PLR 200246034: Waiver of pension funding deficiency tax denied

Plain-English summary

A company asked the IRS to waive additional taxes proposed under section 4971(b) for funding deficiencies in its defined benefit pension plans from 1996 through 1999. The IRS said it would not grant unconditional waivers because the company had taken no steps to correct the deficiencies or terminate the plans. The company had also ceased operations and did not respond to the IRS's later communications offering a choice between a denial and withdrawal. The IRS denied the waiver request.

Ruling snapshot

• Question: Would the IRS waive section 4971(b) taxes for the pension plans' accumulated funding deficiencies?
• Outcome: Denied.
• Key authorities: IRC § 4971(b).

Full text (IRS public release)

Significant Index No. 04971.02-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
200246034
TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION

AUG 21 2002

T:EP:RA:T1

In re:

Company =

The letter constitutes notice that with respect to the above-named defined benefit pension plans, your request for waivers of the tax the Internal Revenue Service has proposed to impose under section 4971(b) of the Internal Revenue Code with respect to the accumulated funding deficiencies for the 1996 through 1999 plan years, has been denied.

The information furnished indicates that the Company has had net losses and been in a position of negative net worth since 1995. Furthermore, we have been informed that the Company has now ceased operations and shuttered their manufacturing facilities.

Your authorized representative was informed, by telephone call of March 25, 2002, that we were not willing to give unconditional waivers of the section 4971(b) taxes because no steps had been taken to either rectify the funding deficiencies of the Plans or to terminate the Plans. Your authorized representative was also, on March 21, 2002, offered a conference of right, such conference to be scheduled within 21 days. Subsequently we were informed that the Company had ceased operations and shuttered its doors.

On June 3, 2002, your authorized representative was informed by telephone call that, because the Company had not responded to our communication of March 25, 2002, and because the Company had ceased operations, we would, at the Company's direction, either issue a ruling denying the request or permit the Company to withdraw the request.

2 200246034

Your authorized representative was then informed by letter of June 27, 2002, that because the Company had not responded to our communications of March 25, 2002, and June 3, 2002, that, absent any communication from the Company by July 15, 2002, a final denial of the Company’s request for waivers of the section 4971(b) taxes would be issued. Accordingly the request for waivers is denied.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

If you have any questions on this ruling letter, please contact

Sincerely,

Carol D. Gold, Director
Employee Plans