IRS Recognizes Milberg Consulting as Pension Compliance Advocate
- May 23, 2003
We are pleased to
inform our clients, business associates, News and Insights subscribers and
the business community that our article:
412(i) Plan: A "Dream"
for the Small Business Owner?
published on our website on March 28, 2003 was referenced in the Tax Exempt
and Government Entities Division (TE/GE)
Advisory Committee Report on Abusive Tax Shelters
released on May 20, 2003.
Information about the TE/GE and excerpts from the report
follow this news release.
Milberg firm would like to publicly thank the members of the TE/GE advisory
committee for validating our
advocacy of strict adherence to governmental compliance requirements for
qualified retirement plans on behalf of our clients.
Report on Abusive Tax
Shelters Discusses IRS’s use of “Soft Guidance”
report discusses the IRS’s use of “soft guidance” to inform and direct
practitioners (e.g., pension third party administrators (TPAs))
variety of other forms of guidance have also been used to curb abusive tax
transactions. In that regard, notice that the IRS is “concerned” about a
transaction is often enough for the many relatively compliant communities of
taxpayers serviced by the TE/GE Division. For example, TE/GE officials
advised the Project Group that merely announcing that IRS Employee Plans and
the Department of Labor’s Employee Benefits Security Administration were
going to be investigating non-filers led to an increase in the number of
plans coming into the Department of Labor’s delinquent-filer program.
In short, TE/GE can speak softly and still have
significant powers of persuasion. For TE/GE soft guidance can be
particularly effective because of the nature of the regulated entities.
Charities, pensions, and governmental entities generally strive to comply
with the prescribed laws. Similarly, in order to market a tax-exempt bond,
the issuer must be able to provide an unqualified tax opinion. Consequently,
the IRS is often able to stop a perceived abuse merely by issuing a notice
indicating that the IRS is looking at a certain type of transaction.”
Context of Milberg Consulting
report continues in its discussion of “soft guidance” stating:
“Even just talking about a
perceived abuse can help curb it. For example, the IRS recently let
practitioners know that it is looking at certain section
While there are many
legitimate uses of section 412(i), the IRS has recently become aware of
certain schemes that use section 412(i) as a vehicle for abuse. These
abusive schemes purportedly enable small businesses to generate large
tax-deductible contributions to plans and tax-free retirement distributions
and death benefits. The IRS addressed a similar issue in Notice 89-25, and the IRS is
expected to issue formal guidance with respect to these abusive section
412(i) plans soon.”
412(i) Plan: A “Dream” or
“Nightmare” for the Small Business Owner? MILBERG
Pending Guidance on 412(i) Plans Discussed at ASPA
Convention - November 3, 2003
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© 2003 Milberg Consulting LLC All Rights Reserved
We intend the information in this publication as a general resource, not as legal or plan compliance advice or counsel. If you consider any actions discussed in this update, we suggest that you consult a tax or ERISA professional. Milberg Consulting LLC and Barry R. Milberg do not warrant and are not responsible for any errors and omissions from this update.
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