Final 419 Regs

Actually, after reading through the examples, bye bye any death benefit 419 plan unless it is pure term only (with no level term period allowed and no bogus "special term" insurance to get around the rules).

Aftermessage:

BTW, Dave's edit only steered the URL link to a cleaner version of the regs (provided by the Congressional Register through Benefitslink) than the one I originally posted through Relius. No "big brother" action by our fearless leader for anyone wondering why there was a message for awhile that said "edited by Dave Baker"

I wonder if any of my Advanced Market friends and the advisors who facilitated these abusive plan designs think that their E&O will cover much other than Defense costs to a restricted extent?

John Koresko asked me to post this to the site -- it's a letter he wrote to another attorney. He has written various other articles in support of the use of multiple employer trusts for the funding of employee benefits: see http://pennmont.com/html_pages/veba_articles.html

-- Dave Baker

------------------------------------

Dear Steve,

I saw your alert yesterday.

As my testimony and written comments on November 11, 2002 indicated, these regs are invalid and unenforceable as a matter of law. It is a pity you devoted so much work to explaining a nullity and work of intellectual dishonesty.

The regs as issued do not establish any standard anyone could possibly use to unequivocally design a plan that "complies with the rules." By Treasury's own admission, plans with so-called "bad characteristics" can demonstrate they are not experience-rated, and plans with all Treasury's "good characteristics" can fail. You probably remember the void for vagueness doctrine. "The responsibility to promulgate clear and unambiguous standards is upon the Secretary." Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor v. Eastern Associated Coal Corp., 54 F.3d 141, 147 (3d Cir. 1995) (internal quotation marks omitted).

Notice that the Treasury/IRS brain trust, most of whom refused to engage me or even look me in the eye when I testified, responded directly to my comments, wherein I reminded them that the Supreme Court and Tax Court had definied "experience rating" quite specifically in American Bar Endowment v. U.S. and Sears Roebuck v. Com'r., respectively. Treasury called these precedents not conclusive, although they refused to say so in public when that ridiculous comment could be debated against experts. Justice Scalia and company have time and time again advised agencies they are not free to disregard the plain meaning of statutory language. Weller, Holland, Clary and company do not care -- for now.

In reviewing an agency's construction of a statute which it administers, a court must consider the Supreme Court's opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, reh'g. denied, 468 U.S. 1227 (1984). Under Chevron, the reviewing court or body must first ask "whether Congress has directly spoken to the precise question at issue." Id. at 842. If Congress' intent is clear from the plain language of the statute, then inquiry ends there. Id. If the reviewing body concludes, however, that Congress has not directly addressed the precise question at issue or that the statute is silent or ambiguous regarding the issue, then one must determine whether the agency's interpretation "is based on a permissible construction of the statute." Id. at 843.

"When [a] 'statute's language is plain, the sole function for the courts' - at least where the disposition required by the text is not absurd - 'is to enforce it according to its terms.'" Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 520 U.S. 1, 6 (2000) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989) (quotation omitted)).

Regulations may construe, interpret or implement an ambiguous, doubtful or general provision of the Code. However regulations cannot amend the unambiguous language of a Code section by adding to it a proviso to the effect that expenses shall not be deducted by a taxpayer even though they are ordinary and necessary in its business. It is settled that the law cannot thus be amended by regulation. Koshland v. Helvering, 298 U.S. 441, 56 S. Ct. 767, 80 L. Ed. 1268, 105 A.L.R. 756; Manhattan General Equipment Co. v. Commissioner, 297 U.S. 129, 56 S. Ct. 397, 80 L. Ed. 528.

The Treasury folks also stated an outright lie by stating in the preamble that the legislative history indicated that experience rating was supposed to be interpreted in the broadest possible fashion. I challenge them or anyone to show me the words that say so, because they are not in either the House or Senate Report on DEFRA. Perhaps there is a secret legislative history because there is absolutely nothing that indicates Congressional intention to create new and expansive definitions of a term the Supreme Court also described in American Bar Endowment. Treasury has no power to expand the definition of experience rating as they have done. "Where Congress uses terms that have accumulated settled meaning under . . . the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms. . . ." Nationwide Mutual Ins. v. Darden , 503 U.S. 318 (1992)

The regulations fail a fundamental test of the real legislative intent expressed by Congress in both 1984 and 1986. Sec. 419 was enacted to prevent PREMATURE DEDUCTIONS. After the first set of temp. regs. in 1985, Congress made clear the following in the 1986 amendments to sec. 419: payments for the shifting of risk are not premature deductions. In other words, Insurance premiums are not premature deductions. That's one of the reasons insurance premiums are qualified direct costs. Congress never sought to limit payments to third parties. Sec. 419 and 419A were specifically directed at self-funded severance payments.

Deference is ordinarily owing to the agency construction if one can conclude that the regulation "[implements] the congressional mandate in some reasonable manner." United States v. Correll, 389 U.S. 299, 307 (1967). But this general principle of deference, while fundamental, only sets "the framework for judicial analysis; it does not displace it." United States v. Cartwright, 411 U.S. 546, 550 (1973).

The Proposed Regulations suggest that the Commissioner promulgated the interpretion of section 419A(f)(6) under his general authority to "prescribe all needful rules and regulations." 26 U. S. C. § 7805(a). Accordingly, the interpretation is owed less deference than a regulation issued under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision." United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S. Ct. 821, 70 L. Ed. 2d 792, 50 U.S.L.W. 4137 (1982); Rowan Cos. v. United States, 452 U.S. 247, 253 (1981).

The Supreme Court has firmly rejected the suggestion that a regulation is to be sustained simply because it is not "technically inconsistent" with the statutory language, when that regulation is fundamentally at odds with the manifest congressional design. United States v. Cartwright, supra, at 557. A challenged Regulation is not a reasonable statutory interpretation unless it harmonizes with the statute's "origin and purpose." National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472, 477 (1979).

A regulation that purports to do no more than add a clarifying gloss on a term --like “insurance company” or “experience rating" -- that has already been defined with considerable specificity by Congress or the courts is not entitled to automatic deference. United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S. Ct. 821, 70 L. Ed. 2d 792, 50 U.S.L.W. 4137 (1982). “The Commissioner's authority is consequently more circumscribed than would be the case if Congress had used a term "'so general . . . as to render an interpretive regulation appropriate.'" Vogel Fertiziler, supra; citing National Muffler Dealers Assn., Inc. v. United States, supra, at 488 (1979).

A court should not give deference to the IRS's interpretation when it amounts to no more than a self-serving litigating position. See Bowen v. Georgetown University Hospital, 488 U.S. 204, 213 (1988).

Congress clearly and specifically declared in 1984 that a plan that looks more like an insurance company than like a fund is not to be considered an experience-rating arrangment or subjected to the restrictions of Subpart D. Congress further clearly and specifically stated in 1986 that Treasury regulations are not to include typical group insurance arrangements in the definition of a fund. Congress clearly specified that insurance premiums are to be permitted as currently deductible qualified direct costs, even if insurance contracts are held by an organization that could be considered a fund. Therefore, the Secretary of the Treasury is without power by regulatory amendment to add a provision interfering with any aspect of these declarations of Congress, whether directly or indirectly through an arbitrary and capricious redefinition of the term “experience rating arrangement.” See Commissioner of Internal Revenue v. Textile Mills Securities Corporation., 117 F.2d 62 (3rd Cir. 1940)(MARIS, Circuit Judge, dissenting in part)’The Treasury Department has also ignored compliance with the Regulatory Flexibility Act and the Small Business Regulatory Fairness Enforecement Act. My comments to the Office of Management and Budget echo this in great detail. Contrary to their outlandish drivel, the effect on small business is significant. Over $50 billion of death benefits have been effected.

As the draftsmen of the regs. have inserted opinions without clear standards, the Regs are nothing more than distortions and opinion meant to achieve an end without statutory support-- i.e., propaganda. The term means the same today as when then Judge (now Justice) Scalia wrote the following:

"[T]he statute's definition of "political propaganda" . . . includes communication that is simply "reasonably adapted to . . . prevail upon, indoctrinate, convert, induce, or in any other way influence a recipient or any section of the public . . . . This definition is in accord with dictionary definitions of the term "propaganda" -- e.g., "ideas, facts, or allegations spread deliberately to further one's cause or to damage an opposing cause," WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 942 (1983); "information or ideas methodically spread to promote or injure a cause, group, nation, etc.," THE RANDOM HOUSE COLLEGE DICTIONARY 1060 (1982).

"It seems to us not quite true that, as asserted in a district court opinion involving the same provision at issue here (with whose holding we disagree) "'political propaganda' is ordinarily and commonly understood to mean material that contains half-truths, distortions, and omissions." Keene v. Smith 569 F. Supp. 1513, 1520 (E.D. Cal. 1983) (granting preliminary injunction): see also Keene v. Meese, 619 F. Supp. 1111 (E.D. Cal. 1985) (granting plaintiffs' motion for summary judgment), probable jurisdiction noted, 475 U.S. 1117, 106 S. Ct. 1632, 90 L. Ed. 2d 178. It is understood to mean precisely the type of political speech the dictionary definitions quoted above describe (and which no other English word accurately describes) -- which type of speech is, in turn, generally regarded as more likely than other speech to contain "half-truths, distortions, and omissions."

Block v. Meese, 1986.CDC.204 (http://www.versuslaw.com) (D.C. Cir. 1986).

The Regulations therefore violate the Treasury-Postal Appropriations Act of 2002, which in two separate sections barred the Treasury Dept. from using any Congressional appropriation for the advancement of propaganda. These bureaucrats have committed an illegal act by using tax money to advance their ridiculous opinions.

You have probably seen the law review article Ms. Martin and I had published at 32 Southwestern Law Review 1 (2003). The arguments contained therein and here will some day find their way into an opinion from a court of law, not a collection of bureaucrats.

I have already told Bill Sweetnam and Finance Committee Counsel Ed McClelland that my clients are not going to comply with these or the 1.6011-4 regulations that rely on broad innuendo instead of law for their effect. The line in the sand has been drawn. The regs are for show and for scare tactics. As I told that gang on Nov. 11, they have done a great job scaring people and companies. In the meantime, their own lawyers conceded in Booth that a fully-insured death benefit plan is not experience rated as a matter of law. (Memorandum of Issues, page 9, by Ann Durning, IRS Counsel.) Notice they kind of left that admission out of the preamble or text of the "regulations." Legal positions of the IRS expressed in new regulations that are inconsistent with prior positions deserve no deference by a court. Harco Holdings, Inc. v. United States, 977 F.2d 1027 (7th Cir. 1992)

Why doesn't anyone talk about the obvious? 419A(f)(6) is nothing but a deduction acceleration statute. It does not create any deduction. Amounts in excess of 419 limits (if they apply) are carried forward perpetually. As IRS admitted in its own VEBA Awareness continuing education manual, "the taxpayer will eventually be allowed a deduction for its contributions....The only question is in which period." Wells Fargo confirms that a deduction for any benefit expected to last into retirement years, including permanent insurance is deductible on a level basis over the expected working life of the employee - both as qualifiied direct cost and qualified asset addition. See also, GCM 39440. The regs are one Tax Court case too late.

As I stated in my testimony, these regulations are not about the deduction. They are a cover for IRS' inability to cure the employer deduction / employee inclusion mismatch that results when the economic value of compensatory life insurance is less than the premium paid by an employer. See, GCM 39440 (IRS created administrative prohibitions to try to match deductions by an employer with income by an employee). Remember the Third Circuit's declaration in Neonatology:

"Beyond peradventure, employee benefits like life insurance are a form of compensation deductible by the employer. [FN 8] See Treas. Reg. S 1.162-10(a); see also Joel A. Schneider, M.D., S.C. v. Comm’r, 1992 T.C. Memo. 1992-24, 63 T.C.M. (C.C.H.) 1787"Neonatology Assoc. PA v. Com'r, ___F.3d ___ (3rd Cir. 2002). See also, Anesthesia Med. Surg. Assoc. v. U.S. __ F. 2d. __ (9th Cir. 199__) (Employee insurance premiums are either deductible as welfare plan contributions under Reg. sec. 1.162-10(a) or simple insurance costs under Reg. sec. 1.162-1).

If that reality is so self-evident to some of the most knowledgeable Courts in this country, why is it lost on so many people who are supposed to know better?

Finally, it is settled that regs that are not contemporaneous interpretations of a statute are not entitled to deference. See National Muffler Dealers Ass'n v. United States, 440 U.S. 472, 59 L. Ed. 2d 519, 99 S. Ct. 1304 (1979), Water Quality Assn. v. U.S., __ F.2d __ (7th Cir. 1992) (VEBA regs held invalid). These regs are about 18 years too late -- a post hoc reaction to legal market behavior that certain IRS people do not like rather than a valid, contemporaneous interpretation issued when the intentions of Congress were fresh.

But that also reminds me -- in 1986, Congress stated without equivocation that Treasury's first round of regulations did not implement Congressional intent and purpose. There seems to be a pattern here.

If a man lives in fear, he cannot have any faith in the law, or anything else.

Have a great day.

John Koresko

Well, that's a very impressive letter. However, my (limited) exposure to 419 plans has been with plan proposals that are trying to bend the rules as far as they can go (and hence the reason why the IRS has taken such an interest in cutting out the abuses). Skipping legal issues, the real premise of the IRS's position is that a company should be allowed a deduction for the reasonable costs of providing the welfare benefit in question for the year (and not future funding). I've seen plan proposals using two types of "term" insurance issued; what we would all refer to as honest to god term insurance for the rank and file, and a "special term" insurance issued on the owners (with "term" premiums 10 to 15 times higher than term). Supposedly this "term" insurance at the end has no value, so the owner "buys" the policy for $0, throws in some nominal premiums for a couple of years, and then surprise, the policy now has a monstrous value, which he can get through either "tax-free" loans or through increased death benefit coverage. The funny thing is that this term policy no longer requires premiums to be paid...

When this gambit obviously wasn't going to fly, they switched to "paid up term" (whatever the heck that animal is; don't really remember that from the actuarial exams). You can call an animal whatever you want, but if walks like a duck, talks like a duck...

Just waiting for the other shoe to drop now on the abusive 412i schemes being pitched.

Now presumably your firm is not one that is bending the law, and is offering only real term insurance in the plan. Good for you if that's the case.

As an aside, you could see the groundwork being laid by the IRS a couple of years ago to detect abusive death benefit plans with the revised PS-58 tables for group term. This gives the IRS a fairly handy tool to discern abuse (you know when the sum of the PS-58s is about a tenth of the premium paid for term insurance that something isn't quite right).

There are other cases which limit Treasury's authority to issue regulations interpreting a statute to those rules for which there is an express intent under the statute or legislative history, see US. v. Meade (US Sup Ct.) and Household Finance, since the Treasury can only administer the law. Needless to say the validity of these regs will be litigated in the future.

Yes, the validity of the Regs will and should be questioned, but then again there are claims, quotes and/or interpretations in the Koresko letter that I question for accuracy and or relevance. The writing of a letter claiming invalidity etc does not make it so.

IMHO, the purpose of the IRS action is to stop the abusive schemes. What is abusive will be decided in Court not in Forums or by attorney's opinions.

The fact is that there are abusive schemes, some have deduction questions some have questions regarding the "insurance" that is involved. Are all 419 Plans "good"? Are all 419 Plans "bad"? The answer to both is obviously no, which means that the questions should be resolved in Court.

All the IRS is doing is setting the stage as best they can for the expected Court actions. The use of so called "propaganda" is no different from the use of sales material complete with allegedly "supporting" legal opinion letters. It just levels the playing field. To criticise the IRS actions as "propoganda" makes me wonder if "Methinks thou dost protest too much" is in order.

The proposed regulations don't address abusive welfare benefit plans, but abusive welfare plans purporting to comply with IRC section 419A(f)(6).

While Mr. Koresko makes some valid points, he will not get Justice Scalia when he goes to Tax Court. He may get Judge Laro who obviously ran out of patience with such arrangements after hearing the Neonatology case.

Even if IRS was "wrong" in going too far, they did not exceed their legal authority. In adopting IRC Sections 6111 and 6112 in the Taxpayer Relief Act of 1997, Congress granted the IRS the authority to carry out the purposes of the statute, specifically, the regulation and registration of tax shelters. In addition, Congress gave powers to IRS to require attachments to tax returns under IRC Section 6011. Incorrect or not, the regulations appear to be a legal exercise of the IRS’s powers. Also note that under IRC Section 6112, a PATS does not need to be a “tax shelter”, as defined above. It only needs to have been determined by the IRS in “regulations as having a potential for tax avoidance or evasion.“ Since IRS has called 419A(f)(6) arrangements listed transactions, their ability to restrict them beyond the statute is relatively clear.

After meeting with the drafters of the Regulations last September, I came away convinced that IRS and Treasury have put some of their sharpest minds on this project. They were not cowed by Mr. Koresko's testimony, but bored with his pedantic lecturing and tired of his empty threats. I am convinced that IRS will prevail in against challenges on this issue.

Unlike other sponsors of IRC Section 419A(f)(6) plans, Mr. Koresko has notified his clients to disregard the Regulations since they are "illegal", and not to comply with the tax shelter registration requirements. Those clients are in peril. IRS has already begun disallowing tax deductions for those who registered required. Penalties will be much worse for those who refuse to comply with the Regs.

As for those who question what welfare plan design works, the cases pretty much tell us. Grant-Jacoby teaches that a plan that cuts out rank and file is not a welfare plan. Neonatology teaches that a plan in a C Corp that cuts out the rank and file is no plan at all. Neonatology was correct that the continuous term insurance product was nothing more than a sham with no real welfare benefit purpose. For goodness sake, the marketing materials used the words "retirement income."

Abusive welfare designs are not real welfare plans. For example, no plan exists when employees are not offered participation. Loans, that are prohibited transactions under ERISA, and de facto distributions under the Code, are not loans. Treasury could have dealt with this by clarifying sec. 404.

It is not "abusive" to take a deduction when the amount of same has not been arbitrarily suppressed in the manner applied to retirement plans. Usually, I find persons use that term when they cannot give a valid legal explanation for thier position. It also comes up when persons have some competitive interest in seeing a strategy fail.

"Aggressive" is often used to describe what IRS does not like. There have been over 40 FLP cases. It seems IRS does not like them. Does anyone call FLPs aggressive or an abuse? Perhaps it's because so many people can make money from them.

How can any mechanism, like a welfare plan, that finds its roots in law continuously re-enacted since 1928, be considered an "abuse?"

The VEBA guru should have a chat with Judge Laro prior to predicting his next opinion. In the hallway outside the Southern California Tax Institute about 2 years ago, he shared his belief that plans could be designed compliant with 419A(f)(6) -- and the experience rating definition he embraced was something far different from Treasury's. Treasury's own expert, Charles DeWeese, gave testimony at odds with the Proposed Regulations.

Judge Laro rejected the IRS plea for him to decide Neonatology on 419A(f)(6) grounds. He effectively gave the government nothing, partly because the facts were so bad. IRS prayed that Neonatology would be the case that would be their atom bomb, and it turned out to be a dud. The only thing they could win was the constructive dividend argument. The same thing gave them victory in Coastal Neurological. But that argument holds no water in the S Corp arena or elsewhere.

Consequently, this tax lawyer has no trepidation about trying a case involving a plan with proper design attributes. After all, IRS admitted in Booth that a fully-insured death benefit plan is not experience-rated. That judicial admission will come back time and again to harm their case where there is no potential constructive dividend potential.

In 1984, Congress wrote that insurance premiums were qualified direct costs. I asked the Treasury team why that did not make the first set of discredited temporary regulations. In 1986, Congress clarified that the first set of temp regs did not reflect Congressional intent. Congress clarified that payments made for risk shifting were not premature deductions. The regs state in the preamble that 419 was enacted to stop premature deductions. Ergo, the regs should not have been made applicable to any payments relating to risk shifiting, i.e., insurance payments. This comports with the classification of insurance premiums as qualified direct costs. Nowhere do the words 'deduction is limited to term insurance' appear in the 1984 or 1986 acts or the accompanying committee reports.

Furthermore, if the only permissible design were one that used only term insurance, sec. 419A(f)(6) would not have been necessary. Sec. 79 and its regulations existed and were quite able to handle the matter. The fact that the Sec. 79 paradigm was NOT integrated by statute into sec. 419 or 419A(f)(6) pretty much settles the argument that there was no intention to make the rules Treasury made up in the 419 regs. Oh, by the way, sec. 79 permits the use of permanent insurance, too.

Some seem to forget Treasury tried to integrate the sec. 79 paradigm into sec. 419A(f)(6) in the failed legislation they offered during the 106th Congress. It is no shock these regs try to do what Treasury could not get into law.

The VEBA guru should tell us all exactly what penalties exist presently under sec. 6011. If he doesn't realize it, there are none; which is why Treasury so desperately covets the Tax Shelter Transparency Act.

Exactly what is the "risk" that VEBA guru talks about? Under sec. 419, any excess deductions are carried over indefinitely. In 22 years of practice, my experience has been that the standard IRS position in welfare cases has been to try to resolve them without penalties. Moreover, we have successfully avoided Tax Court without conceding deductions or penalties.

VEBA guru, what does a meeting in September have to do with hearings that happened in November? The Treasury people were obviously not very moved by the meeting.

Funny, the VEBA guru was not present in November at the hearings. The hearings were three hours long. The six presenters got a 10 minute statement. Koresko was questioned for over 45 minutes by Treasury and IRS personnel, for a total of 55 minutes. That means the panel extended an average of 15 minutes for questions posed to the five others, exclusive of the lunch break.

The interrogation of Mr. Koresko was far from "pedantic lecturing," VEBA guru. Messrs. Sweetnam, Weller, and Schwimmer asked the questions, and they kept asking them over nearly 40 pages of transcript.

The Proposed Regulations state that plans that have the bad characteristics can demonstrate compliance, and the plans with all the good characteristics can be noncompliant. That is not guidance.

Frankly, ignoring the bad characteristics "test" simply means that one can otherwise demonstrate that the plan is not an experience-rated arrangement under sec. 419A(f)(6). That is the position we will take, whether the matter proceeds to litigation or not. I have faith that the Supreme Court's definition of experience rating expressed in American Bar Endowment, as well as the Tax Court's similar definition expressed in Sears Roebuck & Co., will carry the day as it has in the past.

It is quite ridiculous for anyone, especially a VEBA guru, to assert that a regulation at odds with the common law and legislative history is worthy of any deference by any taxpayer or any court. Regulations are not law until a court agrees that they are reasonable interpretations of a statute. Only Congress can make law.

That's what makes the new Regulations so comedic and tragic.

It is interesting that some have used the word "abuse" with respect to deductible life insurance. Compensatory life insurance has been deductible as long as the Code has existed. See Frost v. Commissioner. Sec. 79, qualified plans, and welfare plans all contemplate that there will be insurance funded as part of a business' expenses. As with the Frost case, the issue is that employees have an income tax effect that is very much reduced due to legal risks of forfeiture integrated quite commonly into benefit plans.

Frankly, I am seeing cross-tested retirement plans with designs for employee classification that look as owner-skewed as any welfare plan. Is that an "abuse?"

Some day, certain people will realize that it is not pedantic lecturing to urge citizens to assert their rights not to be bullied by an agency that has repeatedly proven its inability to responsibly execute its duty. This country was built in part as a result of a tax dispute involving tea in Boston. Madison warned us in Federalist 10 of the dangers of the tax collector.

There was a time when real lawyers, not self-styled experts, dominated the benefits arena, advocating the law and not cow-towing to the bureaucrats who fancy themselves above the written law.

It is an honor to be so despised by the VEBA gurus and Treasury people that they would call someone names.

However, I doubt that the Treasury folks hurled any abusive, childish names, as alleged by VEBA guru. The record of the Hearings reflects that all of the speakers referred to Mr. Koresko's testimony, and Bill Sweetnam himself offered one of the highest compliments for Mr. Koresko's competence anyone could expect:

Transcript of Hearing on Proposed Regulations, Doc 2002-25938, P. 56:

16 MR. BLEIWEIS: ...But what I’m saying is that
17 other sections of 419A -– and I don’t have the cite from
18 Memory. I’m not quite as good at that as Mr. Koresko was.
19 MR. SWEETNAM: I don’t think anybody is.

I would someday be very interested to see the VEBA guru or anyone else write a scholarly article subject to peer review that tells us why the Regulations are correct, and why it is appropriate for IRS to ignore Supreme Court precedent and make-up legislative history that doesn't exist.

John-

It's good to see you back on this board after a considerable absence. When you had someone else post your article, I feared that we wouldn't have your input and response.

I serve on the welfare benefit plans subcommittee of the Employee Benefits Committee of the Tax Section of the American Bar Association. Two or three times per year our committee of "real tax attorneys" meets with each other and with IRS, Treasury and DoL officials to discuss issues relevant to our practices, including 419A(f)(6) plans. Our subcommittee provided an official comment on the proposed regulations at IRS's request. Hence, there was no need for oral testimony.

I have had several articles published, some scholarly and some for the popular press. However, I don't have enough interest in 419A(f)(6) to spend the hours that would be required, especially when it does not affect my usual practice.

Within the past month I received a copy of a form letter from IRS that has been sent to adopters of registered 419A(f)(6) plans. The letter includes a blanket disallowance of deductions and assessment of taxes. I can provide you a fax copy of the letter if you are interested.

You state: . I have reviewed my post and cannot even guess where you found this "allegation". If someone called you names, I am unaware of it.

I agree with most of your arguments. Clearly, employer-funded life insurance may be tax deducted under various provisions of the IRC. When I met with IRS, I asked whether or not they were prejudiced against life insurance. They were offended at the suggestion, and responded in strong language that they were not against life insurance, but were prejudiced against those who misrepresent the content and purpose of subsection 419A(f)(6) of the Code.