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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" or "Nightmare" 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. 

The 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”

The report discusses the IRS’s use of “soft guidance” to inform and direct practitioners (e.g., pension third party administrators (TPAs))

Excerpt: “A 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 Article Reference

The report continues in its discussion of “soft guidance” stating:

Excerpt:  “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 412(i) plans.48  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.”

48 412(i) Plan: A “Dream” or “Nightmare” for the Small Business Owner? MILBERG CONSULTING, LLC NEWS AND INSIGHTS (March 28, 2003) .

Access Article: Pending Guidance on 412(i) Plans Discussed at ASPA Convention - November 3, 2003

Click here to learn more about the TE/GE

© 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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