen non-physician members c’s board_of directors consists of eight physicians employed by c and three non-physician members of a’s board_of trustees the physician directors serving on c’s board_of directors are different from those physicians serving on a's board_of directors the persons serving on c’s board_of directors also serve on e’s board_of directors rulings requested the reorganization as described will not adversely impact a’s exemption from tax under sec_501 of the code and its classification as a public charity under sec_509 and sec_170 the reorganization as described and the subsequent business arrangements between a b and c relating to the provision of administrative management services and the lease of land and buildings will not give rise to unrelated_business_income to the three entities law sec_501 of the code provides in part for the exemption from federal_income_tax of organizations that are organized and operated exclusively for charitable educational or scientific purposes provided no part of their net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense the promotion of health has long been recognized as a charitable purpose see restatement second of trusts sec_368 sec_372 iv scott on trusts sec_368 sec_372 ed and revrul_69_545 1969_2_cb_117 sec_509 of the code provides that all organizations described in sec_501 are private_foundations except those described in sec_509 or sec_509 of the code excludes from the term private_foundation an organization described in sec_170 other than in clauses vii and viii sec_170 of the code describes an organization whose principal purpose or functions include providing medical or hospital care or medical education or medical_research sec_511 of the code imposes a tax on the unrelated_business_income of organizations described in sec_501 sec_512 of the code defines unrelated_trade_or_business taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions directly attributable to such business activity with certain modifications sec_512 of the code provides that rents_from_real_property and its incidental related personal_property are not treated as unrelated_business_income unless the real_property is debt-financed under sec_514 debt-financed_property does not include any property substantially related to the exercise or performance by such organization of its charitable functions nt sec_513 of the code defines unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for funds or the use it makes of the profits derived to the exercise of the organization’s exempt purposes or functions sec_1_513-1 of the regulations defines unrelated_business_taxable_income to include the gross_income of an exempt_organization if and to the extent that it is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the productions of funds to the organization's performance of its exempt functions sec_1_513-1 of the regulations provides in part that a trade_or_business is related to exempt purposes only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and it is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct_of_a_trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of exempt purposes sec_514 of the code provides for the taxation under sec_512 of income from debt- financed property sec_514 however provides that the definition of debt- financed property does not include any property substantially_all the use of which is substantially related to the exercise or performance by such organization of its charitable purposes constituting the basis for its exemption under sec_501 revrul_69_545 1969_2_cb_117 acknowledges that the promotion of health is a charitable purpose within the meaning of sec_501 of the code revrul_78_41 1978_1_cb_148 describes a_trust whose sole purpose was to accumulate and hoid funds for use in satisfying malpractice claims against a hospital the trust was determined to be an integral part of the hospital because it was controlled by the hospital directly and was performing a function that the hospital could do directly the organization was ruled to be exempt under sec_501 of the code for federal_income_tax purposes a parent_corporation and its subsidiary are separate taxable entities so long as the purposes for which the subsidiary is incorporated are the equivalent of business activities or the subsidiary subsequently carries on business activities see 431_f2d_227 cir and the corporation was not created to contravene directly or indirectly the policies of the internal_revenue_code see 293_us_465 see also 336_us_422 that is where a corporation is organized with the bona_fide intention that it will have some real and substantial business function its existence may not generally be disregarded for tax purposes see britt supra pincite however where the parent_corporation so controls the affairs of the subsidiary that it is merely an instrumentality of the parent the f ws corporate entity of the subsidiary may be disregarded see 483_f2d_1098 cir revrul_69_463 1969_2_cb_131 provides that the leasing of its adjacent office building and the furnishing of certain office services by an exempt hospital to a hospital based medical group is not an unrelated_trade_or_business under sec_513 of the code where the medical group performs important health services for the hospital revrul_74_132 1974_1_cb_152 provides that an exempt foundation that fosters and supports the activities and purposes of an exempt hospital and advances the hospital’s objectives including the sponsorship of specific projects and programs to improve the hospital's services to its patients and to support and provide the hospital's education training and research programs is exempt within the meaning of sec_501 of the code in announcement 1999_2_cb_545 the internal_revenue_service expressed its intention to modify the instructions to forms 990-ez and 990-pf to clarify the reporting requirements of tax-exempt owners of entities disregarded for federal tax purposes under sec_301_7701-1 et seq of the regulations according to this announcement when an entity wholly-owned by an organization exempt from tax under sec_501 is disregarded its operations are treated as a branch or division of its owner a will continue to own and operate a hospital it will continue to provide hospital health care services to the x community a’s tax exempt status under sec_501 of the code and its classification as not a private_foundation pursuant to sec_509 and sec_170 will not be affected by the reorganization the creation of b and c furthers a’s charitable purposes b is exempt under sec_501 of the code and classified as a supporting_organization pursuant to sec_509 b will be the parent_corporation of the restructured health care system by establishing and coordinating policies supervising operations providing centralized_management and allocating resources exclusively for the reorganized structure b is providing services which support a’s and c’s exempt purposes and activities such services could be performed by a if b or c had not been created c is exempt under sec_501 of the code and is classified as not a private_foundation pursuant to sec_509 and sec_170 c was created to operate the clinics and facilities of the health care system to employ physicians staff facilities and provide medical services to the communities served by a c’s activities are of the same nature as those engaged in by a prior to the restructuring by providing the clinical services to the community c is furthering a’s charitable purposes consequently a’s tax-exempt status under sec_501 of the code and public charity status under sec_509 and sec_170 will not be affected by the proposed reorganization c will continue to provide the physician services previously provided by a’s division a transferred ail clinical assets and physician office furniture to c the transferred assets will be used in the manner they were being used by a prior to the restructuring a represents that d asset of a d was transferred by a to b b will utilize d in the same manner it was utilized by a the expansion of access by the community to its hospital and employed physicians is a disregarded_entity for federal tax purposes which was previously an a represents that e is a disregarded_entity for federal tax purposes e’s sole member is b a transferred certain administrative assets to e b will use the transferred assets through e ina manner analogous to a’s use of such assets therefore the assets will continue to be used to further charitable purposes a has represented that d and e are disregarded entities for federal tax purposes therefore the activities of d and e will be treated as activities of a branch or division of b the contractual relationships between a b and c will not posses the characteristics of a trade_or_business regularly carried on following the restructuring the sharing of services facilities personnel and or resources whether or not a fee is charged and the transfer of cash and assets among the exempt_organizations will be substantially related to the exercise or performance of the exempt purposes of the involved corporations and will therefore not constitute unrelated_trade_or_business activities subject_to tax each corporation will be merely supplying a related charitable_organization with a service or facility necessary for and in the furtherance of the performance of exempt functions under sec_501 accordingly based on all the facts and circumstances described above we rule as follows the reorganization as described will not adversely impact a’s exemption from tax under sec_501 of the code and its classification as a public charity under sec_509 and sec_170 the reorganization as described and the subsequent business arrangements between a b and c relating to the provision of administrative management services and the lease of land and buildings will not give rise to unrelated_business_income to the three entities this ruling is based on the understanding that there will be no material changes in the facts upon which it is based furthermore we are not ruling as to the consequences of the provision of office space and administrative services to the non-employee physicians this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent this ruling does not address the applicability of any section of the code or regulations to facts submitted other than with respect to the sections described a we are informing the please keep a copy of this ruling in your permanent records tax exempt and government entities te_ge office of this action sincerely signed marvin fri marvin friediandencdander manager exempt_organizations technical group


uniform issue list nov 5eterratf legend decedent a surviving_spouse b amount d bank f dear in a letter dated date your authorized representative requested a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested surviving_spouse b and decedent a were married to each other decedent a died on date as a result of als amyotropic lateral sclerosis - lou gehrig’ s disease decedent a had established a rollover individual_retirement_account ira at bank f surviving_spouse b is the sole beneficiary of decedent a's ira account decedent a withdrew funds in amount d from his bank f ira or account the withdrawal was made by a direct transfer by bank f into decedent a’s joint checking account at bank f surviving_spouse b attempted to rollover the funds received from the ira distribution back in her now deceased husband's ira account to facilitate a rollover of such fund sec_2 into her ira however bank f would not permit her to rollover the funds because the 60-day period to replace the funds had been missed by days the 60-day period expired on mee surviving_spouse b believed the day period of time was business days and not calendar days which was not explained by her husband nor was it explained properly by the bank's written instructions the severe stress of surviving_spouse b dealing with her husband's debilitating medical_condition its progression and his death contributed to the surviving_spouse b’s failure to rollover timely based on the facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount d because the failure to waive such requirement would be a hardship and against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed ‘since the distribution occurred the information presented by surviving_spouse b demonstrates mistake on the part of surviving_spouse b in calculating the 60-day period which caused her to miss the day deadline by days additionally the death of surviving_spouse b’s husband his prolonged illness and surviving_spouse b's lack of accounting knowledge contributed to her mistake therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the withdrawal of amount d pursuant to this ruling letter surviving_spouse b is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount equal to amount d to an ira or iras described in code sec_408 provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 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_61 k of the code provides that it may not be used or cited as precedent if at you wish to inquire about this ruling please contact mm please address all correspondence to ld a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours ov rances v sloan employee_plans nager technical group enclosures deleted copy of letter_ruling notice of intention to disclose


department of the treasury internal_revenue_service washington d c ivernment entities division release number release date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final since you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions f you disagree with our proposed deletions you should follow the instructions in notice further action if you agree with our deletions you do not need to take any in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements letter cg catalog number 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 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 if you have any questions about your sincerely robert s choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number uil no dollar_figure-00 tax_exempt_and_government_entities_division date legend d date b state c board member m applicant n non profit organization o housing developer q community dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue do you m qualify for exemption under sec_501 of the code facts you m are a corporation formed on d and operate pursuant to the laws of the state of b your articles of incorporation state the corporation is organized and operated to promote the reduction of greenhouse gases and carbon emissions by encouraging homebuilding that utilizes energy efficient technologies renewable fuels and reduced consumption of raw materials and energy thereby creating a healthier environment for all citizens the corporation is organized and will be operated exclusively for charitable and educational_purposes within the meaning of c of the internal_revenue_code all references to section in these articles refer to the internal_revenue_code_of_1986 as amended or to comparable sections of subsequent internal revenue laws in pursuance of these purposes it shal have the powers to carry on any business or other activity which may be lawfully conducted by a nonprofit corporation organized under the b general statutes whether or not related to the foregoing purposes and to do all things necessary proper and consistent with maintaining tax exempt status under sec_501 in your form_1023 application you m describe your proposed activities as follows m was founded to promote the increased development of green construction and the reduction of excessive consumption in the building industry m is an independent nonprofit organization that is not associated with any developer real_estate agent or others involved in the building or selling of _ residential real_estate provides downpayment assistance to low- and moderate-income individuals and families that otherwise could not afford to purchase a high-energy-efficient home by providing down-payment assistance to low and moderate-income individuals and families that purchase residential homes certified by the leadership in energy and environmental design leed green building rating system of the u s green building council m will achieve its educational and charitable purpose of promoting the increased development and purchase of highly- energy efficient homes in your application you state that you plan to provide downpayment assistance to low and moderate income individuals and families to enable them to purchase leed-certified green housing the downpayment assistance application will be reviewed by a committee unrelated to any applicant funder real_estate_professional or developer the selection criteria include gross household_income current housing cost monthly debt equity current home assets liabilities estimated mortgage cost and fund availability the service requested additional details of such criteria in the form of actual numbers in the inquiry letter of date you responded to the questions however you did not provide further details by using actual numbers you also stated that all deeds of houses for which down payment assistance has been provided will be permanently deed-restricted so that the property will continue to be affordable to persons and households of limited income however the deed rider sample attached with your form_1023 application does not contain any income limitation for the buyers it provides that you will have a right to locate a homebuyer if current homeowner sells the home the home price will be determined at fair_market_value with some discount that will be determined at the time of signing the deed there is no rule or determination factor specified for the discount amount in the deed in your letter of date you stated that in order to achieve your purpose of promoting green building and a green lifestyle you will require recipients of the subsidies to open their homes for tours and demonstrations of techniques that reduce energy consumption and cost you further stated that your program is intended to help alleviate the shortage of green housing available to low and moderate income level families you did not provide any details about the content budget schedule location personnel plan and or related agreements regarding the tours and demonstrations the sample downpayment assistance application form which was provided with form_1023 contains the following descriptions and applicant information e the purpose of grants is to encourage families who could not otherwise afford to purchase an energy efficient green home available housing grants to assist with the purchase of an leed certified home are limited e the amounts of grants vary based on financial need of the applicant and the funding available the anticipated amount is a maximum of of the unit cost e families with children are preferred e general applicant information such as address phone number etc e financial information of applicants e home preferences one bedroom quad w additional bedroom two bedroom quad two bedroom quad with additional upstairs bedroom two bedroom duplex two bedroom duplex with revised floor_plan to create three bedrooms three bedroom duplex other nd additional details of the requirements and selection criteria werte stated in correspondence beneficiaries must show the following e the beneficiaries’ income and assets would not otherwise qualify them via conventional financing to purchase an leed certified green home e the beneficiaries will commit to live and publicly promote a green lifestyle e the beneficiaries show that the home has been certified by leed green building rating system of the u s green building council e the applicant agrees that the house deed will be restricted in the amount of the subsidy to insure that the applicant does not profit from the subsidy when the home is sold you provided a sample deed rider contract agreement that specifies various restrictions on sale resale transfer and leasing of the house e factors that will affect the amount of the subsidy are the beneficiaries’ gross household_income income as percent of median income current housing cost monthly debt equity current home assets liabilities estimated mortgage cost and money available for down payment e the applicant will be expected to pay of his her monthly income for monthly payments a hypothetical example illustrrates how the amount of subsidy is determined income level - dollar_figure family size - two adults two children price of leed certified home - dollar_figure price of similarly-sized non-leed certifted traditional home - dollar_figure expected traditional monthly mortgage on dollar_figure home with down dollar_figure housing burden with a subsidy of dollar_figure added to the applicant's downpayment the monthly principal and interest on the resulting dollar_figure loan amount would be about dollar_figure housing burden housing burden is recommended not to exceed of income your anticipated income for was dollar_figure in our letters of january and february also planned to use the same amount that you earned each year we requested further breakdowns for the program expenses and the percentage of subsidy amount out of total expenses in both instances you did not provide the requested information instead you sent updates of the same data you included in the form_1023 application and for for it you is dollar_figure is dollar_figure it you have three board members who live in or around q among them c was also a board member of n a 501_c_3_organization which leases land in q from o a local green housing developer according to your letter of march operating a housing subsidy program associated only with n in your letter of october big_number clarified this statement as follows c resigned from the board_of n due to structural concerns associated with o you further as you are aware n is a nonprofit organization that applied for recognition of tax-exempt status under c of the internal_revenue_code in august n agreed to remove its housing some of the subsidy program tax exemption was granted by irs letter dated september board members of n including mr c remained committed to promoting green housing throughout the united_states including to individuals and families who due to their lower incomes could not afford the generally higher cost of purchasing an environmentally friendly green home as a result mr c low-and moderate-income individuals and families that otherwise could not afford to purchase a high- energy-efficient home left the board_of n and started a new organization m to provide down payment assistance to you stated that the reason m and n use the same sample deed rider is in your letter of september because the two organizations have the same legal counsel and the counsel reused the model deed rider you also stated that the reason that m offers its downpayment assistance for the exact same types of homes that n builds is as follows when creating an assistance application_for m counsel reused the draft application from counsel's prior work with n m's application and assistance is not limited to any particular type of unit other types of units may be listed under other in your application you stated that you plan on fundraising by soliciting donations from individuals interested in environmental issues and by seeking both government and private_foundation grants to help further your mission the service letter of january requested further details of your funding plans however you did not provide any details for planned fundraising in your response of march you stated that you had not yet solicited for grants and you admitted that you had not researched any funding sources as of that date law sec_501 of the internal_revenue_code provides for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable or educational_purposes provided no part of the net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_50 c of the code an organization must not engage in substantial activities that fail to further an exempt_purpose reg c -1 d states in part that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus it organization to establish that it designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests is not organized or operated for the benefit of private interests such as is necessary for an sec_1_501_c_3_-1 of the regulations defines the term charitable as used in sec_501 in its generally accepted legal sense and is therefore not to be construed as limited by the separate enumeration in sec_501 of other tax-exempt purposes which may fall within the broad outlines of charity as developed by judicial decisions such term includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes or to lessen neighborhood tensions ii to eliminate prejudice and discrimination iii to defend human and civil rights secured_by law or iv to combat community deterioration and juvenile delinquency the fact that an organization which is organized and operated for the relief of indigent persons may receive voluntary contributions from the persons intended to be relieved will not necessarily prevent such organization from being exempt as an organization organized and operated exclusively for charitable purposes revrul_68_14 1968_1_cb_243 by planting trees in public areas and assisting municipal authorities in their programs to plant trees and keep the city clean the organization is lessening the burdens of government the organization's informational program directed to the public architects and builders is educational the overall effect of these activities is to combat community deterioration accordingly the organization is exempt from federal_income_tax under sec_501 of the code revrul_70_585 1970_2_cb_115 discusses four examples of organizations providing housing and whether each qualified as charitable within the meaning of sec_501 of the code situation describes an organization formed to construct new homes and renovate existing homes for sale to low-income families who could not obtain financing through conventional channels the organization also provides financial aid to eligible families who do not have the necessary down payment its operating funds were mainly obtained from federal loans and contributions from the general_public the ruling holds that by providing homes for low-income families who otherwise could not afford them the organization relieved the poor and distressed situation describes an organization formed to ameliorate the housing needs of minority groups by building housing units for sale to persons of low and moderate income on an open occupancy basis it constructs new housing that is available to members of minority groups with low and moderate income who are unable to obtain adequate housing because of local discrimination these housing units are so located as to help reduce racial and ethnic imbalances in the community they are sold at or below cost to low_or_moderate_income families or rented with options to purchase to families who cannot presently afford to purchase preference ts to be given to families previously located in ghetto areas the organization also informs the public regarding integrated housing as a means of minimizing potential misunderstanding and stabilizing integrated neighborhoods it and state housing programs since the organization's activities are designed to eliminate prejudice and discrimination and to lessen neighborhood tensions it is engaged in charitable activities within the meaning of sec_501 of the code situation describes an organization formed to formulate plans for the renewal and rehabilitation of a particular area in a city as a residential community the median income level in the area was lower than in other sections of the city and the housing in the area was generally old and badly deteriorated the organization developed an overall plan for the rehabilitation of the area the organization also purchased apartment buildings that it rehabilitated and rented at cost to low and moderate income families with a preference given to residents of the area the revenue_ruling holds that the organization is charitable within is financed by contributions from the general_public and by funds obtained under federal the meaning of sec_501 of the code because its purposes and activities combat community deterioration situation describes an organization formed to alleviate a shortage of housing for moderate-income families in a particular community the organization planned to build housing to be rented at cost to moderate-income families the service held that the organization failed to qualify for exemption under sec_501 of the code because the organization’s program did not provide relief to the poor or further any other charitable purpose within the meaning of sec_501 revrul_72_560 1972_2_cb_248 by providing information to the public concerning environmental problems caused by solid_waste materials and the advantages of recycling such materials the organization is instructing the public on subjects useful to the individual and beneficial to the community the recycling of the waste materials is an essential element in the organization's efforts to combat environmental deterioration since it prevents the pollution of the environment caused by the usual disposition of these materials these activities are thus analagous to the tree planting and street cleaning operations that were held to serve a charitable purpose in revrul_68_14 c b revrul_76_204 1976_1_cb_152 through transfer to a governmental agency ecologically significant undeveloped land the organization is enhancing the accomplishment of the express national policy of conserving the nation’s unique natural_resources in this sense the organization is advancing education and science and is benefiting the public in a manner that the law regards as charitable in this case by acquiring and preserving whether by self-maintenance or revrul_79_316 1979_2_cb_228 held that an organization that provides prevention and clean-up of liquid spills in a city port was found exempt under sec_501 because it provided a benefit to the public by improving the environment the ruling also provided that incidental_benefits such as better insurance rate that resulted from the organization's activities does not prevent recognition of exemption revrul_80_278 c b held that an otherwise qualifying_organization that was formed to protect and restore environmental quality and whose principal activity consists of instituting litigation as a party plaintiff to enforce environmental legislation is operated exclusively for charitable purposes and qualifies for exemption under sec_501 revrul_2006_27 2006_21_cb_915 situation finds that an organization x that as a substantial part of its activities i makes assistance available exclusively to low-income individuals and families to provide part or all of the funds they need to make a down payment on the purchase of a home 1i offers financial counseling seminars and conducts other educational activities to help prepare potential low-income homebuyers for the responsibility of homeownership iii ensures that the dwelling is inhabitable iv structures its grant making process to ensure that its staff in awarding the grants does not know the identity of the party selling the home or the identities of any other parties v rejects any contributions that are contingent on the sale of a particular property or properties and vi conducts a broad based fundraising program that attracts gifts grants and contributions from several foundations businesses and the general_public qualifies for exemption from federal_income_tax under sec_501 of the code situation y is a nonprofit corporation that is like x in all respects as set forth in situation except as follows under y's grantmaking procedures y's staff considering a particular applicant's application knows the identity of the party selling the home to the grant applicant and may also know the identities of other parties such as real_estate agents and developers who may receive a financial benefit from the sale moreover in substantially_all of the cases in which y provides down payment assistance to a home buyer y receives a payment from the home seller further there is a direct correlation between the amount of the down payment assistance provided by y in connection with each of these transactions and the amount of the home seller's payment to y finally y does not conduct a broad based fundraising campaign to attract financial support rather most of y's support comes from home sellers and real estate-related businesses that may benefit from the sale of homes to buyers who receive ’s down payment assistance y is structured and operated to assist private parties who are affiliated with its funders like the organizations considered in american campaign academy easter house and columbia park recreation association y also serves an exempt_purpose but because y is not operated exclusively for exempt purposes y does not qualify for exemption from federal_income_tax as an organization described in sec_501 situation z is a nonprofit corporation formed to combat community deterioration in an economically depressed area that has suffered a major loss of population and jobs z receives funding from government agencies to build affordable housing units for sale to low and moderate-income families as a substantial part of its activities z makes down payment assistance available to eligible home buyers who wish to purchase the newly-constructed units from z z also offers financial counseling seminars and conducts other educational activities to help prepare potential low and moderate-income home buyers for the responsibility of home ownership to fund its down payment assistance program and other activities z conducts a broad based fundraising program that attracts gifts grants and contributions from several foundations businesses and the general_public in this situation the organization is operated exclusively for charitable purposes and qualifies for exemption from federal_income_tax as an organization described in sec_501 section dollar_figure of revproc_2009_9 provides that exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed a mere restatement of purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement the organization must fully describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures where the organization cannot demonstrate to the satisfaction of the service that its proposed activities will be exempt the service will venerally issue a proposed adverse determination_letter or ruling in 326_us_279 the supreme court stated that the presence of a single nonexempt purpose if substantial in nature will preclude exemption under sec_501 of the code regardless of the number or importance of statutorily exempt purposes thus the operational_test standard prohibiting a substantial nonexempt purpose is broad enough to include inurement private benefit and operations that further nonprofit goals outside the scope of sec_501 in 505_f2d_1068 the court held that an organization seeking a ruling as to recognition of its tax exempt status has the burden of proving that it satisfies the requirements of the particular exemption statute whether an organization has satisfied the operational_test is a question of fact in church in boston v commissioner of internal_revenue_service 61_tc_102 the tax_court held that the church did not satisfy the operational_test of sec_1_501_c_3_-1 because the church's grant program was a nonexempt activity that was more than incidental to its overall purpose the court also affirmed the commissioner's determination that the church failed to establish that its grant program constituted an activity in furtherance of an exempt_purpose in dumaine farms v commissioner t c in a ruling that was based on the educational and scientific aspects of the model farming operation the tax_court found that an operating farm and educational model that encouraged the practice of previously untried sound farming and soil conservation techniques that the organization believed could be ecologically sound qualified as a charitable activity under sec_501 in 283_fsupp2d_58 the court held that an organization that operated aconference center that promoted educational and cultural activities in accord with its stated organizational purpose did not qualify for tax exemption under sec_501 because it was operated in a manner consistent with that of a commercial business application of law charity vs private benefit sec_501 provides that an organization must operate for one or more exempt purposes and its net_earnings must not inure in whole or in part to the benefit of private shareholders or individuals your primary activity consists of providing financial assistance to homebuyers who purchase a leed certified home in your case you give downpayment assistance to any homebuyers who want to buy green housing without any income limitation the only criteria you address is the limitation of a housing burden for individuals an organization cannot be recognized as exempt under sec_501 unless it shows that it is both organized and operated exclusively for charitable educational or other exempt_purpose you failed to meet the operational_test of sec_1_501_c_3_-1 and sec_1_501_c_3_-1 of the regulations because you are organized for substantial private purpose and operate in a manner that will benefit private shareholders or individuals the homebuyers who receive financial assistance from you privately benefit is the responsibility of the applicant organization to sufficient information is needed as noted in section dollar_figure of revproc_2009_9 it demonstrate that it has met the operational_test as specified under sec_501 of the code by describing in detail the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures you did not provide the details about the proposed financial assistance program you did not explain how your selection criteria will factor into the actual selection in your response you listed selection criteria without indicating how you apply such criteria you were created to continue the down payment assistance program that n dropped in order to receive exemption under c where n's target beneficiaries were the homebuyers of o's condominiums initially you failed to provide an itemized list for the budgeted expenses for year dollar_figure even when we asked for the details of expenses repeatedly you also state that you have a plan for some educational activities however you failed to provide the details of your educational activities such as percentage and significance of the activity or an educational methodology of the activity you have failed to describe your proposed educational activities in sufficient detail to permit a conclusion that you will meet the requirements under sec_501 therefore you have not demonstrated that your proposed activities will be exempt and that vou are not operated to serve the private benefit of individuals and dollar_figure as courts have ruled harding hospital inc v united_states and church in boston v commissioner it incumbent upon an organization seeking a ruling recognizing its tax exempt status to carry the burden of proving that it satisfies the requirements of the particular exemption statute whether an organization has satisfied the operational_test is a question of fact the situations in church in boston v commissioner have striking similarities with your situation in key exemption elements the basis for the denial was twofold tn this case first the petitioner's records of past grants did not demonstrate any criteria which constituted an exempt activity second petitioner gave money with no legal obligations for repayment to its members and officers which resulted in a benefit to private shareholders or individuals another key resemblance ts church fatled to provide any evidence that its grants are for charitable purposes just as you failed to provide any information that your downpayment assistance is limited to low-income individuals or that there is any is that the legal_obligation for repayment these bases very much summarize our position about the adverse course for your case as your downpayment assistances do not constitute exempt activity and they result in private benefits to homebuyers as determined in better business bureau v united_states the prescence of a single substantial non-exempt purpose can preclude exemption under sec_501 comunerciality you have stated that the purpose of your grants is to encourage families who could not otherwise afford to purchase an energy efficient green home you assert that the homebuyers do not receive any eventual benefits by receiving downpayment assistance because of a deed rider that they sign to receive your assistance contains a discount clause which you can apply to discount the home price when they sell the home however you did not explain how this discount will be determined nor did you explain how the discount clause prevents the private benefit provisions of the deed rider are consistent with the details of a commercial transaction the specific issues addressed in the multi page deed rider including detailed obligations of the buyer are concerned exclusively with commercial aspects of the agreement between the home buyer and you such as increase in fair_market_value and recouping the monetary discount plus any profits with no reference to environmental or green issues or educational activities the specifics of your operation are similar to and in competition with other for-profit home selling enterprises entering into contracts to sell homes at a discount and then recouping the dollar amount of the discount plus any increase in fair_market_value is using commercial methods to entice buyers to your product and using business techniques to recover both the cost and profits of the program this constitutes another basis for disqualification of tax exemption as courts have ruled in airlie foundation v internal_revenue_service a conference center promoting educational and cultural activities did not qualify for tax exemption because it operated in a manner consistent with that of a commercial business environment while revrul_68_14 revrul_72_560 and revrul_76_204 represent situations where organizations have been recognized as tax-exempt as a result of activities that promote or protect the environment the activities of your organization are not similar the organizations described in each of these revenue rulings provides a specific direct environmental benefit to the public as a result of its activities trees to combat community deterioration - revrul_68_14 information on solid_waste recycling - revrul_72_560 acquisition and preservation of ecologically significant land - rev_rul environmental benefits of your activities would be non-specific and indirect the situation in revrul_79_316 describes oil spills in a city port that are a tangible and direct harm to humankind and sea animals private benefit involved in this situation in rev_rul is totally different from private benefit in your case the benefits that businesses might realize in this ruling are merely indirect benefits such as lowered insurance rates which are truly incidental and unavoidable in the accomplishment of the exempt_purpose the private benefit in your situation is direct money assistance to the limited group of people who wish to purchase green housing the key difference between your situation and the situations of the organizations in these revenue rulings is that in these examples any indirect private benefits are inevitable and incidental to accomplishing the exempt_purpose however you do not have a charitable purpose nor are you the provider of a reasonable means to accomplish a charitable purpose as described in revrul_80_278 finally the tax_court ruling in dumaine farms v commissioner which found that an educational model farm promoting ecologically sound practices qualified for tax exemption is not applicable as a precedent in your case you did not provide a detailed description of your educational activities the facts do not show education as a primary purpose rather your primary purpose ts to provide financial assistance to homebuyers housing revrul_70_585 include sec_4 situations involving organizations that provide housing you are unlike the organizations that qualified for tax exemption as described in the first situations in situation because you do not construct or renovate existing homes or limit your assistance to low income families who could not obtain financing through conventional channels in situation because you do not construct new housing for sale at or below cost to help reduce racial and ethnic imbalances in the community in situation because you do not formulate plans for the renewal and rehabilitation of a particular community with median income below that of other sections of the city to combat community deterioration however you are similar to the organization in the situation which did not qualify for tax exemption because you also do not provide relief to the poor or further a charitable purpose revrul_2006_27 provide sec_3 examples involving organizations that provide down payment asistance to home buvers although you have indicated that your down payment assistance program is conducted in accordance with situations and there are significant differences you are unlike the organization described in situation because you do not make assistance available exclusively to low-income individuals in addition you have not described a program of financial counseling and other educational activities to help prepare low- income homebuyers for home ownership you also are unlike the organization described in situation because you were not formed to combat community deterioration in an economically depressed area you do not receive funding from government agencies and you have not described a program of financial counseling and other educational activities to help prepare low-income homebuyers for home ownership applicant's position in your response you explained the reasons why you qualify for tax exemption under sec_501 the letter states the organization's mission is to promote more building of 'green' homes and to promote living a ‘green’ lifestyle in an effort to slow down the deterioration of our environment through excessive consumption and greenhouse emissions in addition m is promoting 'green' housing for all not just those with incomes above the median to meet these goals m plans to provide downpayment assistance to buyers who cannot otherwise afford to purchase a home built to leed 'green housing’ standards the downpayment assistance limits and criteria have been developed so that the housing burden to purchase a leed certified home will be no greater than the burden to purchase a home that is not built 'green' and so that the housing burden does not exceed the hud recommended level of of income the letter states m is similar to rev_rul situation assistance is only part of its overall charitable and educational purpose of promoting ‘green’ building and ‘oreen lifestyles’ your letter further elaborates on your assertion that promoting green housing and lifestyle is charitable under sec_501 by citing the following precedents involving organizations that have been recognized as tax-exempt as a consequence of their environmental protection and or preservation activities in that its provision of downpayment the article published by the internal_revenue_service environmental preservation issues by sadie copeland and james bloom noted that it protect the natural environment for the benefit of the public serve a charitable purpose under irc s01 c is generally recognized that efforts to preserve and you continued to quote rev ruls and 73_tc_650 to support your position the following illustrates the key points of your comparisons and arguments that were offered in your favor rev_rul city beautification and preservation of environments are qualified activities under sec_501 rev_rul an organization formed to preserve the environment by educating the public on environmental deterioration due to solid_waste pollution was recognized as tax-exempt under sec_501 rev_rul preservation of land is a qualified_activity under sec_501 even with limited access to the public rev_rul an organization formed to limit oil spills in a city port was found exempt and the benefits to private business members are incidental rev_rul the service noted that while the purpose of an organization must be charitable the means used to achieve the purpose does not have to be per se charitable as long as the means used is reasonably related to accomplishing the purpose dumaine farms v commissioner the tax_court found that promoting ecological practices and educating the public through the operation of an experimental model demonstration farm as a consevation project and educational model served a charitable tax-exempt purpose despite limited or no public access to the land or project you concluded your argument as follows as a result m has shown that its mission and programs support a recognizable charitable purpose that of preserving our environment for the benefit of the health of our planet its means of doing so comply with irs guidance and ruling are legal and do not directly provide any financial benefit to any individual or other party asa result m should be recognized as a charitable and educational_organization under sec_501 of the internal_revenue_code service response to applicant's position you assert that you are similar to the organizations in situation of rev_rul in this situation financial assistance to the moderate income families overcomes private benefit to the individuals because the private benefits are incidental to accomplishing the direct exempt_purpose of combating community deterioration however your support and private benefit to homebuyers is not incidental in fact any environmental benefit resulting from this subsidy is incidental to the direct private benefit rev_rul the organization actually developed housing facilities in the deteriorated area to provide affordable housing and revitalize the depressed area you provide financial assistance to buy any leed certified houses already constructed by for-profit or non-exempt developers without a focus on revitalizing a depressed or deteriorated area in situation of although the article environmental preservation issues provides support for recognizing efforts to preserve and protect the natural environment for the benefit of the public can serve a charitable purpose under sec_501 the activities described in the publication are related to the achievement of an organization’s primary purpose environmental benefits appear to be incidental to your primary purpose which is providing financial assistance to homebuyers you are not similar to the organizations recognized as tax-exempt in revrul_68_14 revrul_72_560 revrul_76_204 revrul_79_316 and the dumaine farms court decision because the organizations involved in these rulings have demonstrated that the primary purpose and result of the organization’s activity is conservation preservation remediation or improvement of the environment however benefit to the environment is incidental to your primary activity which is providing a subsidy to the buyers of homes built by others as a for-profit commercial activity the impact from your green housing program is vague and indefinite except when it comes to the direct private benefit resulting from your downpayment assistance to any homebuyer again the focus of the adverse determination does not concern whether preservation of the environment is a charitable activity as demonstrated in the cited revenue rulings the nexus of our adverse determination is that your subsidy to the particular homebuyers conveys a substantial private benefit to homebuyers and developers you also are not similar to an organization described in revrul_80_278 the organization in that revenue_ruling does not provide any substantial private benefit to individuals that is in contrast to your activities revrul_80_278 provides that while the purpose of an organization must be charitable the means to achieve the purpose does not have to be per se charitable as long as the means used is reasonably related to accomplishing the purpose however the purpose must be charitable and the means used to accomplish that purpose cannot be specifically identified as inconsistent with the internal_revenue_code or regulations as is the private benefit associated with your activities conclusion in summary your application and responses strongly demonstrate that your primary activity a downpayment assistance program is designed to benefit any individual and in so doing furthers a nonexempt purpose since more than an insubstantial part of your activities further this nonexempt purpose you have failed to establish that you operate exclusively for exempt purposes within the meaning of sec_501 in addition you also failed to establish that other activities will be exclusively educational accordingly you do hot qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal these items include o l the organization’s name address and employer_identification_number m n a statement that the organization wants to appeal the determination the date and symbols on the determination_letter a statement of facts supporting the organization’s position in any contested factual issue a statement outlining the law or other authority the organization is relying on and a statement as to whether a hearing is desired the statement of facts item must be declared true under penalties of perjury this may be done by adding to the appeal the following signed declaration under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete your appeal will be considered incomplete without this statement i 'an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney a forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you fax your if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert choi director exempt_organizations rulings agreements attachment publication


internal_revenue_service number release date index number ---------------------- ---------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------------ telephone number ----- refer reply to cc psi plr-132141-12 date december ------------------------------------------------------ ----------------------------------------------- --------------------------- --------------------------- ------- ------- taxpayer trust date date year year accounting firm --------------------------- law firm law firm ---------------------------------- ----------------------------------------- dear ------------- this letter responds to your letter dated date requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to allocate generation-skipping_transfer gst_exemption to transfers to a_trust facts on date taxpayer created an irrevocable_trust trust that has gst potential on date taxpayer funded trust with limited_partnership interests date sec_1 and are in year and year is prior to december ---- taxpayer retained accounting firm to prepare a year form_709 united_states gift and generation-skipping_transfer_tax return to report the date transfer to trust on behalf of taxpayer law firm instructed accounting firm to allocate taxpayer’s gst_exemption to the date transfer accounting firm failed to allocate taxpayer’s gst_exemption to the date transfer reported on taxpayer’s year form_709 in year taxpayer retained law firm to provide estate_planning advice after reviewing taxpayer’s year form_709 law firm informed taxpayer of accounting firm’s failure to allocate taxpayer’s gst_exemption to the date transfer plr-132141-12 taxpayer represents that no taxable terminations or distributions have occurred taxpayer requests an extension of time under sec_2642 and sec_301_9100-3 to allocate taxpayer’s gst_exemption to the date transfer to trust law and analysis sec_2601 imposes a tax on every generation-skipping_transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides that for purposes of chapter the inclusion_ratio with respect to any property transferred in a gst is generally defined as the excess if any of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption allocated to the trust or to property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip sec_2631 as in effect at the time of the transfers provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date plr-132141-12 sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than 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_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to allocate his gst_exemption to the date transfer in year the allocations will be effective as of plr-132141-12 the date of the transfer to trust the value of the property of which taxpayer is the transferor for purposes of chapter as determined for federal gift_tax purposes will determine the amount of taxpayer’s gst_exemption that taxpayer may allocate to trust the allocations should be made on a supplemental form_709 for year and filed with the internal_revenue_service cincinnati service center-stop cincinnati ohio the enclosed copy of this letter should be attached to the supplemental form_709 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 internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by _____________________________ james f hogan chief branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes one copy of this letter