DocketNumber: Docket No. 14566-79
Citation Numbers: 81 T.C. 735, 1983 U.S. Tax Ct. LEXIS 21, 81 T.C. No. 44, 4 Employee Benefits Cas. (BNA) 2201
Judges: Fay
Filed Date: 10/13/1983
Status: Precedential
Modified Date: 1/13/2023
*21
Petitioner, a nonprofit corporation, was organized by the trustees of several employee benefit welfare funds and pension funds solely for the purpose of administering their funds. During the year in issue, petitioner provided administrative services for three member welfare funds which had previously been granted tax-exempt status under
*736 OPINION
Respondent determined a deficiency of $ 51 in petitioner's*23 Federal income tax for its fiscal year ended June 30, 1976. The only issue is whether petitioner is a tax-exempt organization as described in
The facts have been fully stipulated and are so found.
Petitioner Bricklayers Benefit Plans of Delaware Valley, Inc., is a Pennsylvania nonprofit corporation. Its principal place of business was Philadelphia, Pa., when the petition was filed herein.
In 1971, the trustees of several employee benefit welfare funds and pension funds organized petitioner for the sole purpose of providing administrative services on behalf of their funds. The trustees' funds, which had been previously established pursuant to collective bargaining agreements entered into by several bricklaying companies and the unions representing their employees, were designated as "Charter Fund Members" in petitioner's "By-laws." 2
*24 Petitioner initially had eight "Charter Fund Members," but due to the merger of some of the unions, during the year in issue that number was reduced to six. All six of these "Charter Fund Members" (herein the member funds) had previously been granted tax-exempt status by respondent, three as employee benefit welfare funds under
*737 In providing administrative services for the member funds, petitioner collected employer contributions, distributed employee benefits, maintained all records, and provided information to all parties involved. Prior to petitioner's formation, the member funds either hired their own administrators or contracted with a commercial third party to perform the administrative services now provided by petitioner.
During the year in issue, petitioner also performed similar services for seven employee benefit funds which were not designated as "Charter Fund Members" in its "By-laws." Petitioner charged those seven nonmember funds a total of $ 21,193 and its member funds a total of $ 123,985, for such services during that year.
Petitioner's application for recognition as a tax-exempt organization*25 under
The only issue before us is whether petitioner qualifies as a tax-exempt organization under
The term "other benefits" includes only benefits that are similar to life, sick, or accident benefits. A benefit*26 is similar to a life, sick, or accident benefit if --
(1) It is intended to safeguard or improve the health of a member or a member's dependents, or
(2) It protects against a contingency that interrupts or impairs a member's earning power.
The regulations also specifically state that "other benefits" do not include pension or annuity benefits payable at the time of *738 mandatory or voluntary retirement.
The parties agree that petitioner provides for the payment of pension benefits since three of its six members are pension funds. 3 They also agree that the regulations properly define the term "other benefits" to include only benefits that are similar to life, sick, or accident benefits. Petitioner contends, however, that pension benefits are similar to life, sick, or accident benefits, and that the regulations are unreasonable and inconsistent with the language of the statute to the extent they conclude otherwise. Petitioner therefore asks us to invalidate the regulations to the extent they prohibit tax-exempt status under
The Commissioner has broad authority to promulgate all necessary regulations.
Applying these rules to
Consistent with this interpretation,
*30 This conclusion is certainly consistent with the fact that Congress has specifically provided tax-exempt status for qualified pension trust funds under
Furthermore, petitioner fails to qualify as a voluntary employees' beneficiary association under
*31 Whether an individual is an "employee" is determined by reference to the legal and bona fide relationship of employer and employee. The term "employee" includes the following:
(1) An
(i) For employment tax purposes under Subtitle C of the Internal Revenue Code and the regulations thereunder, or
(ii) For purposes of a collective bargaining agreement,
whether or not the
* * * *
(2) An
(3) The surviving spouse and dependents of an employee * * *
[Emphasis added.]
Clearly, petitioner is not an association of employees within the meaning of
Accordingly, for the above reasons, we sustain respondent's determination that petitioner is not a voluntary employees' *741 beneficiary association as described in
*33 To reflect the foregoing,
1. All section references are to the Internal Revenue Code of 1954 as amended and in effect during the taxable year in issue.↩
2. Petitioner's "By-laws" do not set forth what it meant to be a "Charter Fund Member."↩
3. Arguably, petitioner does not provide for the payment of any benefits, but instead it merely provides administrative services for other associations that do provide for the payment of such benefits. If petitioner did not provide for the payment of benefits, it would clearly fall outside the coverage of
4. Petitioner alternatively argues that if it is reasonable to exclude pension benefits under
5. On this point, see
6. Respondent also argues petitioner is not a tax-exempt organization because it is a "feeder organization" described in sec. 502. It is unnecessary for us to address this issue in light of our holding that petitioner is not an organization described in
The Citizen's National Bank of Waco, Trustee v. United ... , 417 F.2d 675 ( 1969 )
National Muffler Dealers Assn., Inc. v. United States , 99 S. Ct. 1304 ( 1979 )
Commissioner v. South Texas Lumber Co. , 68 S. Ct. 695 ( 1948 )
United States v. Correll , 88 S. Ct. 445 ( 1967 )