Ezel / IRS Rulings / 1043035
Chief Counsel Advice 1043035 Released October 29, 2010 Advice

Subsidy payments that are not taxes need another deduction basis

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This page covers one taxpayer's ruling from 2010, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2010
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel addressed whether payments used to provide a subsidy qualify as deductible taxes. The advice states that IRC § 901(i) treats such a payment as not being a tax for purposes of Title 26. As a result, the payment is not deductible under IRC § 164, and its deduction is not disallowed under § 275. The taxpayer would instead need an independent basis under another Code provision.

Ruling snapshot

  • Question: How should subsidy payments that are not treated as taxes be analyzed for deduction purposes?
  • Outcome: Advice given
  • Key authorities: IRC §§ 164, 275, and 901(i)

Full text (IRS public release)

ID: CCA-628162-10 Number: 201043035
Release Date: 10/29/2010
Office: -------------------------
UILC: 901.00-00

From: ----------------------
Sent: Monday, June 28, 2010 4:22 PM
To: ---------------------
Cc: -----------------------------
Subject: RE: FTs are a subsidy. Do we allow a deduction? ----------

Hi -----------

Section 901(i) provides that a tax used to provide a subsidy is not treated as a tax for purposes of title 26. If the payments are not a tax, they are not deductible under section 164 and deduction is not disallowed under section 275. Rather, the taxpayer would have to make an independent justification for deducting the tax payments under another Code provision. Please feel free to give me a call if you’d like to discuss.

Thanks,

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