IRS written determination 201432028

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
U.I.L 414.08-00
xxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxx
Attention: xxxxxxxxxxxx
LEGEND:
Order A
=
University B
=
Order C
=
Board D
=
Agreement E
=
State F
=
Commission H
=
Entity K
=
Plan X
=
Plan Y
=
Plan 1
=
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
MAY 1 6 Z014
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
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Plan 2
=
xxxxxxxxxxxxxx
Plan 3
=
xxxxxxxxxxxxxx
Plan 4
=
xxxxxxxxxxxxxx
Plan 5
=
xxxxxxxxxxxxxx
Directory Z
=
xxxxxxxxxxxxxx
College N
=
xxxxxxxxxxxxxx
Community M
=
xxxxxxxxxxxxxx
Board P
=
xxxxxxxxxxxxxx
Church
0
=
xxxxxxxxxxxxxx
Dear xxxxxxx:
This is
in response to your letter dated April17, 2012, as supplemented by
correspondence dated July 16, 2012, and May 10, 2013, submitted on your behalf by
your authorized representative, concerning whether Plan
X, Plan Y, and your five
welfare plans, Plan
1, Plan 2, Plan 3, Plan 4 and Plan 5 are church plans within the
meaning
of section 414(e) of the Internal Revenue Code (Code).
The
following facts and representations have been submitted under penalty
of perjury in
support of the rulings requested:
Order A was incorporated
in xxxxxxx in State F as a seminary for priesthood students.
Order A
is part of Order C, a Church 0 religious order, which consists of independent
xxxxxxx communities.
University B includes a college
of Liberal Arts and Sciences and the School of
Theology. University B operated under the full direction and responsibility of Order A
from xxxxxxxx until xxxxxxx. From xxxxxx until xxxxxxxxxx, University B remained an
operating division
of Order A which was assisted in its governance functions by Board

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D. Board 0 consists of 24-44 persons. The xxxxxxx of Order A appointed eight xxxxxxx
to Board
0, and Board 0 self-selected the remaining members, including one
representative each nominated by the
alumni association, student government, and
faculty.
In response to a recommendation by Commission H, Order A was restructured so that
University B would be established as a separate tax-exempt entity. The restructure
of
Order A was done in a two-step process in xxxxxx and xxxxxxx. The first step occurred
in xxxxxxxx, when the xxxxxxx of Order A created Entity K, a tax-exempt organization.
Entity K was incorporated with two
classes of members, Class A members and Class B
members, and a governing body called Board P. The two classes of members are made
up
of xxxxxxxx. The Class A members are five xxxxxxxx of the xxxxxxxx, including the
xxxxxxx and the xxxxxxx Treasurer. The Class B members consist
of the finally
professed xxxxxxx
of Order A.
The second step occurred on xxxxxxxxxxxx, when the functions, assets and employees
of University B were transferred to Entity K. Order A transferred all assets necessary to
operate University
Bas well as the associated liabilities to Entity Kat that time.
Accordingly, beginning xxxxxxxxxxxx, the
College of Liberal Arts and Sciences and the
School of Theology have been operated by Entity K and other functions and assets of
Order A have remained with Order A.
Entity K's initial Board was composed of five xxxxxxxxx who make up the Class A
members
of Order A. Since October 2011, when Entity K was created, Board P
expanded its members through a process of self-appointment. On an ongoing basis, the
Class A members will elect one representative to Board
P, and the Class B members
will elect four representatives to Board
P. The remaining members of Board Pare self-
elected. All nominees are subject to the disapproval
of the Class A members. A trustee
may generally be removed by the affirmative vote
of a majority of Board P. A trustee
elected by the Class A or Class B members may be removed by the body that
appointed such trustee.
Class A members have the power and authority to remove all
of
the members of Board P and name successor trustees, but do not have the authority to
remove and name successor trustees on
an individual basis, except with respect to
Class A and Class B representatives.
The mission and purpose
of Entity K is the provision of education in the liberal arts and
graduate theological disciplines within the Church
0 university tradition. All staff
providing services to University B have become employees
of Entity K, except for
faculty members who are xxxxxxx
of Order A. These individuals are considered
appointees
of Order A. In the past, compensation they received from Entity K for their
services was paid directly to Order A, effective xxxxxxxxxx, paychecks for services
performed by Entity K employees are being issued by Entity K and Entity K will issue W-
2s to its employees for services performed by them on or after this date.

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Previously, the xxxxxx of Order A nominated the President, who was then appointed by
Board
D. After the restructure, the President of Entity K is appointed by Board P on its
own initiative, but the selection
is subject to the approval of Class A members.
Land
located within the core campus has been leased from Order A to Entity
K through
a
long term ground lease; buildings located
on the ground-leased land have been
conveyed to Entity
K. Other space and facilities belonging to Order A have been leased
to
Entity K and Entity K and preparatory
school students continue to have the right
to
use the land and forest areas surrounding the Order A xxxxxxxx for educational
purposes.
Order A and Entity K entered into Agreement E that details the parties understanding
regarding the
relationship between Entity K and Order
A. In particular, the parties
acknowledge and commit to the fact that the formation
of Entity K and the restructure
will not affect the xxxxxxxx status of University
B. Entity K will remain a part of Order A's
juridical person for xxxxxxxx purposes. Order A and Entity K realized and acknowledged
the complexity
of establishing a separate civil corporation that has this status, but
stressed that sustaining this status is of the paramount importance and
in order to
achieve this goal, Order A and Entity K set out
in detail their roles and responsibilities.
Among the
responsibilities of Order A to Entity K are:
1. Be a living model of Order A spiritually, mission, identity, and values, as well as a
model of dedication and excellence
in the performance of responsibilities with
regard to Entity
K, both as individuals and as a community.
2. Foster the xxxxxxxxx relationship of Entity K and Order A by regular
communication and consultation with the President of Entity K and Board P on
matters
of special concern, such as mission and identity, pastoral care, religious
practice, and the care and maintenance of the campus.
3. Support Entity K's preference in hiring and retaining members of the xxxxxxxxx
community and participate
in the periodic process or updating this policy.
4. Make the Order A xxxxx and University B Order available to Entity K as the
primary places of worship and reflection.
Among the responsibilities
of Board P to Order A are:
1. Conduct Entity K as an education under the leadership of
Order A as the xxxxxxxx juridical person, looking to the xxxxxxxx community in
order to define and deepen Entity K's understanding of its Church 0, Order A
character.
2. Together with the President of Entity K, foster Entity K's and civil
relationship with the xxxxxxx community through regular communication and
consultation with the xxxxxxxx
of Order A, senior council, and xxxxxxx chapter on
matters of
special concern, such as mission and identity, pastoral care, religious
practice, and the care and maintenance
of the campus.

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3. Continue the use of the Order A xxxxxxxxxx and University B Order as Entity K's
primary places
of worship and reflection.
4. Uphold Entity K's policy on Order A preference in the hiring and retention of
members of the xxxxxxxxxxxxxx community by ensuring its implementation by
Entity K administrators, and periodically updating such policy, as necessary, in
collaboration with the
xxxxxxxxxx community; and support the education of xxxxx
for work at Entity K.
In addition, in order to sustain and promote the Church 0, Order A character, mission,
and identity
of Entity K, Board P is required to:
1. Maintain and promote the Order A heritage, values and Church 0 identity as
fundamental elements
of Entity K's mission.
2. Charge the Chair of Board P and the President of Entity K with the responsibility
of:
(a) promoting, understanding and appreciation of the
xxxxxxxxxxxxxxx character,
mission, and identity of Entity K among Trustees, faculty, administration, staff,
alumni, and the broader constituencies
of Entity K;
(b) ensuring that the xxxxxxxx, xxxxxxxxx character of Entity K is reflected in its
curriculum, programs, policies, and practices by reporting annually to the
xxxxxxxx community on these matters; and
(c) collaborating with Order A's leadership to foster the xxxxxxxxxx community's
commitment to and participation
in the mission of Entity K.
3. Recognize that the person holding the office of President of Entity K serves as
the director of an xxxxxxxx work of Order A and Church 0. In this regard, the
Trustees commit to encourage and promote qualified
xxxxxxxx of Order A as
candidates, as well as qualified xxxxxxx of other xxxxxxxxx xxxxxxxxxx. Further,
the Trustees comm,itted to selecting as President
of Entity K a qualified xxxxxxx
who understands, appreciates and will ensure the xxxxxxxx, xxxxxxxx character,
mission, and identity
of Entity K.
4. Actively seek qualified members of the xxxxxxxxxx community for faculty, staff,
and administrative positions, consulting in advance with the xxxxxxxx of Order A
and his representatives according to the policy and procedures on
xxxxxxxx
Preference outlined in Entity K's governing documents and in the faculty,
administrative, and support handbooks.
5. Engage the xxxxxx community as an active partner in dialogue when discerning
and promoting the Church
0, xxxxxxxxx character, mission, identity and religious
practices
of Entity K.
6. Keep the xxxxxx, xxxxxxxxx character of Entity K strong by promoting an
orientation program for Trustees, faculty, administration, staff and students,
addressing this character.
7. Promote and sustain the School of Theology-Seminary curriculum and program
and the strength of the library's theology section so that a vibrant and active
graduate school and seminary program can flourish, preparing ministers for the
church.

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8. Maintain and promote the faculty resident model of residential programming in
cooperation with the xxxxxxxx community by recruiting and training xxxxxx
of the
xxxxxxxxx community to serve as faculty residents, assuring that this program
remains a central and unique xxxxxxxxx element of Entity K educational
experience.
9. Maintain structures within Entity K in cooperation with the xxxxxx community
designed to promote the Church
0, xxxxxxx character, mission and identity of
Entity K.
10. Maintain a robust theology requirement with ample support and resources as an
integral part of the curriculum for all undergraduate students and a distinctive
academic program
in theology that attracts strong undergraduate majors and
minors.
11. Ensure the continued presence
of visible religious symbols throughout the
campus, such as crucifixes, statues, and artwork to provide a material culture
of
faith.
Order A similarly is required to commit itself to ongoing collaboration with Entity K
leadership to sustain and strengthen the Church
0, Order A character, mission and
identity
of Entity K, including the training and promotion of Order A xxxxxxxxxx in
leadership, faculty, residential and ministry roles at Entity K.
Order A, University 8 and Entity K are all organizations exempt from federal income tax
under section
501 (a) of the Code as organizations described in section 501 (c)(3) of the
Code. Order
A, University 8 and Entity K are all listed in Directory Z. Also, no
employees
of Order A or Entity K are employed in connection with any unrelated trades
or businesses with the meaning of section 513 of the Code.
Order A maintains two retirement plans for its employees, Plan X and Plan
Y, both of
which are intended to comply with section 403(b) of the Code and were established
prior to January
1, 1974. Order A also maintains welfare benefit plans, Plan 1 through
Plan
5, for its employees.
Prior to the restructure, University 8 employees participated in Plan X, Plan Y, and Plan
1 through Plan 5 (Plans) as employees
of Order A Following the restructure, Entity K
became a participating employer
in the Plans. Accordingly, employees of Entity K
continue to participate
in the Plans. In addition, employees of College N participate in
Plan 1 through Plan 5. College N is a women's college established by xxxxxxx of Order
A College N is a separate tax-exempt organization that has received a favorable church
plan ruling on its retirement plans.
The Plans are administered by a committee (Committee) consisting
of the Chief
Financial Officer (CFO)
of Order A, the CFO of Entity K and the CFO of College N. The
CFO
pf Order A is appointed by the xxxxxxx of Order A The CFO of Entity K is
appointed by the President of Entity
K. The CFO of College N is appointed by the
President
of College N. The Committee's primary purpose and function is the
administration
of the Plans.

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Order A has not made an election under section 41 0( d) of the Code to have the Plans
treated other than as church plans under section 414(e) of the Code.
In accordance with Revenue Procedure 2011-44, 2011-39 I.R.B. 446, a Notice to
Employees with reference to Plan X and Plan Y was provided on April 16, 2012. This
notice explained to participants of Plan X and Plan Y the consequences
of church plan
status.
Based on the foregoing, you request a ruling that Plan
X, Plan Y and Plan 1 through
Plan 5 are church plans as defined
in section 414(e) of the Code. Also, that Plan X and
Plan Y have been church plans since January
1, 1974, Plan 1 has been a church plan
since July
1, 2008, Plan 2 has been a church plan since September 1, 2007, Plan 3 has
been a church plan since July
1, 2012, Plan 4 has been a church plan since January 1,
2011 and Plan 5 has been a church plan since January 1, 2007.
Section 414(e) was added to the Code by section 1015 of ERISA. Section 1017(e) of
ERISA provided that section 414(e) of the Code applied as of the date of ERISA's
enactment. However, section 414(e) of the Code was subsequently amended by section
407(b)
of the Multiemployer Pension Plan Amendments Act of 1980, Pub. Law 96-364,
to provide that section 414(e) of the Code was effective as
of January 1, 1974.
Section 414( e)( 1) of the Code generally defines a church
plan as a plan established and
maintained for its employees (or their
beneficiaries) by a church or a convention or
association of churches which is exempt from taxation under section
501 of the Code.
Section 414(e)(2)
of the Code provides, in part, that the term "church plan" does not
include a
plan that is established and maintained primarily for the benefit of employees
(or their beneficiaries) of such church or convention or association of churches who are
employed
in connection with one or more unrelated trades or businesses (within the
meaning of section 513
of the Code); or if less than substantially all of the individuals
included
in the plan are individuals described in section 414(e)(1) of the Code or section
414(e)(3)(B)
of the Code (or their beneficiaries).
Section 414( e )(3)(A) of the Code provides that a plan established and maintained for its
employees (or their beneficiaries) by a church or by a convention or association
of
churches includes a plan maintained by an organization, whether a civil law corporation
or otherwise, the principal purpose or function of which is the administration or funding
of a plan or program for the provision of retirement benefits or welfare benefits, or both,
for the employees
of a church or a convention or association of churches, if such
organization is controlled by or associated with a church
or a convention or association
of churches.
Section 414(e)(3)(B) of the Code defines "employee" of a church or a convention or
association
of churches to include a duly ordained, commissioned, or licensed minister
of a church
in the exercise of his or her ministry, regardless of the source of his or her

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compensation, and an employee of an organization, whether a civil law corporation or
otherwise, which is exempt from tax under section
501 of the Code, and which is
controlled by or associated with a church or a convention or association
of churches.
Section 414(e)(3)(C)
of the Code provides that a church or a convention or association
of churches which is exempt from tax under section 501 of the Code shall be deemed
the employer of any individual included as
an employee under subparagraph (B).
Section 414(e)(3)(0)
of the Code provides that an organization, whether a civil law
corporation or otherwise, is associated with a church or a convention or association
of
churches if the organization shares common religious bonds and convictions with that
church or convention or association
of churches.
Section 414(e)(4)(A)
of the Code provides that if a plan, intended to be a church plan,
fails
to meet one or more
of the church plan requirements and corrects its failure within
the correction period, then that
plan shall be deemed to meet the requirements
of this
subsection for the year
in which the correction was made and for all prior years.
Section 414(e)(4)(C)(i) of the Code provides,
in pertinent part, that the term "correction
period" means the period ending 270 days after the date
of mailing by the Secretary of a
notice
of default with respect to the plan's failure to meet one or more of the church plan
requirements.
Revenue Procedure 2011-44, 2011-39 I.R.B. 446, supplements the procedures for
requesting a letter ruling under section 414(e) of the Code relating to church plans. The
revenue procedure: (1) requires that plan participants and other interested persons
receive a notice
in connection with a letter ruling request under section 414( e) of the
Code for a qualified plan; (2) requires that a copy
of the notice be submitted to the
Internal Revenue Service (IRS) as part
of the ruling request; and (3) provides
procedures for the IRS to receive and consider comments relating to the ruling request
from interested persons.
In order for an organization that is not itself a church or convention or association of
churches to have a qualified church plan, it must establish that its employees are
employees or deemed employees of a church or convention or association
of churches
under section 414( e )(3)(8)
of the Code by virtue of the organization's control by or
affiliation with a church or convention or association of churches. Employees of any
organization maintaining a plan are considered to be church employees if the
organization: (1) is exempt from tax under section 501 of the Code; and, (2) is controlled
by
or associated with a church or convention or association of churches. In addition, in
order to be a church plan, the plan must be administered or funded (or both) by an
organization described
in section 414(e)(3)(A) of the Code. To be described in section
414(e)(3)(A) of the Code, an organization must have as its principal purpose the
administration or funding of the plan and must also be controlled by or associated with a
church or convention or association of churches.

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In this case, Order A, University Band Entity K are all organizations exempt from
federal income tax under section
501 (a) of the Code as organizations described in
section 501 (c)(3) of the Code. Order A, University Band Entity K are all listed in
Directory Z. Order A is a well-established religious order of Church 0 that carries out
Church
0 functions. The mission and purpose of Entity K is the provision of education in
the liberal arts and graduate theological disciplines with the Church 0 university
tradition.
Entity K has two
classes
of members, Class A and Class B, both of which are
representatives
of Order A. Order A exerts control over Entity K by its right to appoint
five Board P trustees through these two
classes
of members; the Class A Members'
right to disapprove new Board P candidates; the
Class A Members' right to approve the
President
of Entity K; and, the Class A Members' right to remove and reappoint the
entire Board
P.
In view of the common religious bonds between Order A, University B, Entity K and
Church
0, the inclusion of Order A, University B and Entity K in Directory Z, and the
indirect control
of University B and Entity K by Church 0 through Order A, we conclude
that University B and Entity K are associated with a church
or convention or association
of churches within the meaning of section 414(e)(3)(D) of the Code. That the employees
of University Band Entity K meet the definition of employee under section 414(e)(3)(B)
of the Code, and that they are deemed to be employees of a church or a convention or
association of churches by virtue
of being employees of an organization which is
exempt from tax under section
501 of the Code and which is controlled by or associated
with a church or a convention or association of churches.
The administrative control of the Plans is vested
in the Committee. The Committee is
controlled by and shares common religious bonds with Church
0 through the controlling
power that the CFOs of Order
A, Entity K and College N exercise over the Committee.
The CFO
of Order A is appointed by Order A which is a religious order of Church 0.
The CFO of Entity K is appointed by Entity K which is an organization controlled by or
associated with Church 0. The CFO of College N is appointed by College N who has
received a
favorable church plan ruling
on its retirement plans. The Committee's
primary purpose and function is the administration
of the Plans.
Thus, the administration
of the Plans satisfies the requirements regarding church plan
administration under section 414(e)(3)(A) of the Code. Accordingly, the Plans are
maintained by an organization that is associated with a church or convention
or
association of churches, and the principal purpose or function of which is the
administration
of the Plans for the provision of retirement and welfare benefits for the
deemed
employees
of a church or convention or association of churches.
Based on the foregoing facts and representations, we conclude that Plan
X, Plan Y and
Plan 1 through Plan 5 are church plans as defined
in section 414(e) of the Code. Also,
that Plan X and Plan Y have been church plans since January
1, 1974, Plan 1 has been
a church plan since July
1, 2008, Plan 2 has been a church plan since September 1,

,
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2007, Plan 3 has been a church plan since July 1, 2012, Plan 4 has been a church plan
since January
1, 2011 and Plan 5 has been a church plan since January 1, 2007.
This letter expresses no opinion as to whether Plan X and Plan Y satisfy the
requirements
of section 403(b) of the Code.
No opinion is expressed as to the tax treatment of the transaction described herein
under the provisions
of any other section of either the Code or regulations which may be
applicable thereto.
This letter
is directed only to the taxpayer who requested it. Section 611 O(k)(3) of the
Code provides that it may not be used or cited as precedent.
Pursuant to a power
of attorney on file with this office, a copy of this letter ruling is being
sent to your authorized representative. If you have any questions regarding this letter,
please
contact xxxxx, xxxxxxxxxxxx, SE:T:EP:RA:T3, at xxxxxxxxxxxxx.
Enclosures:
Deleted
copy
of ruling letter
Notice
of Intention to Disclose
cc: xxxxxxxxxxxxxxxxx
2
.
I urs,
6w-~~,.__--
au a arshawsky, Manager
Employee Plans Technical Group 3