PLR 200608024: Minimum funding waiver denied because hardship was not temporary

Plain-English summary

A nonprofit company requested a waiver of the minimum funding standard for its plan year ending December 31, 2004. It cited declining revenue and losses tied to government reimbursement and local funding. The IRS tentatively denied the request, held a conference with the company's representative, and reviewed additional information. It then denied the waiver because the company's business hardship did not appear to be temporary.

Ruling snapshot

• Question: Would the company receive a waiver of its plan's minimum funding standard for 2004?
• Outcome: Denied because the hardship did not appear temporary.
• Key authorities: Minimum funding standard; IRC § 501(c)(3).

Full text (IRS public release)

Significant Index No. 0412.06-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 29 2005

SE:T:EP:RA:T:A1

In re:

Company =

This letter constitutes notice that your request for a waiver of the minimum funding standard for the above-named plan for the plan year ending December 31, 2004, has been denied.

The Company is a nonprofit 501(c)(3) corporation. The Company provides a continuum of prevention and protective services. The current financial hardship was brought on by the lack of any increases in reimbursement from local and state governments, as well as a reduction in the amount of funding from the local [illegible] resulting from reductions in contributions to the local [illegible]. Revenues have declined from $[illegible] for the fiscal year ending June 30, 2002, to $[illegible] for 2003, and
$[illegible] for 2004. For the year ending June 30, 2005, there was a modest increase to $[illegible]. The Company incurred losses in all these years. For the fiscal years ending June 30, 2002, 2003, 2004, and 2005, the losses were $[illegible], $[illegible],
$[illegible] and $[illegible] respectively.

Because the business hardship being experienced by the Company does not appear to be temporary, you were notified by a telephone call from [illegible] of this office on September 15, 2005, and in a letter dated October 7, 2005, that your request had been tentatively denied. On November 16, 2005, a conference was held with your authorized representative. The additional information submitted was insufficient for us to change our decision. Hence, your request for a waiver of the minimum funding standard for the plan year ending December 31, 2004, has been denied.

Page 2

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.

We have sent a copy of this letter to the Manager, EP Classification in [illegible], to the Manager, EP Compliance Unit in [illegible].

If you require further assistance in this matter, please contact [illegible].

Sincerely yours,

Donna M. Prestia, Manager
Employee Plans Actuarial Group 2